Earnings Claims
Argentina
No legislation.
Australia
There is no specific legislation in relation to earnings claims. DSAA is incorporating clauses in its Code of Practice to make unrealistic earnings claims a violation of the Code by the member company to which that sales-person is contracted. This will be a mirror of the WFDSA Code requirements. Unreasonable claims in relation to possible earnings and other benefits can be caught under Section 53 of the Federal Trade Practices Act, which deals with false and misleading behavior.
Austria
No legislation.
Brazil
No legislation.
Canada
Earnings claims in relation to a multi-level marketing (MLM) plan refer to claims made by a person with respect to earnings which a participant in the plan can expect to make. One is considered to be a participant in a plan if one is actually conducting activities necessary to realise the benefits of the plan. If a plan qualifies as a MLM plan, its operator and its participants are subject (among several other rules) to the rules of fair, reasonable and timely representations on compensation under the plan.
The Competition Act forbids operators or participants to make any representation relating to compensation under the plan to a prospective participant in the plan, unless “it constitutes or includes fair, reasonable and timely disclosure of information” with respect to:
- compensation actually received by typical participants in the plan, or
- compensation likely to be received by typical participants in the plan, having regard to any relevant considerations.
MLM plans usually produce various levels of earnings for their participants. A typical participant is a person who receives a level of earnings which is the closest to the level of earnings received by the majority of participants. Reference must be made to the fewest levels containing the largest number of participants.
In the same manner, if the information provided by the company includes the highest figures earned by participants, then the operator must also disclose the proportion of participants at that dollar figure. The Competition Act contains criteria for disclosure of information, a ‘due diligence’ defence, a prohibition of compensation on recruitment and penalties on summary conviction or indictment.
Chile
There is no specific legislation in connection with earnings claims applicable to direct selling.
Columbia
No specific legislation for earning claims.
Czech Republic
No information.
European Union
In B2C relations, earnings misrepresentations will be considered unfair commercial practices. A commercial practice shall be regarded as misleading if it contains false information and is therefore untruthful or in any way, including overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more of the following elements, and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise. (Article 6(1) of Directive 2005/29/EC)
In B2B relations, earnings misrepresentations will be considered misleading advertising. ‘Misleading advertising’ means any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor. (Article 2 of 2006/114/EC)
Finland
There is no difference between the rules governing direct sellers and other forms of trading.
France
No information
Guatemala
No legislation
Hungary
No legislation.
India
There is no legislation on the subject. However, the nature of the claim depends upon the terms and conditions of the Agreement and, if unethical, it would be for the DSAs to control the same under their code of ethics practice.
Indonesia
No legislation.
Ireland
Earnings claims made by anyone with respect to earnings which a participant in any plan can expect to make, must be able to be substantiated by actual cases of existing or past participants. This particularly applies to public advertisements offering such opportunities. Such plans must make clear the level of activity required in order to achieve such levels of earnings.
Italy
No law exists on earning claims. However, rules of fair and reasonable representation relating to compensation to a prospective participant in the compensation plan are provided by the DSA Code of Conduct.
Lithuania
Both Direct sellers and company must declare their income.
Malaysia
Earnings claims should be substantiated.
Mexico
No information.
Netherlands
Apart from our codes of conduct, there are no specific regulations for direct selling. Of course, civil law with regard to misleading claims, etc, can be applicable.
New Zealand
Earning claims must be accurate and reasonably attainable and must be properly represented by both the company and its representatives. Failure to do so may breach the Fair Trading Act 1986 under sections, 9, 12 and/or 22.
Under the Consumer Law Review, a new section 13A governing “Unsubstantiated Claims� will be inserted and will make it essential that any earnings claims are able to be substantiated as real or likely within New Zealand to avoid challenge.
Even under the existing law great care in ensuring that earning claims are not overstated should be taken as an investigation by the Commerce Commission can be expensive in defending even if no prosecution is undertaken.
What is earned, when and why it is earned needs to be spelled out clearly to ensure that there is no possibility of misunderstanding by independent contractors or salespeople.
Norway
No regulations.
Peru
Companies, CAPEVEDI and Code Administrator shall establish procedures for the proper care and claims that these are addressed in the near future and the decisions in relation to their solution are taken within a reasonable time. The attention of the consumer complaints will be free.
