Others
Argentina
No other legislation.
List of D.S. Advisory firms.
Audit/ Accounting/ Taxes
Price Waterhouse Coopers (Argentina)
Audit/ Accounting Services: Partner: Carlos M. Barbafina
phone (5411) 4319-4713
email: Carlos.martin.barbarina@ar.pwcglobal.com
Taxes: Jorge San Martin
phone (5411) 4381-8181
Email: jorge.a.san.martin@ar.pwcglobal.com
Dr. Marcelo Bergé
phone (5411) 4374-9272/ 4373-5047
email: mberge@cponline.org.ar
Riveiro Mary & Asociados: Audit/ Acctg/ Tax Services: Oscar Mary
phone (5411) 4373-5800
fax: (5411) 4384-9263/9264
email: oem@riveiromary.com.ar
Legal Services
Estudio Beccar Varela Dr. Alberto Las Heras Shine
Phone (5411) 4372-5100/ 4379-6800
Fax: (5411) 4372-6619-6809-6841
email: alasheras@beccarv.com.ar
Dr. Ricardo Vilamonte
phone/ fax (5411) 4381-9793/6630
email: villamonteasoc@arnet.com.ar
Australia
The principal Acts which affect the operations of direct selling organisations are:
| Federal: | Trade Practices Act | |
|
States:
|
Fair Trading Act
Fair Trading Act Fair Trading Act Door to Door Sales Act Door to Door Sales Act Fair Trading Act |
|
| Territories
|
||
|
Door to Door Trading Act | |
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Consumer Affairs and Fair Trading Act |
Note: This legislation may be sourced from http://www.austlii.edu.au
Austria
No information
Brazil
No information.
- Unfair Trade Practices. Most provinces have legislation to protect the consumer from unfair or unethical practices in the conduct of trade. Quebec and Saskatchewan have incorporated prohibitive business practices in their Consumer Protection Acts. With an increasing trend towards this sort of consumer protection, direct sellers should become familiarised with the unfair trade practices legislation in the province in which they carry on business.
- Frustrated Contracts Acts. Most provinces have such acts.
- Sales of Goods Act – Warranties and Conditions. All of the provinces have such legislation except Quebec, which has a similar provision in its Consumer Protection Act.
- Consumer Credit Reporting Laws. All provinces except New Brunswick have these.
- Unsolicited Goods. All provinces have legislation to protect recipients of unsolicited credit cards, and in some cases, goods.
- Promotional Contests are regulated by the Competition Act and the Criminal Code. Companies conducting promotional contests in the province of Quebec must ensure that they comply with the requirements of the Act respecting Lotteries, Racing, Publicity Contests and Amusement Machines.
- Quebec Charter of the French Language. This charter requires that all labels, leaflets, brochures, directions for use and warranties be in the French language. Other languages are allowed provided they are not given greater prominence than the French. Direct sellers should note that standard form (pre-printed) contracts must be in French unless expressly requested otherwise.
- Privacy Legislation. A few provinces have passed legislation to protect personal information collected by private sector organizations in the course of commercial activities.
FEDERAL LEGISLATION
- Competition Act prohibits certain practices. Criminal offences include bid-rigging, price discrimination and misleading sales promotion offences. Civil constraints include refusal to supply, exclusive dealing and tied sales.
- Natural Health Products Regulations. Came into effect in 2004. They regulate the manufacture and sale of natural health products including product licensing, site licensing, good manufacture practices, clinical trials, labelling and packaging requirements and adverse reaction reporting.
- Consumer Packaging and Labelling Act covers the packaging, labelling, sale, importation and advertising of pre-packaged and certain other products. It is administered federally.
- Food and Drugs Act applies to the sale, advertisement, labelling, packaging and manufacturing of food, cosmetics, drugs and therapeutic devices.
- Personal Information Protection and Electronic Documents Act. Individuals are protected by PIPEDA which sets out rules for how private sector organizations may collect, use or disclose personal information in the course of commercial activities.
Chile
- Pharmaceutical Products need prior registration with the corresponding health authorities and can only be sold in establishments specially authorized to commercialize such kind of products (e.g. pharmacies, drugstores, etc.), therefore, they cannot be freely sold to the public through direct selling. Additionally, Food Supplements and similar kind of products do not need registration but each importation of the same must go through a clearance process before health authorities. Once such process is performed, they can be freely sold to the public through direct selling unless they are classified by the competent health authorities as pharmaceutical products, in which case the rules stated above shall apply. Cosmetic Products needs registration with the relevant health authorities prior to its commercialization but, in general, they can be freely sold to the public through direct selling, unless they are classified as pharmaceutical products, in which case the same rules stated above shall apply.
- Data Protection. Use of personal data must be performed in compliance with applicable laws, mainly the Personal Data Protection Law, which establishes that, save for certain specific exceptions, it is mandatory to obtain the prior written consent of the data subject to gather and process personal data (including communicating personal data to third parties).
Columbia
There are other laws applicable to direct selling such as consumer protection (Decree 3466 Of 1982), unlawful practices (Law 256/96), and competitiveness promotion (Decree 2153 de 1992).
Czech Republic
Amendment to the Civil Code – Act367[PDF]
Consumer Credit Act 321-2001[PDF]
Consumer Protection Act No. 634 – 1992[PDF] — New Amendment of the Act on the protection of consumers – is being discussed in Parliament of the CR.
The Law on Electronic records of sales – new.
Context: The law is under preparation.
If the Law on Electronic records of sales touches the distributor´s base (the third phase of the project), it will be determined after evaluation of the first two phases. First two phases are:
- Phase 1: restaurant / hospitality
- Phase 2: retail / wholesale.
The evaluation of the situation is expected in the late 2016 or early 2017.
The second phase of the project for business entities, which concerns the DSA companies is waiting for the final standpoint if internet sales and cash on delivery will be included in the cash payments.
Directive on Consumer Rights (2011/83/EU)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:304:0064:01:EN:HTML
Adopted: 11 October 2011
Transposition deadline: 13 December 2013.
The rules will be applied in all Member States at latest by 13 June 2014.
The provisions of the Directive on Consumer Rights will apply to contracts concluded after 13 June 2014.
Importantly, the new Directive will repeal the current Distance Selling and Doorstep Selling Directive.
Aim: The Directive aims at achieving a real business-to-consumer internal market, striking the right balance between a high level of consumer protection and the competitiveness of enterprises.
The Directive contains a single set of core rules for distance contracts and off-premises contracts in the European Union.
Main novelties of the Directive:
The Directive will cover all transactions whether solicited or unsolicited.
Cooling-off period is extended to 14 calendar days (also in the case of solicited visits). The 14 day period will begin from the time the consumer receives the goods – not at the conclusion of the contract. This period will be further extended by potentially up to a year if appropriate information is not given at the key stages of the sales process. In addition, Member States (Belgium, France, Greece) that had payment bans before the entry into force of the Consumer Rights Directive are allowed to maintain the payment bans.
The right of withdrawal is extended to online auctions, such as eBay – though goods bought in auctions can only be returned when bought from a professional seller.
There will be a model form for consumers to use when cancelling, although the consumer will not have to use this form.
The period for refunding consumers is cut to 14 days from the date of notice of cancellation. The refund must include the costs of delivery.
Retailers pay for returns, unless specified. The Directive is clear that if retailers want the consumer to bear the cost of returning the goods then it must clearly inform the consumer of this in advance and may need to provide an estimate in advance.
In general, the trader will bear the risk for any damage to goods during transportation, until the consumer takes possession of the goods.
Retailers must not charge more than actual costs for use of credit cards or any other method of payment, or hotlines. This means that a surcharge cannot be added and telephone calls must only cost the standard rate.
Cost transparency: Retailers must ensure that the total cost of a product or service is disclosed including any extra fees or charges. If shoppers are not informed in advance they will not have to pay these fees.
Contracts concluded on the basis of catalogues are covered by the Directive (these types of contracts are currently exempted from the scope of the 85/577/EEC Directive on off-premises contracts).
Prohibition on pre-ticked boxes: If the retailer offers the consumer additional extras – for example, purchasing batteries with an electronic product – these cannot already be pre-selected on the page. The consumer must positively opt in or tick the box in order to select the relevant products.
For distributors of digital content the Directive states that retailers must be clear about compatibility with hardware and software and the application of any technical protection measures.
