Germany

Germany

Report Topics:

1:- General Information

2:- Cooling-off Period

3:- Pyramid Schemes

4:- Multi-Level Marketing

5:- Prohibition on Products

6:- Credit Restrictions Country

7:- Money Collections

8:- Licenses

9:- Status of Direct Sellers

10:- Earnings Claims

11:- Taxes and Fees

12:- Social Security

13:- Others

  1. General Information Direct selling in Germany is regulated under general commercial law, consumer protection laws, and competition law. The primary legal sources include the German Civil Code (Bürgerliches Gesetzbuch – BGB), the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb – UWG), and EU directives such as Directive 2005/29/EC on unfair commercial practices. Direct selling is a legally accepted business model, provided it complies with relevant legal provisions.
  2. Cooling-off Period Under Section 355 of the German Civil Code (BGB) and Directive 2011/83/EU on consumer rights, consumers have a 14-day withdrawal period when purchasing goods or services off-premises, including direct selling transactions. The seller must provide clear information about this right, and failure to do so extends the withdrawal period to up to 12 months.
  3. Pyramid Schemes Pyramid schemes are explicitly prohibited under Section 16(2) of the Unfair Competition Act (UWG) and EU Directive 2005/29/EC on unfair commercial practices. Any system where earnings primarily derive from recruiting new participants rather than the sale of goods or services is considered an illegal pyramid scheme.
  4. Multi-Level Marketing (MLM) MLM is legal in Germany as long as it complies with competition and consumer protection laws. Companies must ensure that earnings primarily come from product sales rather than recruitment. Misleading or aggressive marketing practices are prohibited under the UWG.
  5. Prohibition on Products Germany has strict regulations on certain product categories, such as pharmaceuticals (Medicinal Products Act – Arzneimittelgesetz), food supplements (Food and Feed Code – Lebensmittel- und Futtermittelgesetzbuch), and cosmetics (EU Regulation 1223/2009). Any direct selling of such products must comply with specific legal requirements.
  6. Credit Restrictions Germany has strict regulations on consumer credit agreements under the German Civil Code (Bürgerliches Gesetzbuch – BGB) and the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG). Specifically, Sections 491-512 of the BGB regulate consumer credit agreements, ensuring transparency and fair terms for borrowers. Additionally, Germany is in the process of implementing the EU Consumer Credit Directive (Directive (EU) 2023/2225), which replaces Directive 2008/48/EC., which enhances consumer protection by strengthening transparency, adapting credit markets to digitalization, and increasing disclosure obligations. The directive came into force on October 30, 2023, and must be transposed into national law by November 20, 2025. The new provisions are expected to apply from November 2026.Once fully implemented, the directive will introduce increased information and disclosure obligations for lenders, ensuring greater transparency and protection for consumers entering into credit agreements. Direct sellers offering installment payments must comply with these provisions and ensure consumer protection. Direct sellers offering installment payments must comply with these credit provisions and ensure consumer protection.
  7. Money Collections Unlicensed money collection and financial schemes are prohibited under the German Banking Act (Kreditwesengesetz – KWG). Depending on their structure, they may also fall under the Securities Trading Act (Wertpapierhandelsgesetz – WpHG), the Investment Act (Vermögensanlagengesetz – VermAnlG), or the Money Laundering Act (Geldwäschegesetz – GwG). Systems involving payment services may require a license under the Payment Services Supervision Act (ZAG). Under the Payment Services Supervision Act (ZAG), a BaFin license may be required if a company processes third-party payments, offers a customer wallet system, or facilitates transactions within its network. Using external payment providers for an online shop generally does not require a license.
  8. Licenses Generally, no special license is required for direct selling, except in regulated industries (e.g., finance, pharmaceuticals). Businesses must register with the local trade office (Gewerbeamt) under the Trade Regulation Act (Gewerbeordnung – GewO).
  9. Status of Direct Sellers Direct sellers typically operate as independent contractors under Section 84 of the German Commercial Code (Handelsgesetzbuch – HGB). Additionally, a significant number of companies work with contract dealers, whose legal status is not explicitly regulated under German law. Furthermore, door-to-door sales, particularly in the telecommunications and energy sectors, are sometimes also carried out by employees.
  10. Earnings Claims The UWG prohibits misleading advertising, including exaggerated earnings claims. Companies must provide transparent, factual, and evidence-based income disclosures. Violations can lead to legal action by consumer protection authorities.
  11. Taxes and Fees Direct sellers must comply with German tax regulations, including:
  1. Social Security
    Independent direct sellers are responsible for their own social security contributions, including health insurance (Krankenversicherung) and pension schemes (Rentenversicherung). Unlike dependent employees, who must contribute to statutory social security (including unemployment insurance and long-term care insurance), self-employed individuals are generally not subject to these obligations. However, they must ensure their own coverage, particularly for health insurance and retirement planning. Exceptions exist, such as mandatory pension insurance for certain professions (e.g., craftsmen, teachers, artists, and publicists).

As of 2025, discussions are ongoing regarding the introduction of a mandatory retirement insurance requirement for self-employed individuals to ensure broader retirement security. The exact design of this obligation has not yet been determined, but it may require self-employed individuals either to contribute to the statutory pension scheme or to provide proof of an equivalent private retirement plan.

  1. Others Germany enforces strict data protection regulations under the General Data Protection Regulation (DSGVO/GDPR) and the Federal Data Protection Act (BDSG). These laws govern the processing of personal data and require businesses to ensure transparency, obtain explicit consent, and implement security measures to protect user information. Direct selling companies must clearly inform individuals about data usage, safeguard personal data against breaches, and respect rights such as access, correction, and deletion. Additionally, businesses must comply with data security requirements outlined in the Telecommunications-Telemedia Data Protection Act (TTDSG) and adhere to cross-border data transfer rules under the EU Data Protection Framework. Non-compliance with the DSGVO can result in fines of up to €20 million or 4% of annual global turnover.

Regulatory Authorities (not conclusive)

  • Federal Cartel Office (Bundeskartellamt) – Ensures fair competition.
  • Federal Financial Supervisory Authority (BaFin) – Regulates financial transactions.
  • Federal Office of Justice (Bundesamt für Justiz) – Oversees consumer protection laws.
  • Local trade offices (Gewerbeamt) – Handles business registrations.
  • Consumer Protection Agencies (Verbraucherschutzverbände) – Monitors compliance with consumer laws.
  • Centre for Protection against Unfair Competition (Wettbewerbszentrale) – Enforces fair trade practices and combats unfair competition.
  • Federal Network Agency (Bundesnetzagentur – BNetzA) – Regulates telecommunications, postal services, and energy markets. Relevant for businesses involved in e-commerce, telecommunications, and digital services.
  • Federal Data Protection and Information Commissioner (BfDI) – Oversees compliance with GDPR (DSGVO) and federal data protection laws. Crucial for companies handling personal data.
  • Customs Administration (Zoll) – Regulates import/export, VAT, and customs duties. Essential for businesses involved in international trade.
  • Federal Environment Agency (Umweltbundesamt – UBA) – Monitors environmental compliance, relevant for sustainability regulations and eco-friendly products.
  • Federal Office for Economic Affairs and Export Control (BAFA) – Regulates foreign trade, export controls, and subsidies. Important for businesses dealing with international markets.
  • German Patent and Trade Mark Office (DPMA) – Manages patents, trademarks, and designs. Critical for companies protecting intellectual property.
  • Health Authorities (Gesundheitsämter) – Oversee health regulations, relevant for businesses in food, pharmaceuticals, and cosmetics.

 

 

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