Compilation of Various International Acts Laws for Direct Selling Industry

8/10/2019 Compilation of Various International Acts Laws for Direct Selling Industry

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Compilation of Various

International

for Direct Selling Industry

ACTS &LAWS

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Background of Direct Selling Industry in India

i

With economic development and growing consumerism, the retail sector in India also underwentsignificant changes. Various store and non-store retail formats have evolved to cater to this growingmarket and direct selling is one such non-store retail format. Direct selling refers to the selling ofgoods and services to the consumers away from a fixed retail outlet, generally in their homes,workplace, etc., through explanation and demonstration of the product by direct sellers. Formallydefining, direct selling is a sales and distribution channel / system whereby, on the basis of certainwell defined rules direct sellers can derive income not only from personal sales but also fromongoing sales and consumption by people whom they, directly or indirectly, have introduced to thedirect selling company and for whom they provide ongoing motivation and training.

This sector is one of the fastest growing non-store retail formats, recording double-digit growth inthe post-reform period. The growing Indian market has attracted a large number of Indian andforeign direct selling companies.

Globally, direct selling is a labour-intensive industry and has a positive socio-economic impact interms of higher employment, women empowerment and skill development.

Direct selling offers self-employment opportunities to a large number of people, especially women.The number of direct sellers in India has almost doubled between 2004 and 2009. In terms of thenumber of direct sellers, India ranked 11th among the top direct selling countries in 2009-10. Infuture, this sector is expected to offer employment opportunities not only in urban areas but also inrural areas. Indirect employment is expected to be generated in manufacturing and the supplychain, as direct selling companies develop India as a sourcing hub. The direct selling industry notonly offers an alternative employment opportunity but has also contributed in terms of increasedincomes for those who have entered the industry as direct sellers.

Financial independence, development of personal and business skills, flexible timings and animproved ability to take care of families are other benefits of direct selling.

Benefits of Direct Selling:




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ii

Regulations on Direct Selling in Singapore,Malaysia, United Kingdom and United States of America

Country

This Act prohibits the registration of businesses that aredesigned to promote multi-level marketing schemes orpyramid selling schemes in relation to the distributionand sale of commodities and makes it unlawful for anyperson to promote such schemes.

Singapore

This Order explicitly excludes from the Multi-levelMarketing and Pyramid Selling (Prohibition) Act certainschemes and arrangements. MTI has enhanced thesafeguards on MLM schemes operating in Singapore,with the aim of protecting Singaporean consumers andat the same time promoting a conducive environmentfor legitimate businesses.

This Act provides the legislative framework to allowconsumers aggrieved by unfair practices to haverecourse to civil remedies before the courts. It alsoprovides for a cooling-off period for direct sales and timeshare contracts, and allows specified bodies to entervoluntary compliance agreements with, or apply forinjunction orders against errant traders.

Malaysia An Act to provide for the licensing of persons carrying

on direct sales business, for the regulation of directselling, and for other matters connected therewith.

UnitedKingdom

This Regulation provides framework for consumerprotection for supply by a trader of goods or services toa consumer either through unsolicited visit or solicitedvisit.

Applicable Regulations Objective

Multi-level Marketing andPyramid Selling(Prohibition) Act (Chapter190)

Multi-level Marketing andPyramid Selling(Excluded Schemes andArrangements) Order2000

Consumer Protection(Fair Trading) Act

Act 500 Direct Sales Act1993 (Reprint 2002)

The Consumer Protection(Cancellation of ContractsConcluded away fromBusiness Premises)Regulations 1987

These Regulations amend the Consumer Protection(Cancellation of Contracts Concluded away from

Business Premises) Regulations 1987 (the principalRegulations) and come into force at the same time asthose Regulations.

They make it clear that under the principal Regulationsthe consumer only has to repay money actuallyadvanced to him before the cancellation of the contractin the form of a cash loan or an overdraft.

The Consumer Protection(Cancellation of Contracts

Concluded away fromBusiness Premises)(Amendment) Regulations1988




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iii

Country

This Regulation provides protection to consumers whenyou buy goods or services from a trader on the doorstepor in the home (or in someone else's home) by way ofconsumers right to cooling of period and duties oftraders to inform of the same to the consumers

UnitedKingdom

Applicable Regulations Objective

The Doorstep SellingRegulations

Defines the pyramid promotional schemeUnitedStates

Texas Statutes & Codes

This Act details the punishments for promoting pyramidpromotional scheme

Oklahoma Statutes

Because of absence of a superior legislation, the PrizeChits & Money Circulation (Banning) Act get erroneously

invoked and gets applied to legitimate Direct SellingBusinesses. These businesses otherwise do complywith all relevant regulations for conducting any general& specific business in India.

India

No separate Regulation /Notification / Act in place

for the Direct SellingIndustry




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G o v e r n e d

b y D i r e c t

S a l e s

A c t 1 9 9 3

[ D S A 1 9 9 3 ]

T h e

A c t ' s

r e g u

l a t o r y

a u t h o r

i t y

i s M i n i s t r y o f

D o m e s

t i c T r a d e a n

d

C o n s u m e r A

f f a i r s

S p e c

i f i c

L e g i s l a t

i o n

o n D i r e c t

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G o v e r n e

d b y :

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t i - l e v e

l M a r

k e t i n g

a n d

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i d S e l l i n g

( P r o

h i b i t i o n )

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( C h a p t e r

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t i - l e v e

l M a r

k e t i n g

a n d

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( E x c

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d

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t s ) O r d e r

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t i o n

( F a i r T r a

d i n g

) A c t

[ C P F T A ]

N o

l e g i s l a t

i o n .