Unfair Commercial Practices Directive (2005/29/EC)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32005L0029:EN:HTML
Adopted: 11 May 2005 – Transposition deadline: 12 December 2007
Aim: The purpose of this Directive is to contribute to the proper functioning of the internal market and achieve a high level of consumer protection by approximating the laws of the Member States on unfair commercial practices harming consumers’ economic interests.
The Unfair Commercial Practices Directive substantially reinforces existing EU standards on misleading advertising and sets new EU standards against aggressive commercial practices – covering harassment, coercion, undue influence, etc.
As the Directive is a maximum harmonization directive, Member States may not adopt more stringent provisions than required by the Directive. The transposition and implementation of the Directive therefore appeared to be problematic in certain Member States, and resulted in the Commission initiating proceedings against these Member States.
Scope of application: The Directive applies to all business-to-consumer transactions whereby the consumer is influenced by an unfair commercial practice which affects decisions on whether or not to purchase a product, on the freedom of choice in the event of purchase and on decisions as to whether or not to exercise a contractual right. It does not apply to business-to-business transactions. Nor does it address matters relating to taste and decency, health and safety, or contractual law.
Main elements:
A General Clause: A far reaching general clause defining practices which are unfair and therefore prohibited.
Misleading Practices (Actions and Omissions) and Aggressive Practices – the two main categories of unfair commercial practices – are defined in detail.
Safeguards for vulnerable consumers: The Directive contains provisions that aim at preventing exploitation of vulnerable consumers such as children.
Black List: An extensive black list of practices which are banned in all circumstances. Item 14 bans pyramid promotional schemes:
“Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.”
Enforcement of the rules is the task of national consumer protection authorities and courts.
Directive to protect the consumer in respect of contracts negotiated away from business premises
(Doorstep selling directive ) (85/577/EEC)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985L0577:en:HTML
Adopted: 20 December 1985 – Transposition deadline: 31 December 1987
The Doorstep Selling Directive will be repealed once the new Directive on Consumer Rights will have to be applied in all Member States, i.e. by 13 June 2014. The Directive on Consumer Rights will incorporate certain provisions of the current Doorstep Selling Directive, whereas others will be repealed.
Aim: The Directive aims to protect the consumer in respect of contracts negotiated away from business premises.
Main elements:
Protection of consumer consists of:
- The right to receive written notice of right of cancellation at the time of conclusion of the contract;
- Right of cancellation (cooling-off) period of minimal 7 days beginning at the time of conclusion of the contract.
The Directive applies to:
- contracts for the supply of goods or services concerning which the consumer did not request the visit of the trader;
- contracts for the supply of goods or services other than those for which the consumer requested the visit of the trader, provided that when he requested the visit the consumer was not aware that those other goods or services formed part of the trader’s commercial or professional activities. (Member States may exempt these contracts if there is a direct connection with the goods or services concerning which the consumer requested the visit of the trader.)
In other words, solicited visits are not covered by the Directive.
Optional Threshold: Member States may decide that the Directive shall apply only to contracts for which the payment to be made by the consumer exceeds a specified amount. This amount may not exceed 60 Euros.
Exemptions:
- Insurance contracts;
- Securities contracts;
- Construction-, sale-, rental contracts of immovable property;
- Contracts for the supply of foodstuffs or beverages or other goods intended for current consumption in the household and supplied by regular roundsmen;
- Contracts concluded on the basis of catalogues provided the following three conditions are met:
- the contract is concluded on the basis of a trader’s catalogue which the consumer has a proper opportunity of reading in the absence of the trader’s representative;
- there is intended to be continuity of contact between the trader’s representative and the consumer in relation to that or any subsequent transaction;
- both the catalogue and the contract clearly inform the consumer of his right to return goods to the supplier within a period of not less than seven days of receipt or otherwise to cancel the contract within that period without obligation of any kind other than to take reasonable care of the goods.
Distance selling directive (97/7/EC)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997L0007:EN:NOT
Adopted: 20 May 1997- Transposition deadline: 20 May 2000
The Distance Selling Directive will be repealed once the new Directive on Consumer Rights will have to be applied in all Member States, i.e. by 13 June 2014. The Directive on Consumer Rights will incorporate certain provisions of the current Distance Selling Directive, whereas others will be repealed.
Aim: The aim of the Directive is to put consumers, who purchase goods or services through distance communication means, in a similar position to consumers who buy goods or services in shops.
Scope of application: The directive applies to all contracts which are negotiated exclusively by means of one or several means of distance communication.
Main elements:
Obligations imposed upon the supplier
Information requirement: Provision of clear and comprehensible information prior to formation of contract relating to identity of supplier, product, payment etc.
Performance: The seller/supplier must perform his/her part of the contract within 30 days from the day following the day on which the consumer forwarded his/her order.
Rights of the consumer
Cancellation: The consumer has an automatic right to cancel and rescind a contract at any time from its formation until seven working days after the goods are delivered; or for service contracts, seven working days after the contract is formed (which might be before the service was to have been performed).
Protection from fraudulent credit card use: The consumer has the right to be re-credited with the sums paid or to have them returned if his/her credit card or credit card data were fraudulently used.
Unsolicited goods: Unsolicited goods are to be considered as presents; the absence of the consumer’s response does not constitute consent.
Misleading and Comparative Advertising Directive (2006/114/EC)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0114:EN:HTML
Adopted: 12 December 2006 – Entry into force: 12 December 2007
Aim: The Directive aims to protect traders against misleading advertising and its consequences. It also aims to lay down the conditions under which comparative advertising is permitted.
Scope of application: The Directive governs business-to-business relations concerning misleading advertising. Its provisions on comparative advertising also apply in the context of advertising directed at consumers.
Main elements:
Misleading Advertising: According to the Directive, misleading advertising is any advertising which, in any way, including in its presentation, is capable of:
- deceiving the persons to whom it is addressed;
- distorting their economic behavior; or
- as a consequence, harming the interests of competitors.
When determining whether advertising is misleading, several factors shall be taken into account. These are:
- the characteristics of the goods or services concerned;
- the price;
- the conditions of delivery of the goods or provision of the services involved;
- the nature, attributes and rights of the advertiser.
Comparative Advertising: The Directive lays down the conditions under which comparative advertising is permitted and, in particular, it requires traders to make sure that their advertisements:
- are not misleading;
- compare “like with like” – goods and services meeting same needs or intended for the same purpose;
- objectively compare important features of the products or services concerned;
- do not discredit other companies trademarks;
- do not create confusion among traders.
Remedies: The enforcement of this legislation is the responsibility of the competent authorities and courts in the EU countries.
Guarantees of Consumer Goods Directive (1999/44/EC)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0044:EN:HTML
Adopted: 25 May 1999 – Transposition deadline: 1 January 2002
Aim: The aim is to achieve a uniform minimum level of consumer protection in the internal market with respect to the sale of consumer goods and associated guarantees.
Main elements:
The main element of the Directive is that the seller has to guarantee the conformity of the goods with the contract for a period of two years after the delivery of the goods. Certain standards exist for assessing when conformity can be assumed and when not.
If a defect becomes manifest within the two-year period, the consumer has the right to choose the remedy, following a hierarchy. He can first demand repair or replacement free of charge. These first two remedies should satisfy the interests of the consumer on the condition that it does not impose unreasonable costs on the seller. In order to determine whether the costs are unreasonable, the costs of one remedy should be significantly higher than the costs of the other remedy. If the consumer is entitled neither to repair or replacement, the consumer may ask for a price reduction or a rescission of the contract (not granted in case of minor defect);
Burden of proof: If a defect appears during the first six months following the purchase, the consumer does not have to prove that the product was defective at the moment of delivery. It is then up to the seller to prove that the product was without any defect;
The final seller, who is responsible to the consumer, can also hold the producer liable in their business relationship.
Member States can require consumers to inform the seller of the lack of conformity within two months after its discovery. A commercial guarantee must be clearly drafted and indicate what rights it gives on top of consumers’ legal guarantees.
The seller must cover costs of postage, labor and materials.
Product Liability Directive (85/374/EEC)
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985L0374:en:HTML
Adopted: 25 July 1985 – Transposition deadline: 7 August 1988
Aim: The Directive aims at reducing distortions in competition between Member States and to give similar protection to consumers throughout the Community against defective products by bringing closer together the laws of the Member States concerning product liability.
