ICC International Code of Direct Selling

Updated by the Commission on Marketing, Advertising and Distribution, June 1999

French version

Introduction

This edition of the ICC International Code of Direct Selling follows the well-established policy of the ICC of promoting high standards of ethics in marketing via self-regulatory codes intended to complement the existing frameworks of national and international law.

The Code, which was first issued in 1978, is an expression of the business community's recognition of its social responsibilities in respect of commercial activities and communications. The globalization of the world's economies, and the intense competition that ensues therefrom, require the international business community to adopt standard rules. The adoption of these self-disciplinary rules is the best way that business leaders have of demonstrating that they are motivated by a sense of social responsibility, particularly in light of the increased liberalization of markets.

This edition combines past experience with current thinking and is based on the concept of direct selling as an important factor in competition and distribution, essential to the market economy. Like its predecessor, this edition has been developed in close co-operation with the World Federation of Direct Selling Associations. The WFDSA has also adopted world codes of conduct based on the first ICC Code and applicable exclusively to members of direct selling associations. There is conformity in substance between the new edition of the ICC Code and the industry world codes. The ICC Code is to be followed by all involved in direct selling to consumers.

In the view of ICC, the Code establishes a fair balance between the interests of all parties concerned, consumers included. ICC considers it to be fundamental and in the interest of the society as a whole that business, while observing the principles of fair competition, should be free to choose between different marketing methods and different channels of distribution.

The Code is designed primarily as an instrument for self-discipline, but it is also intended for use by legal or administrative bodies as a reference document within the framework of applicable laws.

ICC believes that this new edition of the Code will promote adherence to high standards of direct selling practice. Being a pointer to the direction of further international harmonization, it will facilitate the free flow of products across frontiers, leading to efficient markets and significant consumer benefits.

Scope of the Code The Code applies to all direct selling activities in their entirety, whatever their framing, form or content. It should be read in conjunction with the other ICC Codes of Marketing Practice, namely the:

• ICC International Code of Advertising Practice
• ICC International Code of Environmental Advertising
• ICC International Code of Sales Promotion
• ICC International Code of Direct Marketing
• ICC Guidelines on Advertising and Marketing on the Internet
• ICC International Code on Sponsorship
• ICC/ESOMAR International Code of Marketing and Social Research Practice

The Code sets standards of ethical conduct to be followed by all direct selling companies and their direct sellers. It should also be adhered to by practitioners or other contractors providing services for direct selling purposes.

Interpretation
The Code is to be applied in the spirit as well as in the letter, bearing in mind the different degrees of knowledge, experience and discriminatory ability of those to whom direct selling activities are directed.

Definitions
For the purposes of this code:

• the term direct selling refers to the selling of cons umer products directly to consumers, generally in their homes or the homes of others, at their workplace and other places away from permanent retail locations, by the direct seller being physically present, and usually explaining or demonstrating the products;
  
  
• the term direct selling company refers to a business entity which utilizes a direct selling organization for the selling of products associated with its trademark or service mark or other identifying symbol;
  
  
• the term direct seller refers to a person who is a member of a distribution system of a direct selling company. A direct seller may be an independent commercial agent, independent contractor, independent dealer or distributor, employed or self-employed representative, franchisee or the like; the term consumer refers to any natural persons to whom direct selling activities are directed outside of their trade, business or profession;
  
  
• the term party selling refers to selling through explanation and demonstration of products to a group of prospective customers by a direct seller usually in the home of a host or hostess who invites other persons for this purpose;
  
  
• the term products refers to goods or services;
  
  
• the term recruiting refers to any activity conducted to induce a person to become a direct seller.

Rules

Basic principles

Article 1

All direct selling should be legal, decent, honest and truthful.

Every direct selling activity should be carried out with a due sense of social responsibility.