G u i

d e l i n e s w o u

l d

h e l p i n r e g u l a t

i n g

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l e s

a c t i v i t y i n t h e

c o u n

t r y

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f

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e r i c a

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t e d

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l e s

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s

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f f

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t S e l

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a l a y s

i a , U

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d

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f A m e r

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iv




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S e c t

i o n 7 o f

t h e

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i d

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C o n d

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h i b i t e d u n

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l e v e

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k e t i n g a n

d

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h i b i t i o n )

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l

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d

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h e m e s o r

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t o

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f

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s

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v




8/132

N o s p e c i f

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l e g i s l a t

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t l y c o v e r e

d

u n d e r t

h e D S A

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t i - L e v e

l

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k e t i n g

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i f i c

f e d e r a

l

r e g u

l a t i o n s

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r e g u

l a t e m u l

t i - l e v e

l

m a r

k e t i n g

c o m p a n i e s

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i a ,

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d ,

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t s ,

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i n g a n

d t h e

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l t h o f

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t o R i c o )

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t a n a

h a s a

m u l

t i - l e v e

l f i l i n g

r e q u

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t a s p a r t

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t i - p y r a m

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s t a t u t e

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d e f i n e

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t h o s e w

h i c h m a r

k e t

p r o d u c

t s o r s e r v

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t h r o u g

h

i n d e p e n d e n

t a g e n t s

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d i f f e r e n t

l e v e

l s a n

d

i n w

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r e c r u i

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c o m p a n i e s

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t i L e v e l

m a r

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c o m p a n i e s .

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m a y

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i t h

r e f e r e n c e t o

t h e

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i d s c

h e m e s

a s a n

d w h e n

a p p r o p r i a t e

l a w

i s

e n a c

t e d .

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l a w s .

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t w o r

k

m a r

k e t i n g

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e i t h e r

t o c o m p l y

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i n g

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( a s a m e n

d e d b y

t h e

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i n g

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1 9 9 6 ) o r i s

e x e m p t e d

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i t e d

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d o m

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i t e d

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f

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e r i c a

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t e d

R u

l e s

o r c o n

d i t i o n

s

M a l a y s i a

R e g u

l a t i o n s

vi




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10/132

D i r e c t s a

l e s l i c e n s e

i s n e c e s s a r y

b e f o r e

c o m m e n c i n g a

d i r e c t

s e l l i n g

b u s i n e s s a s

u n d e r S e c

t i o n

4 o f

D S A 1 9 9 3

L i c e n s e s

f o r

d i r e c t

s a l e s p e r s o n s

N o l a w o r

l e g i s l a t

i o n

t o

r e g i s t e r w

i t h t h e

a u t h o r

i t i e s e x c e p t u n

d e r

t h e E n v i r o n m e n

t o f

P u b l i c H e a

l t h A c t , t h e

o p e r a

t i o n o f

f o o d

e s t a b l i s h m e n

t r e q u i r e s a

l i c e n s e

f r o m

t h e

C o m

m i s s i o n e r o f

P u b l i c

H e a l t h

N o

f e d e r a

l l i c e n s i n g

D i f f e r e n

t f o r m s o f

r e g i s t r a

t i o n s ,

d i s c

l o s u r e a n

d

b o n d

i n g a r e

m a n

d a t e d i n m a n y

m u n

i c i p a l

i t i e s a n

d

l o c a

l i t i e s a n

d

s o m e t

i m e s

b y s t a t e s

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U n

i t e d

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d o m

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f

A m e r

i c a

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t e d

R u

l e s

o r c o n

d i t i o n s

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l a t i o n s

N o s p e c

i f i c c l a u s e

/

m e a s u r e

i s

r e c o m m e n

d e d

/

r e q u

i r e d .

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i f i c r e

f e r e n c e s

m a y

b e m a d e

b y t h e

r e g u

l a t o r w

i t h

r e f e r e n c e

t o t h e

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a n d w

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i s e n a c

t e d

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t f r o m

c o n s u m e r c r e d

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l i c e n s e

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s e l l e r s

l i c e n s i n g

r e q u

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t s a r e

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l a w s

i n E n g l a n

d a n

d

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t

' p e d

d l e r s '

a n y o n e s e

l l i n g

g o o d s

d o o r

t o d o o r

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a n n u a l

l y r e n e w a b

l e

l i c e n s e

f r o m

t h e

c o u n

t r y p o

l i c e .

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t h a s

i n d i c a

t e d t o r e p e a l

t h e

l a w .

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l y

s a l e s p e r s o n s a r e

i n d e p e n d e n

t

c o n t r a c t o r s a n

d a r e

n o t e m p l o y e e s o f

t h e c o m p a n y

A u t h o r

i t y s t

i p u l a t e s

t h a t c o m p a n i e s a r e

r e s p o n s i

b l e f o r t

h e

c o n d u c

t o f t h e i r

d i s t r i b u t o r s

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D i r e c t

S e l l e r s

C a n

b e c l a s s i

f i e d a s

i n d e p e n d e n

t c o n

t r a c t o r s

H o w

e v e r , a

s f a r a s

t h e i r

l i a b i l i t i e s v i s -

- v i s

t h e

c u s t o m e r

i s c o n c e r n e

d ,

t h e y a r e , u n

l e s s

k n o w n

t o t h e b u y e r , a g e n

t s o f

t h e c o m p a n y

A r e n o n - e m p l o y e e s

f o r

f e d e r a

l e m p l o y m e n

t t a x

p u r p o s e s

i f t h e y :

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w h o i s a

d i r e c t s e

l l e r

R e c e

i v e s u

b s t a n t

i a l l y

a l l r e m u n e r a t

i o n

b a s e

d u p o n s a

l e s o r

o t h e r o u t p u

t s ; a n d

H a v e a w r i t

t e n

c o n t r a c t s t a t

i n g

t h a t

t h e y w

i l l n o

t b e

t r e a

t e d a s e m p l o y e e s

R e f e r d e t a i l e

d

a n s w e r

2 t o

g u i d e l

i n e q u e s

t i o n s .