Main elements:
The Directive establishes the principle of liability without fault applicable to European producers. Where a defective product causes damage to a consumer, the producer may be liable.
A product is defective where it does not provide the safety which a person is entitled to expect, taking all circumstances into account.
The injured person carries the burden of proof. He must prove the actual damage, the defect in the product and the causal relationship between damage and defect. However, he does not have to prove the negligence or fault of the producer or importer.
The injured person has three years within which to seek compensation. This period starts from the date on which the injured person became aware of the damage, the defect and the identity of the producer.
In addition, the producer is no longer liable ten years after the date the product was put into circulation.
No contractual clause may allow the producer to limit his liability in relation to the injured person.
National provisions governing civil liability still apply.
France
The prohibition of receiving any kind of payment before a 7 days period after the order, edicted by the 1972 Law, was tempered with the 2014 Law relating to Consumption.
This law maintained the preexisting exceptions (subscriptions to a daily publication and contracts regarding personal care services), and added two more :
– meeting sales organized at the seller’s or consumer’s residence;
– maintenance and repair works requested by the consumer in case of emergency.
Germany
Shop hours are laid down in the Shops Closing Time Act of 28 November 1956 (as amended by the Act of 10 July 1989 – introducing a service evening). Direct selling is affected by Section 20 of the Act which provides that the offering for sale away from business premises is forbidden during the general closing times laid down in Section 3.
The term ‘offering for sale’ means that the product is delivered to the consumer immediately after the conclusion of the contract.
However, Section 20 does not prevent direct sellers from inviting orders, such as the sale of products from catalogues or other promotional literature when the product is delivered later.
Whether Section 20 is applicable depends on the way in which the sales methods are handled.
Guatemala
No legislation
Hungary
Section 1
- This Decree shall apply to the contracts concluded in a fair, market or market hall, outside of seller’s place of business or premises, or in the absence of such, particularly in the residence or work place of a consumer, except the conclusion of the contract is initiated by the consumer.
- The provisions of this Decree shall also apply to the cases when the consumer proposes to the seller to have a contract concluded under the circumstances described in Subsection 1.
- This Decree shall not apply to:
- buildings contracts;
- contracts for the acquisition of real properties or other rights pertaining to real properties;
- insurance contracts;
- securities transactions;
- contracts for passenger transportation on road or taxi services.
- For the purposes of this Decree:
- consumer: a natural person being one party to a contract, falling under the scope of this Decree, outside the sphere of business or professional activities, or is presenting an offer to the seller to conclude such contract;
- seller: a natural person who, as a private entrepreneur acting in his own behalf, or acting as a representative, salesman or employee of a business organisation to conclude a contract, falling under the scope of this Decree, for the sale of merchandise or for the provision of services;
- door to door sales: the activity based on which the seller sells a merchandise or provides services to a consumer based on a contract concluded under the circumstances described in Section 1.
Section 2
- By way of door to door sales activities only the goods that are for a commonly known purpose in unopened industrial packaging may be sold to consumers.
- See Section V – Prohibition on Products
India
Government of Kerala.
Indonesia
The Implementation of Traiding Business Activities by Direct Selling System.
Ireland
Additional Incidental Legislation
Merchandise Marks Act 1970.
Sale of Goods and Supply of Services Act 1980.
Consumer Information (Advertisements) (Disclosure of Business Interest) Order, 1984 (No.168).
Consumer Information (Miscellaneous Goods) (Marking) Order 1984 (No.178).
Liability for Defective Products Act 1991.
European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (No.27).
European Communities (General Product Safety) Regulations 2004 (No.199).
European Communities (Misleading and Comparative Marketing Communications) Regulations 2007 (No.774).
Ireland Compendium updated 16 June 2014.
Italy
Law on Unfair Clauses in Consumer Contracts
The law 52/96 prohibits the use of abusive terms in any standard contract concluded with a consumer by any person acting in the course of his trade, business or profession.
The law contains an indicative list (black list) of clauses which can be classed as abusive.
The law provides that if, notwithstanding this prohibition, unfair terms are used in such a contract they shall be void and that the remaining terms shall continue to be valid and that the contract shall continue to bind the parties upon those terms.
Legislative Decree 146/2007 on unfair commercial practices
Decree 146/2007 concerns the transposition of Directive 2005/59/EC into Italian legislation. The Decree has introduced new rules governing unfair commercial practices that may occur before, during and after a commercial negotiation between a trader and a consumer.
The commercial practices that can be regarded as unfair are:
- misleading practices when they contain false information of they are untruthful thus deceiving the average consumer;
- aggressive practices when they are performed by harassment, coercion or undue influence so that the average consumer’s freedom of choice is significantly impaired.
Both causing or being likely to cause the average consumer to take a transactional decision that he would have otherwise not taken.
Protection of Personal Data
Legislative Decree 196/2003 provides that the recording in a file and any other processing of personal data is lawful only if it is effected in accordance with the law.
In summary the law specifies:
- the obligation to notify in advance the supervisory authority of the creation of a personal data file when those data may be used for promotional purposes or for credit collection;
- the obligation to inform the individual and to communicate his specific rights at the time of collection;
- the obligation to obtain an informed consent from the individual for any processing of his data when the processing is not carried out under a contract or in the context of a quasi-contractual relationship of trust and when the data does not come from sources generally accessible to the public;
- the obligation to obtain an advanced authorisation from the supervisory authority and the express and written consent from the individual for the processing of special categories of data;
- the obligation to ensure that appropriate technical and organisational measures are implemented to protect personal data files against accidental loss or unauthorised destruction and against unauthorised access, modification or other processing;
- the rules governing the transfer, whether temporary or permanent, of personal data to third countries;
- the liabilities and sanctions.
Consumer Guarantees
Legislative decree 24/02 concerns the implementation of 1999/44 EC Directive regarding certain aspects of consumer goods sale and guarantees.
The most noteworthy aspects of the decree are:
- definition of goods: any movables are regarded as consumer goods;
- conformity to contract: the seller is required to deliver goods conforming to the contract and to the description, fit for use, and having the habitual features and performance of the typology of the goods involved. When installation is included in the contract or has been carried out under the seller’s supervision, the faulty installation is equalized to defective conformity of the goods themselves;
- conventional guarantee: any further undertaking by the seller to intervene should the consumer goods not conform to the terms stated in the guarantee statement itself or in the pertinent advertising;
- consumer’s rights: in case of defective conformity existing at the time of delivery of the goods, the consumer can, in the first instance, by his own choice and at no cost, request the repair or replacement of the goods and then, if the requested remedy is impossible or exceedingly onerous, either a price reduction or the cancellation of the contract;
- terms: the seller is expected to put right the faulty conformity manifesting itself within two years of goods delivery, while the consumer loses his rights if he does not notify said fault within two months of the date when it was noticed, and the right, however, lapses in any case after twenty-six months of the goods delivery;
- imperative nature of the regulation: any agreement and contract clause, that aim at excluding or limiting, even if indirectly, recognized consumer’s rights, are void;
- regression right: the final seller can regress with the producer in order to obtain refund of the remedies lent to the consumer.
Japan
There are more than seventy (70) consumer protection laws. Of these, major laws affecting the direct selling industry are:
- Act on Specified Commercial Transactions
- Installment Sales Act
- The Drugs, Cosmetics and Medical Instruments Pharmaceutical Law
- The Act concerning the Prohibition of Private Monopoly and the Maintenance of Fair Trade
- The Civil Law
- The Consumer Contract Law
- Act concerning Protection Information
Lithuania
Entities whose sales, excluding exempted sales, exceed LTL 100 000 within a 12-months period must register as VAT payers in Lithuanian Tax Board within the following 30 days.
Malaysia
Other laws and regulations affecting direct selling are:
-Hire Purchase Act 1967
-Sale of Goods Act 1957
-Contracts Act 1950
-Companies Act 1965
Section 1(4) of the Direct Sales Act states that where there is any conflict between provisions of that act and the statutes set out above, the provisions of the Direct Sales Act shall prevail.
Mexico
The basic issue is to avoid creating an employer / employee relationship between company and direct sellers. It is essential to consult labor law experts to draw up contracts that do not fall under Articles 285 and 291 of the Federal Labor Law (commercial agents and others alike) to avoid confusion between agents and employees.
The Mexican DSA works to ensure that in case of any amendment to the Labor Law it remains established that direct sales do not imply any employer / employee relationship.