No direct selling should be carried out such as to impair confidence in direct selling. All direct selling activities should conform to the principles of fair competition as generally accepted in business, in particular with regard to:

• the terms of the offer, including the price and modes of payment, and the methods and form of the contact with the consumer;
• the methods of presentation and demonstration of, and the information on the product;
  
• the fulfilment of any obligation arising from the offer or any operation, including delivery, connected with it.

Direct selling companies and direct sellers should voluntarily assume responsibility towards the consumer with respect to fair sales methods and product value, and should make every effort to ensure consumer satisfaction.

Direct sellers should be fully informed by direct selling companies as to the characteristics of the goods or services offered, to enable the direct sellers to give the consumer all necessary information.

Conduct towards Consumers

The terms of the offer

Accuracy

Article 2

The terms of the offer should be clear, so that the consumer may know the exact nature of what is being offered and the commitment involved in the placing of an order.

Fairness, Respect of Privacy and Children

Fairness

Article 3

All direct selling activities should deal fairly with consumers. Activities should be designed and carried out to avoid giving ground for reasonable complaint.

Misleading, deceptive or unfair sales practices should not be used.

High-pressure tactics which may be construed as harassment should not be used.

No direct selling should be represented to the consumer as being a form of marketing research.

Direct selling companies and direct sellers should not abuse the trust of individual consumers, should respect the potential lack of commercial experience of consumers and should not exploit a consumer's age, illness, lack of understanding, or lack of language knowledge.

Respect of Privacy

Any contact should be made in a reasonable manner and during reasonable hours to avoid intrusiveness. A direct seller should discontinue a demonstration or sales presentation upon the request of the consumer.

Children

Direct sellers offering products to children should:

• Identify material intended only for adults;
• Encourage young children to obtain their parent's and/or guardian's permission before entering into a sale, and make reasonable efforts to ensure that parental consent has been given.

Identification

Article 4

At the beginning of the sales presentation, direct sellers should without request truthfully identify themselves to the prospective consumer, and should also identify their company, their products and the purpose of their solicitation. In party selling, direct sellers should make clear the purpose of the occasion to the host/hostess and to the participants.

Promotional literature, advertisements or mailings should contain the name and address or telephone number of the direct selling company or the direct seller.

Presentation of the offer

Truthfulness

Article 5

Presentations used in direct selling should not contain any product description, claim, illustration or other element which directly or by implication is likely to mislead the consumer.

Explanation and Demonstration

Article 6

Explanation and demonstration of the product offered should be accurate and complete, in particular with regard to price and, if applicable, credit price, terms of payment, cooling-off periods and/or return rights, terms of guarantee, after-sales service, and delivery.

Answers to Questions

Direct sellers should give accurate and understandable answers to all questions from consumers concerning the product and the offer.

Order Form

A written order form should be delivered to the consumer at the time of sale, which should identify the direct selling company and the direct seller and which should contain the full name, permanent address and telephone number of the direct selling company or of the direct seller and all material terms of the sale. All terms should be clearly legible.

Comparisons, denigration and exploitation of goodwill

Article 7

Direct selling companies and direct sellers should refrain from using comparisons which are likely to mislead and which are incompatible with principles of fair competition. Points of comparison should not be unfairly selected and should be based on facts which can be substantiated. Direct selling companies and direct sellers should not unfairly denigrate any firm or product directly or by implication. Direct selling companies and direct sellers should not take unfair advantage of the goodwill attached to the trade name and symbol of another firm or product.

Testimonials

Article 8

The presentation of the offer should not contain or refer to any testimonial or endorsement unless it is genuine, verifiable, relevant and based on personal experience or knowledge.

Testimonials or endorsements which have become obsolete or misleading through the passage of time should not be used.

Guarantees

Article 9

Direct selling should not contain any reference to a guarantee which does not provide the consumer with additional rights to those provided by law.

Advertisements may contain the word "guarantee", "guaranteed", "warranty" or "warranted" or words having the same meaning, only if the terms of the guarantee as well as the remedial action open to the consumer are clearly set out in the offer, or are available to the consumer in writing at any point of display and with the goods.