E s s e n t

i a l f o r

d i r e c t

s e l l i n g c o m p a n i e s

t o e n s u r e

t h a t

t h o s e w

h o

p a r t

i c i p a t e

i n t h e i r

s c h e m e s a r e s e

l f -

e m p l o y e d , w

h o l l y

i n d e p e n d e n

t

s a l e s p e o p l e e l s e

t h e y a r e

t r e a

t e d a s

e m p l o y e e s

A p p

l i c a t

i o n o f

E u r o p e a n

c o m m u n

i t y l a w

T h e C o m m e r c i a l

A g e n

t s ( C o u n c

i l

D i r e c t

i v e )

R e g u

l a t i o n s

1 9 9 3

w h i c h g i v e s

t h e

r i g h t t o f i n a n c i a l

c o m p e n s a t

i o n

i f

t h e i r a g e n c y

i s

t e r m

i n a t e d

viii




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N e e

d t o b e

s u b s t a n t i a

t e d

E a r n

i n g

C l a i m s

N o

l e g i s l a t

i o n

N o

i n f o r m a t

i o n

N o s p e c

i f i c c l a u s e

/

m e a s u r e

i s

r e c o m m e n d e d

/

r e q u

i r e d .

H a v e

t o s a

t i s f y

t h e

A d v e r t i s i n g

S t a n

d a r d s

A u t h o r

i t y ' s

r e q u

i r e m e n

t s

t h a t a n y c l a i m

i s

h o n e s t , l

a w f u l ,

d e c e n t a n

d t r u e

S i n g a p o r e

U n

i t e d

K i n g

d o m

U n

i t e d

S t a t e s o

f

A m e r

i c a

S u g g e s

t e d

R u

l e s

o r c o n

d i t i o n s

M a l a y s i a

R e g u

l a t i o n s

T a x e s a n

d

F e e s

i n d i v i

d u a l

P a y

I n c o m e

T a x

t h r o u g

h

t h e

b a s i s o f

d i s c

l o s u r e

R e s p o n s i b

i l i t y l i e s

w i t h t h e

d i s t r i b u t o r s

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t e d a s a n y

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ix




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S o c i a l

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i o n s .

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t i o n o f

c o m p a n i e s w

h i c h

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t o p r o m o t e

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/

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1 t o

g u i d e l

i n e q u e s t

i o n s .

x




13/132

IndexEUROPE. . . . . . . . . . . . . . . . . . 1

MALAYSIA . . . . . . . . . . . . . . . 29

SINGAPORE . . . . . . . . . . . . . . 45

THIALAND . . . . . . . . . . . . . . . 57

UNITED KINGDOM. . . . . . . . . 73

VIETNAM . . . . . . . . . . . . . . . . 99




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EUROPELaw on Direct Selling




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Compilation of Various International for Direct Selling Industry ACTS & LAWS02

EUROPELaw on Direct Selling

1

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION.

Having regard to the Treaty establishing the European Community, and in particular Article 9 5thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and Social Committee

Acting in accordance with the procedure laid down in Article 251 of the Treaty

(1) Article 153(1) and (3)(a) of the Treaty provides that the Community is to contribute to theattainment of a high level of consumer protection by the measures it adopts pursuant toArticle 9 5 thereof.

(2) In accordance with Article 14(2) of the Treaty, the internal market comprises an area withoutinternal frontiers in which the free movement of goods and services and free dom ofestablishment are ensured. The development of fair commercial practices within the areawithout internal fron-tiers is vital for the promotion of the development of cross borderactivities.

(3) The laws of the Member States relating to unfair commercial practices show markeddifferences which can generate appreciable distortions of competition and obstacles to thesmooth functioning of the internal market. In the field of advertising, Council Directive84/450/EEC of 10 September 1984 concerning misleading and comparative advertisingestablishes minimum criteria for harmonising legislation on misleading advertising, but doesnot prevent the Member States from retaining or adopting measures which provide moreextensive protection for consumers. As a result, Member States' provisions on misleadingadvertising diverge significantly.

(4) These disparities cause uncertainty as to which national rules apply to unfair commercialpractices harming consumers' economic interests and create many barriers affecting

Whereas:




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business and consumers. These barriers increase the cost to business of exercising internalmarket freedoms, in particular when businesses wish to engage in cross border marketing,

advertising campaigns and sales promotions. Such barriers also make consumers uncertain oftheir rights and undermine their confidence in the internal market.

(5) In the absence of uniform rules at Community level, obstacles to the free movement ofservices and goods across borders or the freedom of establishment could be justified in thelight of the case-law of the Court of Justice of the European Communities as long as theyseek to protect recognised public interest objectives and are proportionate to thoseobjectives. In view of the Community's objectives, as set out in the provisions of the Treatyand in secondary Community law relating to freedom of movement, and in accordance withthe Commission's policy on commercial communications as indicated in the Communicationfrom the Commission entitled. The follow-up to the Green Paper on Commercial

Communications in the Internal Market', such obstacles should be eliminated. Theseobstacles can only be eliminated by establishing uniform rules at Community level whichestablish a high level of consumer protection and by clarifying certain legal concepts atCommunity level to the extent necessary for the proper functioning of the internal market andto meet the requirement of legal certainty.

(6) This Directive therefore approximates the laws of the Member States on unfair commercialpractices, including unfair advertising, which directly harm consumers' economic interestsand thereby indirectly harm the economic interests of legitimate competitors. In line with theprin ciple of proportionality, this Directive protects consumers from the consequences of suchunfair commercial practices where they are material but recognises that in some cases theimpact on consumers may be negligible. It neither covers nor affects the national laws onunfair commercial practices which harm only competitors' economic interests or which relateto a transaction between traders; taking full account of the principle of subsidiarity, MemberStates will continue to be able to regulate such practices, in conformity with Community law,if they choose to do so. Nor does this Directive cover or affect the provisions of Directive84/450/EEC on advertising which misleads business but which is not misleading forconsumers and on comparative advertising. Further, this Directive does not affect acceptedadvertising and marketing practices, such as legitimate product placement, branddifferentiation or the offering of incentives which may legitimately affect consumers'perceptions of products and influence their behaviour without impairing the consumer'sability to make an informed decision.