New Zealand
Structure of Government New Zealand operates a single level of central government under a mixed member proportional system of representation (MMP). Parliament has 120 seats made up of 60 electorate seats and 60 proportional seats. The electoral system ensures that the final representation in the parliament is exactly in proportion to the percentage of votes gained by the party with a threshold of 5% minimum required if no electorate seats are gained.
The government is made up of the largest party who may govern alone when more than 60 seats are held or in coalition when less are held so long as the coalition exceeds the 60 seats or 50% of the parliament.
Local government is elected separately and has no power to central government. All local government is empowered through controlling legislation from the central government does have the power of general competence allowing the local authority to borrow funds independent of government and fund that debt from rate payers.
=General Law
Most law is based on the British system with case precedents often forming those handed down under British law. Some but not all law is aligned to Australia as the nearest and most significant trading partner and cross references are found in the New Zealand law where this occurs. The ultimate level of appeal is the British Privy Council however there are three tiers of law operation in New Zealand.
- The District Court
- The High Court
- The Appeal Court
Other courts or bodies exist for specific purposes such as:
- The Employment Court
- The Small Claims Disputes Tribunal
The Administration or Bureaucracy
As with all countries there is bureaucracy to deal with the running of government. The key government departments that may impact on Direct Selling are:
- The Inland Revenue Department
- The Ministry of Consumer Affairs
- The Ministry for Economic Development
- The Ministry for the Environment
- The Customs Department
- The Police
Under these are the operations of the various statutory authorities referred to earlier in this document.
Liability Issues
In general terms companies and individuals may be sued or held liable for actions and activities however the level of civil cases in New Zealand is proportionately low compared to the US, Australia or other western nations. While there is no provision for employees to sue when they are injured this is not the case for officials and the Occupational Safety and Health Service will initiate an action for criminal liability if necessary.
Other liabilities for prosecution exist in relation to a range of legislation.
These include such examples as:
- Spillages of toxic substances under the Resource Management Act, HSNO and transport of Dangerous Good Regulations.
- Company Directors liability for trading insolvent or recklessly
- Wages recovery from Directors or responsible persons under the Employment Relations Act
- Breaches of essential safety requirement under the Electricity and Gas regulations
- Fair Trading Act breaches
- Commerce Act breaches
- Consumer Guarantees Act
Injury to Property – The liability of persons causing injury to persons or property is governed by contract and also by the law of negligence. This area is open to legal actions but is rarely used
Norway
No other laws or regulations.
Article 2 .– Relevant Information
2.1 The provider is required to provide consumers with all relevant information to make a decision or make an appropriate choice of consumption and to make appropriate use or consumption of products or services.
2.2 The information must be accurate, sufficient, easily understood, appropriate, timely and easily accessible, and must be provided in Castilian language.
2.3 Without prejudice to the specific requirements of the corresponding sectoral rules, to analyze the relevant information is taken into consideration all that without which it would have taken the decision to use or had been made on terms substantially different. This requires examining whether the omitted information distorts the circumstances in which it made the offer to the consumer.
2.4 Upon assessment of the information, consider the following problems would create consumer confusion that providing too much information or extremely complex, depending on the nature of the product purchased or contracted service.
Article 3 .– Prohibition of false or misleading to the consumer
It is forbidden any information or presentation or omission of information that misleads the consumer into error regarding the nature, origin, method of manufacture, components, applications, volume, weight, dimensions, prices, employment, characteristics, properties, suitability, amount , data quality or any other products or services offered.
Article 4 .– Information on the integrity of the price
4.1 Where the provider display product prices or services or those contained in their price lists, labels, signs, labels, packaging or otherwise, must prominently state the total price of the same, which should include taxes, fees and charges.
4.2 The consumers can not be forced to pay additional sums or charges fixed price, unless they are different or additional services such as transportation, installation, or similar payment which is not included in the price. This possibility should be informed beforehand, appropriate and timely to the consumer, including the price for the additional charges that may be determined by the provider, and expressly accepted by the consumer. The burden of proving this corresponds to the provider.
Article 6 .– Information on prices and foreign currency
6.1 In the event that prices of the products or services are spread or advertise in foreign currency, they are also listed in local currency, in characters and equal, and the indication of the rate accepted for payment. This rule does not apply to those suppliers directly to the public offering products and services to and from abroad.
6.2 If the advertised price in foreign currency, the supplier is obliged to accept payment in that currency or its equivalent in local currency prices to consumer choice.
6.3 In these cases, should be located in conspicuous places from local, posters, notices or similar, with information on the exchange rate accepted for payment.
Article 7 .– Method of payment
7.1 If the supplier differentiates the price of the product or service based on the means of payment such as credit cards or other such information must be made known to the consumer, prominently, a visible and accessible at the local or commercial establishment, through posters, notices or similar. In case of default of the supplier, consumers can not be forced to pay additional amounts, having observed the price set by the product or service.
7.2 In case of offers, promotions, rebates or discounts, consumers can use indifferently any form of payment, unless the supplier to their knowledge, prior to and leading, conditions, restrictions and terms of payment.
Article 11 .– Information on non–original or defects
When it is sold to the public products with a deficiency or defect, used, rebuilt or refurbished, should be reported to the consumer this circumstance noticeably through direct mechanisms of information to be removed either in the articles themselves, labels, envelopes or packages, and the proof corresponding payment being your responsibility to prove compliance with that obligation. Failure to comply with this requirement is considered contrary to good faith in the behavior required of the supplier.
4.14 Warranty and After Sales Service
The conditions of the warranty details and limitations of post–sale service, the name and address of the guarantor, the duration of the warranty must be clearly explained in the form or accompanying literature or provided with the product.
Article 20 .– Guarantees
To determine the suitability of a product or service, compare the same with the assurances that the provider is providing and which is bound. Guarantees are the characteristics, conditions or terms that for the product or service. (…)
(…) May be legal guarantees, express or implied: (…)
b. A guarantee is explicit when it comes to the terms and conditions expressly provided by the supplier to the consumer in the contract, product labeling, advertising, on receipt of payment or any other means by which specifically proved offered the consumer. An express warranty can not be displaced by an implied warranty. (…)
Article 21 .– Protection of consumer expectations
21.1 to lack of express warranty, the implied links to the provider.
21.2 To determine which services and features are incorporated into the terms and conditions of an operation in case of silence of the parties or in case no other evidence to show what the parties actually agreed to, they go to customs and commercial uses, the circumstances surrounding the acquisition and other factors deemed relevant.
In matters not provided, it is considered that the parties agreed that the product or service is suitable for the ordinary purposes for which they are usually purchased or hired as provided in Article 18.21.3 The accreditation of the existence of a condition other than normally expected, given the circumstances, it is to benefit from that status in the relationship of consumption.
Article 22 .– Guarantee of proper use or operation
The provider you commit the words “guaranteed” in the different forms of presentation of a product should inform their scope, duration and conditions, including the identification of the people who spread and facilities where it can become effective. The indication of exclusions or limitations on the provision of security can lead to limitations that are not justified or that denature.
The duration of the repairs under the warranty is not computable within it. In the case of replacement of the product, you must renew the term of the warranty.
4.18 Respect for privacy
Personal or telephone contacts will be made during reasonable hours to avoid interference to privacy. An independent contractor must immediately discontinue a demonstration if required by the consumer.
4.19 Loyalty – Honesty
Independent Entrepreneurs will not abuse the trust of individual consumers, shall respect the lack of commercial experience of them and not exploit the advanced age of these, his illness, lack of understanding or ignorance of the language.
Article V. – Principles
This Code is subject to the following principles: (…)
5. Principle of Good Faith.– When acting in the market and in the field of application of this Code, consumers, providers, consumer associations and their representatives, should guide their conduct according to the principle of good faith, trust and loyalty between the parties . When evaluating consumer behavior are discussed relevant circumstances of the case, as the information provided, the characteristics of recruitment and other elements on the matter. (…)
4.21 Delivery
The Company shall ensure that the products ordered in the order Independent Business are delivered properly and in the agreed time.
Article 18 .– Competence
Fitness is defined as the correspondence between what a consumer expects and what they actually receive, according to what had been offered, advertising and information transmitted, conditions and circumstances of the transaction, the characteristics and nature of the product or service, price, among other factors, according to the circumstances of the case.
The fitness is evaluated according to the nature of the product or service and its ability to satisfy the purpose for which it has been put on the market.
