Victoria Cross Building, Level 10
60 Miller Street, North Sydney
Sydney, NSW 2060 Australia
Contacts: Peter Le Guay
Tel: 61.2.9956.2100
Fax: 61.2.9959.3614
Email: pleguay@cowleyhearne.com.au
Website: www.cowleyhearne.com.au

Electronic Retailing Association Conference & Expo
October 14-17, 2001
Las Vegas, Nevada
USA

Introduction

This report is presented by the Global Advertising Lawyers Alliance ("GALA") to the Electronic Retailing Association ("ERA") in connection with its 2001 Conference held in Las Vegas, Nevada on October 14 - 17, 2001.

The purpose of the report is to present information from GALA members concerning laws and regulations applicable to direct response marketing in their home country which would be relevant to marketers in other countries. By "direct response marketing" we mean all forms of marketing involving a communication to a consumer that is designed to elicit a response from the consumer directly to the seller in the form of an order for that seller's products or services. Common forms of direct selling in the United States, e.g., include infomercials (generally thirty minutes in length), short form television commercials (generally two minutes in length), radio commercials, internet marketing, telemarketing, credit card syndication, direct mail, and product package inserts.

By necessity, this report can only touch on the broadest issues and concerns to the industry in any country. Clearly, this report cannot and is not intended to substitute for legal advice from an expert in the applicable laws and regulations. We believe that its value to marketers will derive from highlighting the issues that marketers should be aware of when considering whether to conduct a particular type of direct selling campaign in a given country. Nor is this report a substitution for local legal advice on specific marketing activities. Before engaging in any marketing campaign, a marketer should consult with legal counsel for advice on their proposed campaign.

Countries covered in this report include:

Belgium Canada France Germany

Ireland Italy Singapore Spain

Sweden Switzerland United Kingdom United States

 

INTERNATIONAL LEGAL ISSUES IN DIRECT RESPONSE MARKETING: AUSTRALIA Cowley Hearne Victoria Cross Building, Level 10 60 Miller Street, North Sydney Sydney, NSW 2060 Australia Tel: 61.2.9956.2100 Fax: 61.2.9959.3614 Email: pleguay@cowleyhearne.com.au pboesenberg@cowleyhearne.com.au