(7) This Directive addresses commercial practices directly related to influencing consumers'transactional decisions in relation to products. It does not address commercial practicescarried out primarily for other purposes, including for example commercial communicationaimed at investors, such as annual reports and corporate promotional literature. It does notaddress legal requirements related to taste and decency which vary widely among the




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Member States. Commercial practices such as, for example, commercial solicitation in thestreets, may be undesirable in Member States for cultural reasons. Member States should

accordingly be able to continue to ban commercial practices in their territory, in conformitywith Community law, for reasons of taste and decency even where such practices do not limitconsumers' freedom of choice. Full account should be taken of the context of the individualcase concerned in applying this Directive, in particular the general clauses thereof.

(8) This Directive directly protects consumer economic interests from unfair business-to-consumer commercial practices. Thereby, it also indirectly protects legitimate businessesfrom their competitors who do not play by the rules in this Directive and thus guarantees faircompetition in fields coordinated by it. It is understood that there are other commercialpractices which, although not harming consumers, may hurt competitors and businesscustomers. The Commission should carefully examine the need for Community action in the

field of unfair competition beyond the remit of this Directive and, if necessary, make alegislative proposal to cover these other aspects of unfair competition.

(9) This Directive is without prejudice to individual actions brought by those who have beenharmed by an unfair commercial practice. It is also without prejudice to Community andnational rules on contract law, on intellectual property rights, on the health and safety aspectsof products, on conditions of establishment and authorisation regimes, including those ruleswhich, in conformity with Community law, relate to gambling activities, and to Communitycompetition rules and the national provisions implementing them. The Member States willthus be able to retain or introduce restrictions and prohibitions of commercial practices ongrounds of the protection of the health and safety of consumers in their territory whereverthe trader is based, for example in relation to alcohol, tobacco or pharmaceuticals. Financialservices and immovable property, by reason of their complexity and inherent serious risks,necessitate detailed requirements, including positive obligations on traders. For this reason, inthe field of financial services and immovable property, this Directive is without prejudice tothe right of Member States to go beyond its provisions to protect the economic interests ofconsumers. It is not appropriate to regulate here the certification and indication of thestandard of fineness of articles of precious metal.

(10) lt is necessary to ensure that the relationship between this Directive and existing Communitylaw is coherent, particularly where detailed provisions on unfair commercial practices applyto specific sectors. This Directive there fore amends Directive 84/450/EEC, Directive 97/7/ECof the European Parliament and of the Council of 20 May 1997 on the protection ofconsumers in respect of distance contracts, Directive 98/27/EC of the European Parliamentand of the Council of 19 May 1998 on injunctions for the protection of consumers' interests(2) and Directive 2002/65/EC of the European Parliament and of the Council of 23 September2002 concerning the distance marketing of consumer financial services. This Directiveaccordingly applies only in so far as there are no specific Community law provisions regulatingspecific aspects of unfair commercial practices, such as information requirements and ruleson the way the information is presented to the consumer. It provides protection for




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consumers where there is no specific sectoral legislation at Community level and prohibitstraders from creating a false impression of the nature of products. This is particularly

important for complex products with high levels of risk to consumers, such as certain financialservices products. This Directive consequently complements the Community acquis, which isapplicable to commercial practices harming consumers' economic interests.

(11) The high level of convergence achieved by the approxima-tion of national provisions throughthis Directive creates a high common level of consumer protection. This Directive establishesa single general prohibition of those unfair commercial practices distorting consumers'economic behaviour. It also sets rules on aggressive commercial practices, which arecurrently not regulated at Community level.

(12) Harmonisation will considerably increase legal certainty for both consumers and business.

Both consumers and business will be able to rely on a single regulatory framework based onclearly defined legal concepts regulating all aspects of unfair commercial practices across theEU. The effect will be to eliminate the barriers stemming from the fragmentation of the ruleson unfair commercial practices harming consumer economic interests and to enable theinternal market to be achieved in this area.

(13) In order to achieve the Community's objectives through the removal of internal marketbarriers, it is necessary to replace Member States' existing, divergent general clauses andlegal principles. The single, common general prohibition established by this Directive thereforecovers unfair commercial practices distorting consumers' economic behaviour. In order tosupport consumer confidence the general prohibition should apply equally to unfaircommercial practices which occur outside any contractual relationship between a trader and aconsumer or following the conclusion of a contract and during its execution. The generalprohibition is elaborated by rules on the two types of commercial practices which are by farthe most common, namely mis lead ing commerc ia l p ract ices and aggress ivecommercial practices.

(14) It is desirable that misleading commercial practices cover those practices, includingmisleading advertising, which by deceiving the consumer prevent him from making aninformed and thus efficient choice. In conformity with the laws and practices of MemberStates on misleading advertising, this Directive classifies misleading practices into misleadingactions and misleading omissions. In respect of omissions, this Directive sets out a limitednumber of key items of information which the consumer needs to make an informedtransactional decision. Such information will not have to be disclosed in all advertisements,but only where the trader makes an invitation to purchase, which is a concept clearly definedin this Directive. The full harmonisation approach adopted in this Directive does not precludethe Member States from specifying in national law the main characteristics of particularproducts such as, for example, collectors' items or electrical goods, the omission of whichwould be material when an invitation to purchase is made. It is not the intention of thisDirective to reduce consumer choice by prohibiting the promotion of products which look




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similar to other products unless this similarity confuses consumers as to the commercialorigin of the product and is therefore misleading. This Directive should be without prejudice to

existing Community law which expressly affords Member States the choice between severalregulatory options for the protection of consumers in the field of commercial practices. Inparticular, this Directive should be without prejudice to Article 13(3) of Directive 2002/58/EC ofthe European Parliament and of the Council of 12 July 2002 concerning the processing ofpersonal data and the protection of privacy in the electronic communications sector.