Authorizations by state agencies for the manufacture of a product or providing a service, where necessary, not relieved of liability to the supplier to the consumer.
Contact:
Cinthia Ramirez
cramirez@camaralima.org.pe
DSA PERU
CAPEVEDI
Philippines
No information.Poland
Regulations.
Portugal
VAT (sales tax) independent sales force are VAT exempt until the sales annual limit of 10.000 Euros.
Slovak Republic
Main laws:
- Act No. 513/1991 Coll. the “Commercial Code, as amended
- Consumer protection laws: e.g. Act No. 250/2007 Coll. on consumer protection, as amended, Act No. 102/2014 Coll. on consumer protection at sale of goods or provision of services on basis of remotely concluded contract or contract concluded outside working premises of seller, as amended
Slovenia
In Slovenia all EU directives + above described!
South Africa
Unfair business practice banned by the Department of Trade & Industry – “work from home opportunity” – in the case of direct sellers advertising – sellers must truthfully identify themselves, the firm and their particular products in advertisements – no blind advertising is allowed.
South Korea
No information
The WFDSA International Guide to Direct Selling Legislation is a guide and is not exhaustive either in terms of subjects presented or for all areas of concern to direct selling companies. It is intended to cover general areas of concern. The Guide is not a substitute for legal counsel but only intended to alert you to the general nature of laws and regulations affecting the direct selling industry in a particular country. Consequently, before beginning an operation in any foreign country, it is strongly recommended that competent legal counsel be consulted. While every effort has been made to insure that the information contained in this Guide is accurate, the variety of sources used makes absolute verification difficult. Further, laws and regulations also can change from time to time without notice. Therefore, the WFDSA cannot be held liable for the information included in this publication.
Spain
Spain is now divided into seventeen (17) ‘autonomous regions’, some of which have the power to legislate on consumer matters. So far, five of the regions of Spain: Catalonia, Valencia, Basque Country, Andalucía and Castilla-La Mancha have passed laws whereby direct selling companies have to register with the regional authorities and make a deposit of money as a guarantee of their activities in the region in addition to providing some other information like products sold, names and addresses of direct sellers, etc.
Sweden
Other Swedish laws and rules which affect the activities of direct selling companies:
Act No:
Name of Law
1915:218 The Contracts Act
1972:207 The Liability to Damages Act
1975:635 The Interest Act
1978:599 The Act concerning Hire Purchase Contracts between Traders
1984:292 The Act concerning Contract Terms between Traders
1985:716 Consumer Services Act
1988:1604 Product Safety Act
1990:931 The Sale of Goods Act
1990:932 The Consumer Purchase Act
1992:18 The Product Liability Act
1992:830 The Consumer Credit Act
1994:1512 The Consumer Contract Terms Act
1995:450 Marketing Act
International Chamber of Commerce’s (ICC) Basic Rules for Advertising.
The Market Practices Act regulates the behaviour of companies in the marketplace. The Consumer Ombudsman is the prosecutor in the Marketing Court, whose decision is final.
By virtue of the agreement regarding self-regulation between the National Board for Consumer Protection and the Swedish DSA, the DSA is responsible for monitoring its member companies while the National Board for Consumer Protection is responsible for monitoring non-members.
Regulations for the Establishment and Administration of the Multi-level Marketing Enterprises and Participants (Effective 19 May 2014)
Chapter I General Provisions
Article 1
The Regulations are enacted in accordance with Article 38 of the Multi-level Marketing Supervision Act (hereinafter referred to as the Act).
Article 2
The term Multi-level Marketing Enterprises and Participants Protection Institute (hereinafter referred to as EPPI) used in the Regulations refers to the incorporated foundation established in accordance with the Regulations.
Article 3
The functions of the EPPI are as follows:
1. Mediating civil disputes between multi-level marketing (hereinafter referred to as MLM) enterprises and participants;
2. Assisting participants to bring lawsuits to court as specified in Article 30 of the Regulations;
3. Advancing the payment to the participants and seeking recovery of the liable damages as a result of civil disputes from MLM enterprises;
4. Managing and employing of the protection fund, annual fees and accrued interest contributed by MLM enterprises and participants;
5. Enhancing MLM enterprises and participants’ awareness of MLM regulations;
6. Assisting training activities;
7. Providing information service with regard to MLM regulations.
Chapter II Establishment of the Institute
Article 4
The EPPI shall be established by MLM enterprises designated by the Fair Trade Commission (hereinafter referred to as FTC) by submitting quadruplicate copies of each of the following documents for FTC’s approval:
1. An application stating that the objectives of establishment, name, the location of main office, total assets, operation items and other required information;
2. The original copy of the charter for endowment for the EPPI;
3. A detailed list of endowment including proof of deposits by financial institutions or other relevant documents for cash payments, or certificates of ownership for the endowed land and buildings for other assets;
4. A roster of directors, with photocopies of National Identification Cards and a diagram of any kinship relations between the directors and supervisors;
5. Consent statements to serve as directors;
6. A detailed list of Specimen seals or signatures of the EPPI and directors;
7. Minutes of the founding meeting of board of directors;
8. A roster of supervisors, with photocopies of National Identification Cards, consent statements to serve as supervisors and specimen seals or signatures;
9. Consent letters from the donors to transfer the ownership of the endowed assets to the possession of the EPPI;
10. The operation plan and capital utilization statement.
The board of directors of the EPPI shall register with the court as a legal person within 30 days after receiving the establishment approval from the FTC, and submit a photocopy of the certificate as a legal person to the FTC for reference within 30 days after registration, as well as apply to the local tax collection authorities for a tax code number after registration and submit the result to the FTC for reference.
Article 5
If there is any amendment to the registration, the EPPI shall fill out the application form for amendment and submit it along with quadruplicate copies of related documents to the FTC for approval within 15 days, and thereafter filed with the court for amendment registration.
Article 6
Once the establishment of the EPPI is approved, the donors shall transfer all the endowed assets to the EPPI within 90 days after completion of registration with the court, to register in the name of the EPPI or deposit in a designated account at a financial institution, and thereafter submit the related documents to the FTC for reference.
For the abovementioned endowment that takes the form of cash payments shall be deposited in an account in the name of the EPPI’s preparatory office at a financial institution before approval of application.
Article 7
The act of endowment for the EPPI shall carry the following information:
1. The name of the EPPI, objectives of endowment and location of the main office;
2. The types, amounts, and custody and management of endowed assets;
3. Operation items and their administration;
4. The numbers, qualifications, appointment, term of office, and regulations on by-election as well as re-election of directors, supervisors and members of mediation committee;
5. The organization, method of adopting resolutions and powers of the board of directors;
6. Adoption of accounting system, calculation of fiscal year and timelines for compilation and presentation of budget and final accounting account;
7. The organization of administrative units;
8. Distribution of remaining assets after dissolution;
9. Completion date of the charter for endowment;
10. Other information required according to the regulations of the FTC.
Article 8
The EPPI shall report the following matters and any amendments thereto, to the FTC for approval:
1. Charter for endowment;
2. The procedures for acquisition and disposal of fixed assets;
3. The internal control system;
4. Other matters to be reported for FTC’s approval pursuant to the Regulations or other rules by the FTC.
Chapter III Organization
Article 9
The EPPI shall set up board of directors of 9 members to be selected/ appointed by the FTC as follows:
1. 2 representatives from MLM enterprises filed for report with the FTC;
2. 2 representatives from the participants;
3. 3 or 4 specialists or scholars;
4. 1 or 2 representative(s) from the FTC.
Each director shall serve a 3-year term and may be re-selected/ re-appointed for a second term. The number of directors to serve a second term may not exceed 2/3 of the total number of directors.
The chairperson of the board of directors shall be elected from among the directors, exclusive of the FTC’s representative(s), with a majority vote at a meeting attended by a quorum of over 2/3 of the directors. The result shall become effective upon approval of the FTC.
Article 10
The responsibilities of the board of directors are as follows:
1. Fund raising, administration and management;
2. Election and dismissal of chairperson of the board;
3. Selection of members of the mediation committee;
4. Stipulation and revision of operating regulations;
5. Establishment and administration of internal organization;
6. Development and promotion of work plans;
7. Review of annual budget and final accounting accounts
8. Proposal of amendments to the charter for endowment;
9. Proposal of property purchases and disposal or creation of encumbrance;
10. Proposal of upper limits of advancing liable damages, litigation expenses and attorney’s fees from the protection fund;
11. Other proposals or decisions to be made according to the charter for endowment.
Article 11
The chairperson of the board of directors shall convene and preside over board meetings. In case the chairperson is unable to convene or preside over a meeting, he or she shall designate a director to act on his or her behalf. If the chairperson fails to or is unable to designate one, the other directors shall elect one among themselves to convene and preside over the meeting.