CODE OF CONSUMER PROTECTION AND DEFENSE (CPDC)
Article 24 .- Claims Service
24.1 Without prejudice to the right of consumers to initiate appropriate action before the competent authorities, providers are required to address complaints by its consumers and respond to them no later than thirty (30) calendar days. This period may be extended for an equal when the nature of the complaint is justified, a situation that is made known to the consumer prior to completion of the initial term.
24.2 In the event that the supplier may have better claims hotline or some other similar electronic means to that end, ensure that care is timely and not become an obstacle to the claim against the company. 24.3 There may be conditional claims the attention of consumers or users to prior payment of goods or services subject such claim or the amount that would have prompted it, or any other payment. Philippines
No legislation.
Poland
No legislation.
Portugal
No specific legal on regulations on the field, depends on the private initiative. All income should be paid after a legal invoice of the sales person dully registered by the Tax services, since Law 51/2013, dated 24th July.
Slovak Republic
No legislation.
Slovenia
No legislation
South Africa
Direct selling companies must not misrepresent the actual or potential sales or earnings of their direct sellers. Any earning claims must be based on documented facts.
South Korea
Door-to-Door Sales Distributors : no regulations
Multilevel Sales Distributors : The total amount of Sponsoring Bonus that a Multilevel Sales Company may pay to Multilevel Sales Distributors may not exceed an amount corresponding to 35%(SDDS ==> 38%) of the total amount of the prices of the goods. (including VAT)
* Sponsoring Bonus means all economic interests regardless of any denomination whatsoever, which a Direct Selling Company pays to Direct Selling Distributor shall be deemed a Sponsoring Bonus, including sales allowance, arrangement commission, etc.
Spain
No legislation or court precedent on this subject.
Sweden
No legislation. Member companies are bound by the wording of the Swedish Codes of Conduct.
Taiwan
Article 20 of MLM Regulations states:
When promoting or selling goods or services or recruiting participants by means of declared cases of success, a multi-level sales enterprise or its participants shall concretely explain the time periods, benefits obtained, and course of development of such cases, and may not make false or misleading representations.
The preceding paragraph shall apply mutatis mutandis to assertions of the items in paragraph 1 of Article 11.
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Thailand
Thai Direct Sales and Direct Marketing Act has stated that :-
Section 19 The direct sales operator and the direct marketing operator shall not operate their businesses in a manner of inducing any person to join a direct sales or direct marketing network and promising to grant benefits which will be calculated from the number of persons joining the network.
Section 21 The direct sales operator shall operate its business in accordance with its remuneration payment plan submitted to the Registrar under Section 38.
The remuneration payment plan shall be in the following manner:
(1) It shall not confer benefit upon the independent distributor or self-employed direct sales representative which is received as its main income by means of recruiting any person or recommending any independent distributor or self-employed direct sales representative to join the direct sales network.
(2) The main income of the independent distributor or self-employed direct sales representative depends on the sales of goods or services to the consumer, including the purchase for personal consumption.
(3) It shall not require the independent distributor to purchase goods.
(4) It shall not encourage the independent distributor to purchase goods in unreasonably large amounts.
(5) It shall clearly demonstrate the actual or possible calculation of the payment of remuneration.
(6) Any other manners as specified by the Commission.
Any terms related to the remuneration payment plan other than those indicated in second paragraph shall be enforceable only to the extent that they are fair to the independent distributor or the self-employed direct sales representative.
Section 46 Any person violating Section 19 shall be subject to imprisonment for a period not more than five years and a fine not exceeding five hundred thousand Baht.
Section 48 Any person who violates the first paragraph of Section 21 shall be subject to a fine not exceeding three hundred thousand Baht.
Turkey
No legislation.
United Kingdom
All earnings claims have to satisfy the Advertising Standards Authority’s requirement that any claim is honest, lawful, decent and true. Additional requirements are imposed on multi-level marketing schemes.
United States
Pursuant to the US Direct Selling Association Code of Ethics, any earnings representation made by a company or member of the salesforce (included, but not limited to representations of homes, vehicles, or vacations) must be truthful, accurate and not misleading. Current and prospective salespeople must be provided with sufficient information to understand that actual earnings may vary significantly, not everyone will achieve the represented level of income, and such amounts are before expenses (if any). All earnings representations must also be adequately documented and substantiated. Furthermore, if a specific independent salesperson’s commission or bonus payments are included in an earnings representation, any distributions made for those payments to others in the sales organization must be disclosed or deducted from the figure(s) used.
Uruguay
No information.