(15) "Where Community law sets out information requirements in relation to commercialcommunication, advertising and marketing that information is considered as material underthis Directive. Member States will be able to retain or add information requirements relatingto contract law and having contract law consequences where this is allowed by the minimumclauses in the existing Community law instru-ments. A non exhaustive list of such information

requirements in the acquis is contained in Annex II. Given the full harmonisation introducedby this Directive only the infor-mation required in Community law is considered as material forthe purpose of Article 7(5) thereof. Where Member States have introduced informationrequirements over and above what is specified in Community law, on the basis of minimumclauses, the omission of that extra information will not constitute a misleading omissionunder this Directive. By contrast Member States will be able, when allowed by the minimumclauses in Community law, to maintain or introduce more stringent provisions in conformitywith Community law so as to ensure a higher level of protection of consumers' individualcontractual rights.

(16) The provisions on aggressive commercial practices should cover those practices whichsignificantly impair the consumer's freedom of choice. Those are practices using harassment,coercion, including the use of physical force, and undue influence.

(17) It is desirable that those commercial practices which are in all circumstances unfair beidentified to provide greater legal certainty. Annex I therefore contains the full list of all suchpractices. These are the only commercial practices which can be deemed to be unfair withouta case-by-case assessment against the provisions of Articles 5 to 9. The list may only bemodified by revision of the Directive.

(18) It is appropriate to protect all consumers from unfair commercial practices; however the Courtof Justice has found it necessary in adjudicating on advertising cases since the enactment ofDirective 84/450/EEC to examine the effect on a notional, typical consumer. In line with theprinciple of proportionality, and to permit the effective application of the protections containedin it, this Directive takes as a benchmark the average consumer, who is reasonably wellinformed and reasonably observant and circumspect, taking into account social, cultural andlinguistic factors, as interpreted by the Court of Justice, but also contains provisions aimed atpreventing the exploitation of consumers whose characteristics make them particularlyvulnerable to unfair commercial practices. Where a commercial practice is specifically aimedat a particular group of consumers, such as children, it is desirable that the impact of the com-




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mercial practice be assessed from the perspective of the average member of that group. It istherefore appropriate to include in the list of practices which are in all circumstances unfair a

provision which, without imposing an out light ban on advertising directed at children,protects them from direct exhortations to purchase. The average consumer test is not astatistical test. National courts and authorities will have to exercise their own faculty ofjudgement, having regard to the case-law of the Court of Justice, to determine the typicalreaction of the average consumer in a given case.

(19) Where certain characteristics such as age, physical or mental infirmity or credulity makeconsumers particularly susceptible to a commercial practice or to the underlying product andthe economic behaviour only of such consumers is likely to be distorted by the practice in away that the trader can reasonably foresee, it is appropriate to ensure that they areadequately protected by assessing the practice from the perspective of the average member

of that group.

(20) It is appropriate to provide a role for codes of conduct, which enable traders to apply theprinciples of this Directive effectively in specific economic fields. In sectors where there arespecific mandatory requirements regulating the behaviour of traders, it is appropriate thatthese will also provide evidence as to the requirements of professional diligence in thatsector. The control exercised by code owners at National or Community level to eliminateunfair commercial practices may avoid the need for recourse to administrative or judicialaction and should therefore be encouraged. With the aim of pursuing a high level of consumerprotection, consumers' organisations could be informed and involved in the drafting of codesof conduct.

(21) Persons or organisations regarded under national law as having a legitimate interest in thematter must have legal remedies for initiating proceedings against unfair commercialpractices, either before a court or before an administrative authority which is competent todecide upon complaints or to initiate appropriate legal proceedings. While it is for national lawto determine the burden of proof, it is appropriate to enable courts and administrativeauthorities to require traders to produce evidence as to the accuracy of factual claims theyhave made.

(22) It is necessary that Member States lay down penalties for infringements of the provisions ofthis Directive and they must ensure that these are enforced. The penalties must be effective,proportionate and dissuasive.

(23) Since the objectives of this Directive, namely to eliminate the barriers to the functioning ofthe internal market represented by national laws on unfair commercial practices and toprovide a high common level of consumer protection, by approximating the laws, regulationsand administrative provisions of the Member States on unfair commercial practices, cannotbe sufficiently achieved by the Member States and can therefore be better achieved atCommunity level, the Community may adopt measures, in accordance with the principle of




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subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle ofproportionality, as set out in that Article, this Directive does not go beyond what is necessary

in order to eliminate the internal market barriers and achieve a high common level ofconsumer protection.

(24) It is appropriate to review this Directive to ensure that barriers to the internal market havebeen addressed and a high level of consumer protection achieved. The review could lead to aCommission proposal to amend this Directive, which may include a limited extension to thederogation in Article 3(5), and/or amendments to other consumer protection legislationreflecting the Commission's Consumer Policy Strategy commitment to review the existingacquis in order to achieve a high, common level of consumer protection.

(25) This Directive respects the fundamental rights and observes the principles recognised in

particular by the Charter of Fundamental Rights of the European Union,

GENERAL PROVISIONS

The purpose of this Directive is to contribute to the proper functioning of the internal market andachieve a high level of con sumer protection by approximating the laws, regulations andadministrative provisions of the Member States on unfair commercial practices harmingconsumers' economic interests.