The board meetings shall be held at least once every three months. Ad hoc meetings may be convened when necessary.
Article 12
Decisions of board meetings shall require the attendance of a quorum of over 1/2 of the directors as well as a majority vote at a meeting.
The directors shall attend the aforementioned meetings in person. In any circumstance that the director is unable to attend in person may entrust another director with the power of attorney, which clearly indicated the scope of authorization, to attend on his or her behalf. Each director may only deputize for one director only.
Article 13
Decisions of the EPPI regarding the following matters shall require the attendance of a quorum of over 2/3 of the directors as well as the consent of at least 2/3 of the attending directors:
1. Revision of the charter;
2. Stipulation and revision of organizational regulations;
3. Dissolution or revision of objectives of the EPPI;
4. Property purchases and disposal or creation of encumbrance;
5. Application for loans;
6. Revision of fund custody and management.
If the revision made to the charter as specified in subparagraph 1 of the preceding paragraph involves any of the circumstances described in Article 62 or 63 of the Civil Code, the FTC may apply to the court for necessary disposition.
The matters stated in subparagraphs 1 to 3 and 6 of paragraph 1 shall acquire the prior approval of the FTC.
The agenda for discussion regarding the matters stated in paragraph 1 shall be provided to all the directors as well as filed with the FTC for future reference ten days before the meeting takes place and the FTC may also send staff members to attend the meeting as observers.
Article 14
The EPPI shall have 1 to 3 supervisors to be selected by the FTC from scholars, specialists and impartial persons.
Each supervisor shall serve a 3-year term and may be reselected. The number of reselected supervisors serving for a new term may not exceed 2/3 of the total number of supervisors.The supervisors may investigate the operations and finances of the EPPI, inspect account books or documents, and may also request the board of directors to make reports thereon.
The supervisor may exercise his or her supervision power individually. Once discovering that the board of directors is acting in violation of the laws, charter for endowment, or operating regulations during execution of its duties, the supervisor shall immediately notify the board to cease its conduct while at the same time inform the FTC, and provide the FTC with a written statement of the finding facts within three days.
Article 15
The EPPI shall establish a mediation committee to handle disputes between MLM enterprises and participants. The committee shall comprise 11 to 21 members, with one of them being the chairperson of the committee. The board of directors shall select all these members from scholars, experts and impartial persons with related professional backgrounds or practical experiences. The appointment shall acquire the prior approval of the FTC.
Each mediation committee member shall serve a 3-year term and may be reselected upon expiration of each term.
Decisions made by the mediation committee shall require the attendance of a quorum of over 1/2 the members as well as a majority vote of the attending members.
The members of the mediation committee shall exercise their duties independently in an impartial manner.
Article 16
The person falls within any of the following categories shall not serve as EPPI’s director, supervisor or mediation committee member. He or she already serving in any of these capacities shall be ipso facto discharged:
1. The representative of an MLM enterprise who have been placed on the FTC watch list;
2. Any person who has engaged in inappropriate MLM activities and indicted by a prosecuting agency or transferred to a prosecuting agency by the FTC;
3. Any person who has received a final and unappeasable conviction for violation of the provisions of the Organized Crime Prevention Act;
4. Any person who has received a final and unappeasable conviction for committing the offence of fraud, breach of trust or misappropriation;
5. Any person who has been declared bankrupt and rights and privileges have not been reinstated;
6. Any person has no capacity or a limited capacity to make juridical acts;
7. Any MLM enterprise representative or participant who has not paid endowment for the protection fund or annual fee.
Article 17
The directors, supervisors, mediation committee members and staff members of the EPPI shall recuse themselves when conflict of interests occurs in the execution of duties, but election of the chairperson of board directors and reselection of directors are excluded.
The conflict of interests stated in the preceding paragraph refers to situations when directors, supervisors, mediation committee members or staff members of the EPPI gain profits or reduce loss either directly or indirectly through any act or omission in execution of their duties.
Article 18
The directors, supervisors, mediation committee members and staff members of the EPPI shall not engage in the following conduct:
1. Making inquiries that transgress the laws or disclosing confidential information accessed through work;
2. Demanding, agreeing to accept or receiving bribes or unjustifiable benefits during execution of their duties or for practices that transgress their duties.
Article 19
The directors, supervisors and mediation committee members of the EPPI may receive part-time fees, attendance fees and transportation expenses. The standards for payment shall be established by the EPPI and implemented after reported to the FTC for approval.
The staff members of the EPPI may receive salaries. The standards for payment shall be established by the EPPI and implemented after reported to the FTC for approval.
Chapter IV Finance
Article 20
The sources of the EPPI’s revenue are as follows:
1. Endowed property;
2. Protection fund contributions or annual fees collected from the MLM enterprises and participants;
3. Interest accrued from the property and management earnings;
4. Other donations.
Article 21
The amounts of protection fund contributions and annual fees to be collected are as follows:
1. Protection fund contributions:
(1) Each participant shall contribute 100 New Taiwan Dollars (NTD, the same currency applies hereinafter). Existing participants shall pay within 3 months after establishment of the EPPI and emerging participants shall pay within the current quarter.
(2) MLM enterprises shall contribute according to their turnover in the preceding fiscal year and the amounts are divided into 8 grades as follows:
A. 4 million for those with turnover exceeding 2 billion;
B. 3 million for those with turnover exceeding 1 billion but less than 2 billion;
C. 2 million for those with turnover exceeding 300 million but less than 1 billion;
D. 1 million for those with turnover exceeding 100 million but less than 300 million;
E. 300,000 for those with turnover exceeding 30 million but less than 100 million;
F. 100,000 for those with turnover exceeding 10 million but less than 30 million;
G. 80,000 for those with turnover less than 10 million;
H. 50,000 for new MLM enterprises filed for record.
(3) Existing MLM enterprises shall pay contributions within 3 months after the establishment of the EPPI and new MLM enterprises shall pay within the current quarter after filing for record.
(4) MLM enterprises with business scaled up shall make up the fee difference between grades.
2. Annual fees:
(1) The FTC shall announce the annual fee of participants before the end of January every year according to the scale of the fund. Existing participants shall pay annual fee before the end of March and new participants shall pay within the current quarter of their participation.
(2) The annual fees for MLM enterprises are divided according to their turnover in the preceding fiscal year and the amounts are divided into 10 grades as follows:
A. 100,000 those with turnover exceeding 700 million;
B. 90,000 for those with turnover exceeding 600 million but less than 700 million;
C. 80,000 for those with turnover exceeding 500 million but less than 600 million;
D. 70,000 for those with turnover exceeding 400 million but less than 500 million;
E. 60,000 for those with turnover exceeding 300 million but less than 400 million;
F. 50,000 for those with turnover exceeding 200 million but less than 300 million;
G. 40,000 for those with turnover exceeding 100 million but less than 200 million;
H. 30,000 for those with turnover exceeding 50 million but less than 100 million;
I. 20,000 for those with turnover exceeding 5 million but less than 50 million;
J. 10,000 for new MLM enterprises filed for record.
(3) MLM enterprises shall pay the EPPI annually before the end of March. New MLM enterprises shall pay within the current quarter of filing for record.
The property endowed by MLM enterprises for the establishment of the EPPI may be applied to offset protection fund contributions or annual fees to be paid.
Participants joining the operations of two or more MLM enterprises may pay their protection fund contributions and annual fees through one of the MLM enterprises.
MLM enterprises shall collect the protection fund contributions and annual fees from their participants and pay the EPPI, unless the ways for payment are otherwise provided in the operating regulations of the EPPI.
Protection Fund contributions and annual fees paid shall be nonrefundable.
The EPPI shall produce and update the registers for payers of protection fund contributions and annual fees, and present them to the FTC for reference on a quarterly basis.
Article 22
For the management of accounting matters of the EPPI, the accrual principle shall be adopted as the accounting basis, and the fiscal year shall be based on a calendar year. The accounting system shall be formulated according to the nature of accounting items, actual business operations as well as the needs in development management, and filed to the FTC for reference.