The name and address of the guarantor and the duration of the guarantee should be clearly stated.

After-sales service

Article 10

When after-sales service is offered, details of the service should be included in the guarantee or stated elsewhere in the offer. If the consumer accepts the offer, information should be given on how the consumer can activate the service and communicate with the service agent.

Safety and Packaging

Article 11

Information provided with the product should include proper directions for use and full instructions covering health and safety warnings whenever necessary. The required health and safety warnings should be made readily understood by the use of pictures, text or a combination of both.

Goods, and where applicable, samples, should be packaged in such a way so as to be suitable for delivery to the consumer - and possible return - in compliance with valid health and safety norms.

Consumer Understanding

Article 12

The direct seller should endeavour to make sure that the individual consumer clearly understands the information given. The demonstration of the product should be adapted to the needs of the individual consumer.

The direct seller should give sufficient time to the consumer in order to enable him to read the entire contract form thoughtfully and without harassment.

Fulfilment

Fulfilment of the order

Article 13

Orders should be fulfilled within 30 days from the date the order is signed by the consumer, unless otherwise stipulated in the offer. Direct selling companies and direct sellers should inform the consumer of any undue delay as soon as it becomes known to them. In such cases, any request for cancellation of the order by the consumer should be granted, even when it is not possible to prevent delivery, and the deposit, if any, should be refunded immediately.

Substitution of Products

Article 14

If a product becomes unavailable for reasons beyond the control of the direct selling company or direct seller, another product may not be supplied in its place unless the consumer is informed that it is a substitution, and unless such replacement product has materially the same or better characteristics and qualities, and is supplied at the same or a lower price. In such a case, an explanation of the substitution and of the right to return the substitute product at the direct seller's cost should be given to the consumer.

Cooling off and return of goods

Article 15

Direct selling companies and direct sellers should make sure that any order form contains, whether it is a legal requirement or not, a cooling-off clause permitting the consumer to withdraw from the order within a specified period of time, and to obtain reimbursement of any payment or goods traded in. Direct selling companies and direct selle rs offering an unconditional right of return should clearly provide it in writing.

Complaints

Article 16

Direct selling companies should ensure that the handling of any consumer complaints related to the purchase is equitable and efficient.

Credit and debt collection Price and Credit Terms

Article 17

Whether the offer is on a cash or instalment basis, the price and terms of payment should be clearly stated in the offer together with the nature of any additional charges (such as postage, handling, taxes, etc.) and, when possible, the amounts of such charges.

In the case of sales by instalment, the credit terms, including the amount of any deposit or payment on account, the number, amount and periodicity of such instalments and the total price compared with the cash price, if any, should be clearly shown in the offer.

Any information needed by the consumer to understand the cost, interest and terms of any other form of credit should be specified either in the offer or when the credit is offered.

Unless the duration of the offer and the price are clearly stated in the offer, prices should be maintained for a reasonable period of time.

Payment and debt collection

Article 18

The procedure for payment and debt collection should be such as to avoid undue inconvenience to the consumer, making due allowance for delays outside the consumer's control. Debtors should not be approached in an unreasonable manner and debt collection documents which might be confused with official documents should not be used.

Data Privacy

Article 19

Direct selling companies and direct sellers should disclose to consumers the specific purpose(s) for collecting and using personal data and should not use the data in a way incompatible with those purposes. The data collected should be adequate, relevant and not excessive in relation to the purpose(s). They should be accurate and kept up to date and preserved no longer than necessary. There should be adequate security measures, to prevent unauthorized access or undue disclosure of the data.

Appropriate measures should be taken so as to enable consumers to exercise the following rights:

• to opt out from data bases (lists) created for direct selling purposes;
• to require that their data are not made available to third parties;
• to rectify incorrect data which are held on them.