For the purposes of this Directive:

(a) 'consumer' means any natural person who, in commercial practices covered by this Directive,is acting for purposes which are outside his trade, business, craft or profession;

(b) 'trader' means any natural or legal person who, in commercial practices covered by thisDirective, is acting for purposes relating to his trade, business, craft or profession and anyoneacting in the name of or on behalf of a trader;

HAVE ADOPTED THIS DIRECTIVE:

CHAPTER 1

Article 1

Purpose

Article 2

Definitions




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(c) 'product' means any goods or service including immovable property, rights and obligations;

(d) 'business-to-consumer commercial practices' (hereinafter also referred to as commercialpractices) means any act, omission, course of conduct or representation, commercialcommunication including advertising and marketing, by a trader, directly connected with thepromotion, sale or supply of a product to consumers;

(e) 'to materially distort the economic behaviour of consumers' means using a commercialpractice to appreciably impair the consumer's ability to make an informed decision, therebycausing the consumer to take a transactional decision that he would not have takenotherwise;

(f) 'code of conduct' means an agreement or set of rules not imposed by law, regulation or

administrative provision of a Member State which defines the behaviour of traders whoundertake to be bound by the code in relation to one or more particular commercial practicesor business sectors;

(g) 'code owner' means any entity, including a trader or group of traders, which is responsible forthe formulation and revision of a code of conduct and / or for monitoring compliance with thecode by those wl1o have undertaken to be bound by it;

(h) 'professional diligence' means the standard of special skill and care which a trader mayreasonably be expected to exercise towards consumers, commensurate with honest marketpractice and / or the general principle of good faith in the trader's field of activity;

(i) 'invitation to purchase' means a commercial communication which indicates characteristics ofthe product and the price in a way appropriate to the means of the commercial communication used and thereby enables the consumer to make a purchase;

(j) 'undue influence' means exploiting a position of power in relation to the consumer so as toapply pressure, even with out using or threatening to use physical force, in a way whichsignificantly limits the consumer's ability to make an informed decision;

(k) 'transactional decision' means any decision taken by a consumer concerning whether, howand on what terms to purchase, make payment in whole or in part for, retain or dispose of aproduct or to exercise a contractual right in relation to the product, whether the consumerdecides to act or to refrain from acting;

(l) 'regulated profession' means a professional activity or a group of professional activities,access to which or the pursuit of which, or one of the modes of pursuing which, is conditional, directly or indirectly, upon possession of specific professional qualifications, pursuantto laws, regulations or administrative provisions.




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Article 3

Scope1. This Directive shall apply to unfair business-to-consumer commercial practices, as laid down

in Article 5, before, during and after a commercial transaction in relation to a product.

2. This Directive is without prejudice to contract law and, in particular, to the rules on the validity,formation or effect of a contract.

3. This Directive is without prejudice to Community or national rules relating to the health andsafety aspects of products.

4. In the case of conflict between the provisions of this Directive and other Community rulesregulating specific aspects of unfair commercial practices, the latter shall prevail and apply tothose specific aspects.

5. For a period of six years from 12 June 200 7, Member States shall be able to continue to applynational provisions within the field approximated by this Directive which are more restrictiveor prescriptive than this Directive and which implement directives containing minimumharmonisation clauses. These measures must be essential to ensure that consumers areadequately protected against unfair commercial practices and must be proportionate to the-attainment of this objective. The review referred to in Article 18 may, if consideredappropriate, include a proposal to prolong this de-rogation for a further limited period.

6. Member States shall notify the Commission without delay of any national provisions appliedon the basis of paragraph 5.

7. This Directive is without prejudice to the rules determining the jurisdiction of the courts.

8. This Directive is without prejudice to any conditions of establishment or of authorisationregimes, or to the deontological codes of conduct or other specific rules governing regulatedprofessions in order to uphold high standards of integrity on the part of the professional,which Member States may, in conformity with Community law, impose on professionals.

9. In relation to 'financial services', as defined in Directive 2002/65/EC, and immovable property,Member States may impose requirements which are more restrictive or prescriptive than thisDirective in the field which it approximates.

10. This Directive shall not apply to the application of the laws, regulations and administrativeprovisions of Member States relating to the certification and indication of the standard of fineness of articles of precious metal.




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Article 4

Article 5

Internal market

CHAPTER 2

Member States shall neither restrict the freedom to provide services nor restrict the freemovement of goods for reasons falling within the field approximated by this Directive.

UNFAIR COMMERCIAL PRACTICES

Prohibition of unfair commercial practices

1. Unfair commercial practices shall be prohibited .

2. A commercial practice shall be unfair if:

(a) it is contrary to the requirements of professional diligence, and

(b) it materially distorts or is likely to materially distort the economic behaviour withregard to the product of the average consumer whom it reaches or to whom it isaddressed, or of the average member of the group when a commercial practice isdirected to a particular group of consumers.

3. Commercial practices which are likely to materially distort the economic behaviour only of aclearly identifiable group of consumers who are particularly vulnerable to the practice or theunderlying product because of their mental or physical infirmity, age or credulity in a waywhich the trader could reasonably be expected to foresee, shall be assessed from theperspective of the average member of that group. This is without prejudice to the commonand legitimate advertising practice of making exaggerated statements or statements whichare not meant to be taken literally.

4. In particular, commercial practices shall be unfair which:

(a) are misleading as set out in Articles 6 and 7, or

(b) are aggressive as set out in Articles 8 and 9.

5. Annex I contains the list of those commercial practices which shall in all circumstancesbe regarded as unfair. The same single list shall apply in all Member States and may only bemodi fied by revision of this Directive.




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Section 1

Article 6Misleading commercial practices

Misleading actions

1. A commercial practice shall be regarded as misleading if it contains false information and istherefore untruthful or in any way, including overall presentation, deceives or is likely todeceive the average consumer, even if the information is factually correct, in relation to one ormore of the following elements, and in either case causes or is likely to cause him to take atransactional decision that he would not have taken otherwise:

(a) the existence or nature of the product;

(b) the main characteristics of the product, such as its availability, benefits, risks, execution,composition, accessories, after sale customer assistance and complaint handling,method and date of manufacture or provision, delivery, fitness for purpose, usage,quantity, specification, geographical or com mercial origin or the results to be expectedfrom its use, or the results and material features of tests or checks carried out on theproduct;

(c) the extent of the trader's commitments, the motives for the commercial practice and thenature of the sales process, any statement or symbol in relation to direct or indirectsponsor ship or approval of the trader or the product;

(d) the price or the manner in which the price is calculated, or the existence of a specificprice advantage;

(e) the need for a service, part, replacement or repair;

(f) the nature, attributes and rights of the trader or his agent, such as his identity and assets,his qualifications, status, approval, affiliation or connection and ownership of industrial,commercial or intellectual property rights or his awards and distinctions;

(g) the consumer's rights, including the right to replacement or reimbursement underDirective 1999/44/EC of the European Parliament and of the Council of 25 May 1999 oncertain aspects of the sale of consumer goods and associated guarantees, or the risks hemay face.