The accounting system mentioned in the preceding paragraph shall include the following item:
1. A general description of the accounting system;
2. Accounting journals and ledgers;
3. The description and usage of the accounting items, accounting documents, accounting books and accounting reports;
4. Standards and procedures of general accounting;
5. Regulations regarding collections, payments, and property management.
Article 23
The EPPI shall open a special account for deposit with the financial institution designated by the FTC to facilitate the control and management of income and expenditure.
Article 24
The endowed assets for the establishment of the EPPI shall be no less than 10 million in cash; the principal under the amount of 10 million shall not be used.
The protection fund shall not be used except for advancing liable damages, litigation assistance and the first year operation of the EPPI.
The annual fees collected shall be used for operation the EPPI.
Article 25
The EPPI shall compile report on budgeting for the next year to be reviewed by the board of directors before the end of October and file it with the FTC for reference.
The EPPI shall compile the final accounting report for the year to be reviewed by the board of directors within six months after the end of each year and file it with the FTC along with the CPA audit report for reference.
The information stated in the preceding 2 paragraphs shall be made public in a proper way.
Chapter V Operations of the Institute
Article 26
The EPPI shall stipulate operating regulations for conducting operations in accordance with the Regulations and file it with the FTC for approval. The same procedure shall apply for revisions.
The operating regulations stated in the preceding paragraph shall include the items specified in Article 3 of the Regulations.
Article 27
MLM enterprises and participants failing to pay protection fund contributions and annual fees as stipulated in paragraph 1 of Article 21 of the Regulations may not apply for mediation. However, those may apply to the EPPI for mediation of civil disputes within the year after paying up the owed amounts.
In addition to applying to the EPPI for mediation, MLM enterprises and their participants, that already filed for record at the time of the EPPI’s establishment and have paid the protection fund contributions and annual fees according to Paragraph 1 of Article 21 of the Regulations, may also apply for mediation of civil disputes taking place since the effective date of the Act.
Article 28
After receiving written requests for mediation from MLM enterprises or participants matching the requirements set forth in the preceding article, the EPPI shall designate personnel to look into the disputes in question and assign 3 mediation committee members to mediate. The assigned mediation committee members shall elect one among themselves to preside the mediation process. With significant disputes, mediation committee meetings may be requested to mediate.
The mediation committee members are required to hold the meeting within 15 days after receiving a written request stated in the preceding paragraph. The meeting may be postponed for 7 days if necessary or with the consent of both parties to the dispute.
The EPPI shall define the requirements and corresponding procedures for significant disputes stated in Paragraph 1and and file for the FTC’s approval before implementation.
Either party to a dispute may not disclose any information with regard to the request, statement or concession proposed by the other party during the mediation process, unless such information is already made public or the disclosure is conducted according to law or with the consent of the other party. The EPPI and its staff members and mediation committee members shall keep confidentiality in mediation process and corresponding information, unless it is otherwise stipulated in related regulations or with the consent of both parties to the dispute.
The mediation committee members (or the committee) shall carefully review related facts and evidence in mediation of disputes and may request MLM enterprises and participants to provide assistance or present related documents and information if it is reasonable and necessary.
The directors (or the board) and supervisors shall not intervene in the mediation of individual disputes.
Article 29
A dispute is settled when both parties to the dispute reach an agreement.
If the MLM enterprise is liable for damages in the settlement, the EPPI shall order the enterprise to pay the liable damages within 30 days. Within a certain amount of the damages, the EPPI shall advance the payment and then seek recovery from the enterprise if the enterprise fails to pay within the given period.
The EPPI shall decide the upper limit of the certain amount stated in the preceding paragraph and file for the FTC’s approval before implementation. The same procedure shall apply when changes are to be made.
Under one of the following circumstances, a dispute is considered unsettled:
1. One of the parties to the dispute fails to attend mediation meetings held by mediation committee members in 2 consecutive times.
2. No settlement has been concluded after 3 mediation meetings are held.
Applicants for mediation may bring civil litigation action or take other measures to seek remedy when it fails to reach an agreement in mediation.
No application may be filed for mediation of the same dispute that has already settled.
Article 30
In cases where the same cause has harmed the interests of more than 20 participants or requested damages amounted to more than 1 million and the EPPI has concluded that the MLM enterprise is liable for damages, though the mediation has failed, the MLM participants may request the EPPI to advance the litigation expenses and attorney’s fees within a certain amount.
MLM participants who have requested the EPPI to advance their litigation expenses and attorney’s fees shall not apply the litigation assistance again until returning the payments.
Article 31
The attorney’s fees mentioned in the preceding article shall not exceed the amounts set forth in Article 4 of the Standards for Payments of Fees for Court-appointed Attorneys and Third-instance Attorneys.
The EPPI shall decide the upper limits of advancing payment of litigation expenses and attorney’s fees set forth in Paragraph 1 of the preceding article and file for the FTC’s approval before implementation. The same procedure shall apply when changes are to be made.
Article 32
The meeting minutes of the board of directors and mediation committee of the EPPI shall be provided to the FTC for reference on a quarterly basis.
Article 33
If directors ( or the board), supervisors and mediation committee members ( or the committee) violate related regulations during execution of their duties, neglect their duties, fail to execute their duties out in a diligent manner or make serious mistakes, the FTC may revoke their decisions, dismiss them or impose other proper sanctions.
Article 34
In order to understand its operations, the FTC may notify the EPPI to provide operation and financial reports at any time, or send staff members or appoint CPAs for auditing whenever necessary.
The EPPI shall be responsible for the fees required for the CPAs’ auditing services stated in the preceding paragraph.
Article 35
The EPPI shall keep the following documents for inspections by the FTC’s staff members:
1. The charter for endowment;
2. Rosters of directors, supervisors and mediation committee members;
3. The certificate for registration of legal person issued by the court;
4. Board of directors meeting minutes for the past 5 years;
5. Dispute resolutions and information related to mediation cases processed for the past 5 years;
6. The inventory of property, budgetary statements, final accounting statements, and CPA-audited financial statements for the past 10 years;
7. Accounting books for the past 10 years and related certificates for the past 5 years;
8. Registers for MLM enterprises and participants which have paid protection fund contributions and annual fees for the past 5 years.
Article 36
The Regulations shall take effect upon the date of promulgation.
Health Food Control Act
This Act was enacted to enhance the management and supervision of matters relating to health food, protect health of the people of the republic and safeguard the rights and interests of consumers.
Taiwan Food and Drug Administration (TFDA) proposed a new amendment of Health Food Control Act, and is planning to scrutinize health food/functional food industry late, especially on labeling and advertisement areas. Currently no clear guideline is released.
Thailand
The direct Sales and Direct Marketing Act, B.E.2545 (2002) which is currently implemented in Thailand.
Turkey
No information.
United Kingdom
DIRECT SELLERS – COOLING-OFF AND BUY BACK
For MLM operators, the direct seller has a legal right to cancel the agreement during the first 14 days and to return any goods and receive a complete refund of all payments made.
At any later time during the agreement, the direct seller has the right to terminate the contract by giving 14 days’ written notice. After termination, he has the legal right to require buy-back of unsold goods which the direct seller purchased up to 90 days before the contract was terminated. He is entitled to a full refund (less a handling charge of, usually, 10%).
The DSA Code of Business Conduct extends the buy-back rights to goods purchased up to one year before the contract was terminated but limits the obligation to refund to 90% of the purchase price, less deductions for handling etc.
The buy-back rights must be included in the direct seller’s written contract: see the DSA’s model direct selling agreement.
PROTECTION OF PERSONAL DATA
The governing Act is the Data Protection Act 1998.
Important aspects are:
- You (the data controller) should have the consent of an individual (e.g. a direct seller) to hold or process his personal data. If you intend to transmit such data outside the European Economic Area, you should obtain specific consent for that (e.g. in your direct seller agreement).
- Individuals are entitled to obtain from you details of personal data you hold held on them – and to ask for it to be corrected.
- Businesses holding or processing personal data are under a duty to register with the Information Commissioner (subject to some exemptions).
- You should comply with the eight data protection principles:
- Personal data shall be processed fairly and lawfully and, in particular, shall not be processed or held unless, either the data subject has given his consent or it is necessary for one of a number of specified purposes: including,
- For the performance of a contract to which the data subject is a party, (or for the taking of steps at the request of the data subject with a view to entering into a contract).