Conduct towards Direct Sellers

Integrity

Article 20

Direct selling companies should deal fairly and honourably with direct sellers and prospective recruits, and should not abuse their trust or exploit their possible lack of business experience. Payments and withholdings should be made in a commercially reasonable manner.

Direct sellers should be given adequate education and training to enable them to operate ethically.

Recruiting

Article 21

Misleading, deceptive or unfair recruiting practices should not be used. Unverifiable factual representations or false promises should not be made to prospective recruits. The advantages of the selling opportunity should be presented truthfully, and should not be exaggerated.

Any legal, economic or other factor likely to affect the decision to become a direct seller should be communicated in such a way and at such a time that the prospective recruit can take it into account before accepting the offer of employment, distributorship or commission.

Relationship and Business information

Article 22

Information provided by a direct selling company to its direct sellers concerning the selling opportunity and related rights and obligations should be accurate and complete.

At the outset, the direct selling company should give its direct sellers either a written agreement to be signed by both parties, or a written statement containing all essential details of the relationship between them. Direct sellers should also be informed of their legal obligations, including any applicable licenses, registrations and taxes.

The direct selling company should keep its direct sellers updated as to the state of their business.

Fees

Article 23

Entrance fees, franchise fees, fees for promotional materials or other fees related solely to the right to participate in the business should not be unreasonably high.

Earnings claims

Article 24

Actual or potential sales or earnings of direct sellers should not be misrepresented. Any sales or earnings representations made should be based upon documented facts.

Inventory

Article 25

Direct selling companies should not require or encourage direct sellers to purchase product inventory in unreasonably large amounts. Any recommendations should be based on realistic estimates of sales possibilities and other relevant factors.

Termination

Article 26

On the termination of a r elationship, the direct selling company should buy back any unsold, but saleable product inventory, including promotional material, sales aids and kits, and credit the direct seller's actual net cost thereof less a reasonable handling charge.

Responsibility, substantiation and implementation

Responsibility

Article 27

The prime responsibility for all aspects of direct selling activities, whatever their kind or content, always rests with the direct selling company.

Those taking part in the planning, creation or execution of any direct selling activity have a degree of responsibility commensurate with their position for ensuring the observance of the Code.

Thus in addition to the direct selling company the Code should be duly observed by:

• direct sellers, whether employed or independent;
• any other member of the direct selling company's distribution system, consultant, agency or their subcontractors, who contribute to the direct selling activity.

Article 28

The direct selling company should promptly investigate any consumer complaints that a direct seller has engaged in an improper course of conduct, and should take any steps appropriate and necessary in the circumstances, all free of charge, to redress any wrongs disclosed.

Direct selling companies should ensure that consumers can easily obtain information on where to file such complaints.

Rules apply to entirety of direct selling activity

Article 29

The rules of this Code embrace the direct selling activity in its entire content and form, including testimonials, statements and visual presentations originating from other sources. The fact that the content or form of the direct selling activity originates wholly or in part from other sources is not an excuse for non-observance of the rules.

Respect of self regulatory decisions

Article 30

No direct selling company or direct seller should be party to the implementation of any direct selling activity nor party to the publication or distribution of any communication which they know to have been found unacceptable by the appropriate self-regulatory body or available dispute-resolution mechanisms.

Effect of subsequent redress for contravention

Article 31

While subsequent correction and appropriate redress according to available dispute-resolution systems for a contravention of the Code are desirable, they cannot excuse the original contravention of the Code.

Substantiation

Article 32

Substantiation of verifiable facts needed to establish compliance of the direct selling activity with the Code should be available and be produced when called for by any appropriate self-regulatory body.

Implementation

Article 33

The prime responsibility for the enforcement of the Code against any direct seller should rest with the direct selling company.

This Code of self-discipline should be applied and referred to nationally by bodies set up for that purpose and internationally by the ICC's International Council on Marketing Practice as and when the need arises.

Document n° 240/406 Rev

International Chamber of Commerce
The World Business Organization

Copyright 1999. All rights reserved.