(a) 1974 c. 39.




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2. A commercial practice shall also be regarded as misleading if in its factual context, takingaccount of all its features and circumstances, it causes or is likely to cause the average

consumer to take a transactional decision that he would not have taken otherwise, and itinvolves:

(a) any marketing of a product, including comparative advertis ing, which creates confusionwith any products, trade-marks, trade names or other distinguishing marks of acompetitor;

(b) non-compliance by the trader with commitments contained in codes of conduct by whichthe trader has undertaken to be bound, where:

(i) the commitment is not aspirational but is firm and is capable of being verified,

and

(ii) the trader indicates in a commercial practice that he is bound by the code.

1. A commercial practice shall be regarded as misleading if, in its factual context, taking accountof all its features and circumstances and the limitations of the communication medium, itomits material information that the average consumer needs, according to the context, totake an informed transactional decision and thereby causes or is likely to cause the averageconsumer to take a transactional decision that he would not have taken otherwise.

2. It shall also be regarded as a misleading omission when, taking account of the mattersdescribed in paragraph 1, a trader hides or provides in an unclear, unintelligible, ambiguous oruntimely manner such material information as referred to in that paragraph or fails to identifythe commercial intent of the commercial practice if not already apparent from the context,and where, in either case, this causes or is likely to cause the average consumer to take atransactional decision that he would not have taken otherwise.

3. Where the medium used to communicate the commercial practice imposes limitations ofspace or time, these limitations and any measures taken by the trader to make theinformation available to consumers by other means shall be taken into account in decidingwhether information has been omitted.

4. In the case of an invitation to purchase, the following information shall be regarded asmaterial, if not already apparent from the context:

(a) the main characteristics of the product, to an extent approptiate to the medium andthe product;

Article 7

Misleading omissions




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(b) the geographical address and the identity of the trader, such as his trading name and,where applicable, the geographical address and the identity of the trader on whose

behalf he is acting;

(c) the price inclusive of taxes, or where the nature of the product means that the pricecannot reasonably be calculated in advance, the manner in which the price iscalculated, as well as, where appropriate, all additional freight, delivery or postalcharges or, where these charges cannot reasonably be calculated in advance, the factthat such additional charges may be payable;

(d) the arrangements for payment, delivery, performance and the complaint handlingpolicy, if they depart from the requirements of professional diligence;

(e) for products and transactions involving a right of withdrawal or cancellation, theexistence of such a right.

5. Information requirements established by Community law in relation to commercialcommunication including advertising or marketing, a non-exhaustive list of which iscontained in Annex II, shall be regarded as material.

A commercial practice shall be regarded as aggressive if, in its factual context, taking account of allits features and circumstances, by harassment, coercion, including the use of physical force, orundue influence, it significantly impairs or is likely to significantly impair the average consumer'sfreedom of choice or conduct with regard to the product and thereby causes him or is likely tocause him to take a transactional decision that he would not have taken otherwise.

In determining whether a commercial practice uses harassment, coercion, including the use ofphysical force, or undue influence, account shall be taken of:

(a) its timing, location, nature or persistence;

Section 2

Article 8

Article 9

Aggressive commercial practices

Aggressive commercial practices

Use of harassment, coercion and undue influence




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(b) the use of threatening or abusive language or behaviour;

(c) the exploitation by the trader of any specific misfortune or circumstance of such gravity asto impair the consumer's judgement, of which the trader is aware, to influence theconsumer's decision with regard to the product;

(d) any onerous or disproportionate non-contractual barriers imposed by the trader where aconsumer wishes to exercise rights under the contract, including rights to terminate acontract or to switch to another product or another trader;

(e) any threat to take any action that cannot legally be taken.

This Directive does not exclude the control, which Member States may encourage, of unfaircommercial practices by code owners and recourse to such bodies by the persons ororganisations referred to in Article 11 if proceedings before such bodies are in addition to the courtor administrative proceedings referred to in that Article.

Recourse to such control bodies shall never be deemed the equivalent of foregoing a means ofjudicial or administrative recourse as provided for in Article 11.

1. Member States shall ensure that adequate and effective means exist to combat unfaircommercial practices in order to enforce compliance with the provisions of this Directive inthe interest of consumers.

Such means shall include legal provisions under which persons or organisations regarded undernational law as having a legitimate interest in combating unfair commercial practices, includingcompetitors, may:

CHAPTER 3

Article 10

CHAPTER 4

Article 11

CODES OF CONDUCT

Codes of conduct

FINAL PROVISIONS

Enforcement




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- either with interim effect,

or

- with definitive effect,

on the understanding that it is for each Member State to decide which of the two options to select.Furthermore, Member States may confer upon the courts or administrative authorities powersenabling them, with a view to eliminating the continuing effects of unfair commercial practices thecessation of which has been ordered by a final decision:

(a) to require publication of that decision in full or in part and in such form as they deem adequate;

(b) to require in addition the publication of a corrective statement.

3. The administrative authorities referred to in paragraph 1 must:

(a) be composed so as not to cast doubt on their Impartiality;

(b) have adequate powers, where they decide on complaints, to monitor and enforce theobservance of their decisions effectively;

(c) normally give reasons for their decisions.

Where the powers referred to in paragraph 2 are exercised exclusively by an administrativeauthority, reasons for its decisions shall always be given. Furthermore, in this case, provision mustbe made for procedures whereby improper or unreasonable exercise of its powers by theadministrative authority or improper or unreasonable failure to exercise the said powers can be thesubject of judicial review.