- For compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract.
- In order to protect the vital interests of the data subject.
There are additional restrictions on the use of “sensitive” personal data.
- Personal data shall be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with that purpose or those purposes.
- Personal data shall be adequate, relevant and not excessive in relation to the purpose or purposes for which they are processed.
- Personal data shall be accurate and, where necessary, kept up to date.
- Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes.
- Personal data shall be processed in accordance with the rights of data subjects under this Act.
- Appropriate technical and organisational measures shall be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data.
- Personal data shall not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.
- Personal data shall be processed fairly and lawfully and, in particular, shall not be processed or held unless, either the data subject has given his consent or it is necessary for one of a number of specified purposes: including,
Further information can be obtained from the Information Commissioners’ Office: www.ico.gov.uk
The DSA Codes require direct sellers to be given written advice as to the safeguarding of the personal data which they have relating to their customers and downlines.
The following is available to members of the DSA:
- Specimen Guidance for Direct Sellers on Safeguarding of personal data of others (part of the annotations to the DSA Consumer Code)
CONSUMER GUARANTEES
A consumer guarantee must provide the consumer with something more than the consumer would otherwise be entitled to in law. Otherwise, the guarantee will infringe the Consumer Protection from Unfair Trading Regulations 2008 in which one of the banned practices is: “Presenting rights given to consumers in law as a distinctive feature of the trader’s offer”.
The Sale and Supply of Goods to Consumers Regulations 2002
These regulations implemented an EU Directive. They apply to any consumer guarantee relating to goods supplied in the UK. Such guarantee must:
- be written in English;
- be in plain intelligible language;
- set out the essential particulars necessary for making claims under the guarantee, include the name and address of the guarantor,
- state the duration and territorial scope of the guarantee;
- be made available to consumer in a durable medium if the consumer requests it from either the trader supplying the goods or, if different, the person giving the guarantee.
A consumer guarantee can be enforced by the consumer as a contractual obligation owed by the person giving the guarantee.
Defective goods
Even in the absence of any express guarantee, the Sale of Goods Act 1979 gives the consumer buyer extensive rights against the seller in the event that the goods are defective, including the right to reject the goods (within a reasonable period) and demand a refund if the goods are not of “satisfactory quality”.
UNFAIR COMMERCIAL PRACTICES
The Consumer Protection from Unfair Trading Regulations 2008 implemented an EU Directive on Unfair Practices. They ban:
- Misleading practices,
- Misleading omissions,
- Aggressive practices, and
- Other unfair practices
Such practices/omissions are banned where they lead (or are likely to lead) a consumer to take a transactional decision which otherwise he would not.
Also banned are 31 specific practices which are set out in a ‘black list’. Some of those banned practices are:
- Claiming to be a signatory to a code of conduct when you are not.
- Establishing, operating or promoting a pyramid promotional scheme (see above under “Pyramid Schemes”)
- Falsely claiming that a product is able to cure illnesses, dysfunction or malformations.
- Conducting personal visits to the consumer’s home ignoring the consumer’s request to leave or not to return, except in circumstances and to the extent justified to enforce a contractual obligation.
Paul Dobson
Code Administrator for the UK Direct Selling Association
pauldobson@dsa.org.uk
1st November 2011.
United States
Others
Business Opportunity and Franchise Statutes
While not intended to encompass direct selling, business opportunity laws and franchising laws should be examined by direct selling companies to ensure that their companies are within the specified exemptions for these statutes.
Twenty-six (26) states have specific laws regarding business opportunities. These statutes are aimed at ‘get rich quick’ schemes, where participants expend typically large amounts of money, are promised support for a venture or locations for a venture, and who are promised that their monies will be refunded if the venture is unsuccessful. The business opportunity statutes protect consumers by requiring registration with the state and disclosure of certain information (i.e., company name, officers, litigation against the company, financial information). These statutes also typically contain anti-fraud provisions, where companies can be held liable if they misrepresent information to consumers.
Franchise statutes regulate a method of business where the business has a trademark component and controls the method of business used by others. Typical state franchise laws also have registration, disclosure and anti-fraud elements, similar to business opportunity statutes.
Direct selling companies are neither franchises nor business opportunities. These types of statutes typically have minimum threshold amounts, over which the provisions of the law are triggered. In franchising statutes, these minimum amounts are specified in their definitions of a ‘franchise fee’. The majority of states have threshold amounts of $500 for upfront costs, and many also include a $500 threshold for certain materials necessary for selling, such as a sales kit or inventory. The thresholds can be as low as $200 in some jurisdictions, and direct selling companies must analyze how their initial costs may affect their need to comply with the various state business opportunity and franchising statutes.
In 2012, the Federal Trade Commission’s new Business Opportunity Rule became effective. In the final rule, the FTC said that it would not be practicable to apply the requirements of the Business Opportunity Rule to MLM companies.
Business Opportunity Definition
While it is not the intent of the FTC to cover direct sellers under the Rule, direct sellers should be aware of the provisions of the Rule and the key definitions to ensure that none of their activities would bring them under the Rule.
The key definition in § 437.1 that determines whether a particular business is covered or not is that of business opportunity, which states:
Business opportunity means a commercial arrangement in which:
(1) A seller solicits a prospective purchaser to enter into a new business; and
(2) The prospective purchaser makes a required payment; and
(3) The seller, expressly or by implication, orally or in writing, represents that the seller or one or more designated persons will:
(i) Provide locations for the use or operation of equipment, displays, vending machines, or similar devices, owned, leased, controlled, or paid for by the purchaser; or
(ii) Provide outlets, accounts, or customers, including, but not limited to, Internet outlets, accounts, or customers, for the purchaser’s goods or services; or
(iii) Buy back any or all of the goods or services that the purchaser makes, produces, fabricates, grows, breeds, modifies, or provides, including but not limited to providing payment for such services as, for example, stuffing envelopes from the purchaser’s home.
Presumably most direct selling companies are going to satisfy section (1) and (2) of this definition, assuming there is some charge for participation.
That leaves consideration of section (3). Section (3)(i) doesn’t seem to in any way affect direct sellers, however section (3)(iii) raised concern because of the use of the term “buy back” and the DSA Code of Ethics required buyback provision. DSA and other member companies argued for a change or clarification to this language. The FTC did not ultimately change the language but made it clear in comments that it is not their intent to cover situations where a company agrees to buyback product for a refund such as the DSA required buyback which is in fact a protection for distributors. The FTC stated in the final report that this provision was only designed to, “capture work-at-home business opportunities in which the seller provides the purchaser with some supplies and the purchaser converts those supplies into a product or other “good” for repurchase by the seller or other person.”
Outlets, Customers, Advertising and General Business Advice
That leaves section (3) (ii) which speaks of providing outlets, accounts, or customers. Companies should look at this provision in light of any representations or promises made in recruiting and signing-up distributors. Direct selling companies that neither provides an internet outlet or customers in anyway should not have an issue with the provision. However, companies that do may want to consider how they operate to ensure they are not covered by the Rule.
In § 437.1 (m) this definition language is further defined as:
Providing locations, outlets, accounts and customers means furnishing the prospective purchaser with existing or potential locations, outlets, accounts, or customers; requiring, recommending, or suggesting one or more locators or lead generating companies; providing a list of locator or lead generating companies; collecting a fee on behalf of one or more locators or lead generating companies; offering to furnish a list of locations; or otherwise assisting the prospective purchaser in obtaining his or her own locations, outlets, accounts, or customers, provided, however, that advertising and general advice about business development and training shall not be considered as “providing locations, outlets, accounts, or customers.”
Advertising, general business advice and training offered by direct selling companies does not trigger coverage under this provision. A direct selling company offering a replicated website or crediting sales to distributors made on the corporate website or referring customers through a company website should not trigger coverage under this part of the definition.
Companies should still consider to what extent they or their distributors promise to provide either internet outlets or customers during the recruiting process. But given the overall desire on the part of the FTC to not cover direct sellers and the unlikelihood that potential direct sellers are relying on a promise to provide outlets or customers, the risk of coverage because of this section appears to be relatively low for companies that operate in this manner. However, an offer by a company, including a direct selling company, that indicated the company would provide customers to the distributor and or sales via an Internet outlet with little work on the part of the distributor and where a distributor reasonably relied on these inducements could presumable be covered under the Rule.
Uruguay
No information.