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#Direct­Selling Compliance

What is direct selling?

Direct Selling is a business model used to market products or services directly to consumers. The direct selling industry offers a variety of goods and services, including foods/food supple­ments, cosmetics, cookware and much more. These products or services are commonly marketed by independent contractors (often referred to as “distri­butors”, “consul­tants” or “repre­sen­ta­tives”) on a person-to-person basis to the end consumer. Typically, these independent contractors use social media and/or their own or a company-repli­cated website to sell or promote products and services.

Direct selling encom­passes a variety of distri­bution methods, including multi-level marketing (also referred to as “MLM” or “network marketing”). In general, multi-level marketing involves a compen­sation structure according to which independent contractors are not only compen­sated for their own product sales, but also for the sales generated by their downline (which are other salespeople whom they recruit into the business, including the recruits’ recruits).

What are the legal ramifications?

There is no harmo­nized single set of European legis­lation which governs direct selling and/or multi-level marketing. There are rather various European and national laws that need to be complied with. 

European laws of parti­cular practical impor­tance are the Consumer Rights Directive 2011/83/EC (stipu­lating off-premises contracts) and the Unfair Commercial Practices Directive 2005/29/EC (dealing with misleading and aggressive commercial practices, including black­listed practices such as the operation of a ‘pyramid promo­tional scheme’).

On a national level, direct selling companies will have to comply with parti­cular laws governing direct selling, such as the Trading Schemes Regula­tions 1997 in the UK, the Incaricati Regime in Italy (“Incaricato alle Vendite a Domicilio” as provided by Italian Law no. 173/2005) or the VDI System in France (“Le Vendeur à Domicile Indépendant” as set out in articles 135 ‑1, L 135–2, and L 135–3 of the French Commercial Code).

Be compliant with LUCID.

Based on our many years of practical experience as European in-house counsel in the direct selling industry, we are well positioned to provide legal advice and support with any of the following topics:

  • Review of Sales and Marketing/Compensation Plans (parti­cu­larly with a view to striking a reasonable balance between upline commis­sions paid for sales to end-users and those paid for purchases of members parti­ci­pating in the compen­sation plan);
  • Review of additional bonuses, incen­tives or other promo­tions granted to your salesforce;
  • Review of Policy Manuals, Code of Conduct, Code of Ethics or any other document governing the relati­onship with your independent salesforce;
  • Provision/review of distri­butor agree­ments, incl. terms and conditions;
  • E‑Commerce;
  • GDPR compliance;
  • Market expansion into or within Europe;
  • Assis­tance with DSA memberships.
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