Member States shall confer upon the courts or administrative authorities powers enabling them inthe civil or administrative proceedings provided for in Article 11:

(a) to require the trader to furnish evidence as to the accuracy of factual claims in relation to acommercial practice if, taking into account the legitimate interest of the trader and anyother party to the proceedings, such a requirement appears appropriate on the basis ofthe circumstances of the particular case;

and

(b) to consider factual claims as inaccurate if the evidence demanded in accordance with (a) isnot furnished or is deemed insufficient by the court or administrative authority.

Article 12

Courts and administrative authorities: substantiation of claims




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Article 1.3

Article 1 4

'Article 1

Penalties

Amendments to Directive 84/450/EEC

Member States shall lay down penalties for infringements of national provisions adopted inapplication of this Directive and shall take all necessary measures to ensure that these areenforced. These penalties must be effective, proportionate and dissuasive.

Directive 84/450/EEC is hereby amended as follows:

1. Article 1 shall be replaced by the following:

The purpose of this Directive is to protect traders against misleading advertising and the unfairconsequences thereof and to lay down the conditions under which comparative advertising ispermitted.';

2. in Article 2:

- point 3 shall be replaced by the following:

'3. "trader means any natural or legal person who is acting for purposes relating to his trade, craft,business or profession and any one acting in the name of or on behalf of a trader.',

- the following point shall be added:

4. "code owner" means any entity, including a trader or group of traders, which is responsiblefor the for mulation and revision of a code of conduct and/or for monitoring compliance withthe code by those who have undertaken to be bound by it.';

3a shall be replaced by the following:

'Article 3a

1. Comparative advertising shall, as far as the comparison is concerned, be permitted when thefollowing conditions are met:




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(a) it is not misleading within the meaning of Articles 2 (2), 3 and 7 (1) of this Directive orArticles 6 and 7 of Directive 2005 / 29 / EC of the European Parliament and of the

Council of 11 May 2005 concerning unfair business-to-consumer commercial practices inthe internal market;

(b) it compares goods or services meeting the same needs or intended for the samepurpose;

(c) it objectively compares one or more material, relevant, verifiable and representativefeatures of those goods and services, which may include price;

(d) it does not discredit or denigrate the trade marks, trade names, other distinguishingmarks, goods, services, activities, or circumstances of a competitor;

(e) for products with designation of origin, it relates in each case to products with the samedesignation;

(f) it does not take unfair advantage of the reputation of a trade mark, trade name or otherdistinguishing marks of a competitor or of the designation of origin of competingproducts;

(g) it does not present goods or services as imitations or replicas of goods or servicesbearing a protected trade mark or trade name;

(h) it does not create confusion among traders, between the advertiser and a competitor orbetween the advertiser's trade marks, trade names, other distinguishing marks, goods orservices and those of a competitor.

4. Article 4(1) shall be replaced by the following:

'1. Member States shall ensure that adequate and effective means exist to combatmisleading advertising in order to enforce compliance with the provisions on comparativeadvertising in the interest of traders and competitors. Such means shall include legalprovisions under which persons or organisations regarded under national law as having alegitimate interest in combating misleading advertising or regulating comparativeadvertising may;

(a) take legal action against such advertising;

or

(b) bring such advertising before an administrative authority competent either to decideon complaints or to initiate appropriate legal proceedings.




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It shall be for each Member State to decide which of these facilities shall be available and whetherto enable the courts or administrative authorities to require prior recourse to other established

means of dealing with complaints, including those referred to in Article 5.

It shall be for each Member State to decide:

(a) whether these legal facilities may be directed separately or jointly against a number oftraders from the same economic sector;

and

(b) whether these legal facilities may be directed against a code owner where the relevantcode promotes non-compliance with legal requirements.';

5. Article 7(1) shall be replaced by the following:

1. This Directive shall not preclude Member States from retaining or adopting provisionswith a view to ensuring more extensive protection, with regard to misleading advertising,for traders and competitors.'

Article 15 above "Amendments to Directives" 97/7/EC and 2002/65/EC

1. Article 9 of Directive 97/7/EC shall be replaced by the following:

Given the prohibition of inertia selling practices laid down in Directive 2005/29/EC of 11 May 2005of the European Parliament and of the Council concerning unfair business-to-consumer commercialpractices in the internal market, Member States shall take the measures necessary to exempt theconsumer from the provision of any consideration in cases of unsolicited supply, the absence of aresponse not constituting consent.

2. Article 9 of Directive 2002/65/EC shall be replaced by the following:

Given the prohibition of inertia selling practices laid down in Directive 2005/29/EC of 11 May 2005of the European Parliament and of the Council concerning unfair business-to-consumer commercialpractices in the internal market and without prejudice to the provisions of Member States' legis-lation on the tacit renewal of distance contracts, when such rules permit tacit renewal, MemberStates shall take measures to exempt the consumer from any obligation in the event of unsolicitedsupplies, the absence of a reply not constituting consent.

'Article 9

Article 9

Inertia selling




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Article 16

Article 17

Article 18

Amendments to Directive 98/27/EC and Regulation (EC) No 2006/2004

Information

Review

1. In the Annex to Directive 98/27/EC, point 1 shall be replaced by the following:

'1, Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005concerning unfair business to-consumer commercial practices in the internal mar ket

2. In the Annex to Regulation (EC) No 2006/2004 of the Euro pean Parliament and of the Councilof 27 October 2004 on cooperation between national authorities responsible for theenforcement of the consumer protection law (the Regulation on consumer protectioncooperation) the following point shall be added:

'16,Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005concerning unfair business-to-consumer commercial practices in the internal market.

Member States shall take appropriate measures to inform consumers of the national lawtransposing this Directive and shall, where appropriate, encourage traders and code owners toinform consumers of their codes of conduct

l, By 12 June 2011 the Commission shall submit to the European Parliament and the Council acomprehensive report on the application of this Directive, in particular of Articles 3(9)

Compilation of Various International Acts Laws for Direct Selling Industry

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