1. Lobbying 1.1 How can an association like ERA successfully lobby in your country to maintain a friendly regulatory environment? Set up meetings and maintain regular contact with the Australian Direct Marketers Association (ADMA) (national industry body) and the Australian Competition & Consumer Commission (ACCC) (government regulatory authority). 2. Laws and Regulations 2.1 Are any forms of direct response marketing prohibited in your country? Un-informed direct marketing (Privacy Act 1988 (Cth)) which is also often prohibited contractually by the relevant ISP. There are restrictions on marketing conduct generally found in State and Territory door-to-door selling Acts and Part V (Consumer Protection) of the Trade Practices Act 1974 (Cth) (TPA). 2.2 What are the major restrictions in your country on direct response marketing, which sellers should be aware of? TPA, State and Territory Fair Trading Acts, industry codes of practice (for example the ADMA Direct Marketing Code of Conduct, the Direct Selling Association of Australia Inc Code of Practice and the Internet Industry Privacy Code of Practice (still in draft form)), intellectual property restrictions, passing off, restrictions on collection and use of information imposed by the Privacy Act 1988 (Cth). 2.3 Are there any laws or regulations pending in your country that could have an impact on direct response marketing? Not aware of any pending amendments, however note the following recent amendments: 1998 country of origin amendments to the TPA; 1999 New Tax system amendments relating to GST and price exploitation to the TPA; Privacy Amendment (Private Sector) Act 2000 (Cth); 2001 amendments to the TPA (penalties significantly increased and limitation period on commencement of actions increased). 2.4 Identify any governmental or regulatory agencies charged with regulating the direct selling industry in your country and the business sector(s) they regulate. The ACCC and various State and Territory departments of fair trading regulate all business sectors, but of late have principally been targeting the telecommunications, motor vehicle, advertising, financial, health and insurance industries. Also ADMA's members are subjected to ADMA's self regulation via the ADMA Direct Marketing Code of Conduct. 2.5 What are the current hot issues among regulators and enforcement agencies in your country that could have an impact on direct response marketers? As above, but especially in the financial services, health and insurance industries. 2.5 Explain briefly what types of penalties may be imposed on marketers by these agencies for violating the laws. Penalties can only be imposed by a court of competent jurisdiction and are generally sought by the ACCC. The penalties can be as high as AUD$220,000 for individuals and up to AUD$1.1 million for corporations. 2.6 Can a company directly sue a competitor for false or deceptive advertising and, if so, what are the penalties if such a suit is successful? The short answer is yes - in respect of civil penalties, damages are at large. In respect of criminal penalties, penalties can be up to AUD$220,000 for individuals and up to AUD$1.1 million for corporations. The Australian Securities and Investment Commission (ASIC) also has capacity to penalise financial institutions by way of fines under the Corporations Act 2001 (Cth) for misleading and deceptive conduct. 2.7 Does your country recognize the concept of "class actions" whereby a law firm can represent all consumers within a particular "class" and sue a marketer for false or deceptive advertising? If so, what are the penalties if such a suit is successful? Yes, as in 2.5 and 2.6. 3. Consumer Privacy Issues 3.1 What is the current law in your country relating to privacy of personal information? Privacy Act 1988 (Cth) (public and private sector personal information). Also: Crimes Act 1914 (Cth) (spent convictions), Taxation Administration Act 1953 (Cth) (tax file numbers (TFN)), Data - matching program (Assistance and Tax) Act 1990 (Cth) (comparison of personal information and TFN), Telecommunications Act 1997 (Cth) (carriers, carriage service providers), Australian Security Intelligence Organisation Act 1979 (Cth) , Freedom of Information Act 1982 (Cth), Archives Act 1983 (Cth), Income Tax Assessment Acts. 3.2 Does the law distinguish between information collected on the Internet and information collected through other marketing methods, e.g., by telephone or by mail? No, the law applies equally regardless of the method of information collection. 3.3 Does the law distinguish between different types of personal information, e.g., name and address vs. financial information such as consumer credit card numbers? If so, how are they distinguished? What restrictions exist on the transfer of credit card or bank account information for marketing purposes? Yes there are general restrictions on the collection, use, disclosure and storage of 'personal information' and additional more stringent requirements on 'sensitive information'. Personal information is information or an opinion from which an individual identity can be ascertained. Sensitive information includes medical records or history, political or religious beliefs, sexual preference. There are specific restrictions imposed on the holders of credit card information which are set out in the Electronic Funds Transfer Code of Conduct, Consumer Credit Code, TPA and again under some of the legislation set out in 3.1. 3.4 Does your country require "opt in" or "opt out" as the method for the consumer to grant consent to disclosure of their personal information? It depends upon the situation - in some circumstances neither are required, otherwise an "opt out" or "opt in" situation will apply depending upon the reasonable expectation of the consumer. 4. Specific Marketing Methods The following marketing methods are currently under scrutiny in some countries, e.g., the United States. The discussion below indicates the extent to which such marketing methods are scrutinized in the reporting country, and if so, what legal restrictions apply: 4.1 Free Trial Offers and Free to Pay Conversion Offers. A marketing plan whereby the consumer accepts an offer to try a product or service free of charge for a specified time period, e.g., 30 days, prior to purchasing. At the end of the trial period, the consumer is automatically charged or billed for the product or service (usually on a credit card), unless he or she takes affirmative action to cancel. This is essentially a contractual issue - that is, it ultimately depends upon the terms of the contract between the consumer and the suppling company. Also unconscionable or misleading and deceptive conduct and other breaches of Part V of the TPA may apply depending on the conduct of the supplying company. The method is not legally prohibited as far as we are aware, however the ADMA Code of Practice deals with circumstances where customers have been suppled unordered items. 4.2 Continuity Plan Offers. A marketing plan whereby the consumer agrees to receive periodic shipments of products or services unless and until the consumer affirmatively declines a periodic shipment or cancels his participation in the plan. The consumer is billed for each shipment of product or service. As in 4.1. 4.3 Automatic Renewal Offers. Generally a feature in a subscription or club membership offer whereby the subscription or membership is automatically renewed at the end of the initial term and each subsequent term unless the consumer affirmatively cancels. As in 4.1. 4.4 Revenue Enhancement Programs. Also known as an "up-sell" offer, this marketing method presents to a consumer multiple product offers from different marketers on one telemarketing call. Typically, the consumer agrees to the first offer and provides their credit card number. The telemarketer then "up-sell" the consumer with additional offers. If the consumer accepts the additional offers, the consumer's credit card number is provided to the other marketers. As in 4.1, but also now subject to privacy restrictions - information can only be collected for a specific purpose unless consent is provided for other purposes. The customer's consent must be first obtained before they are asked about additional offers. 5. Specific Product Categories 5.1 What special laws or regulations apply in your country to the direct marketing of products or services in the following categories: 5.1.1 Dietary supplements Therapeutic Goods Act 1989 (Cth) (TGA) and Therapeutic Goods Advertising Code (Code), Weight Management Code of Practice, Nutrient Claims in Food Labels and in Advertisements Code of Practice. 5.1.2 Diet/Weight Loss products Weight Management Code of Practice. 5.1.3 Drugs TGA and Code, Guidelines on Naming, Packaging and Promotion of Alcohol and Beverages, Australian Pharmaceutical Manufacturers Association Code of Practice, Australian Self Medication Industry Code of Practice. 5.1.4 Electro-muscle stimulators TGA and Code 5.1.5 Health and fitness products TGA and Code 5.1.6 Beauty products TGA and Code 5.1.7 Travel offers State lottery acts and regulations in respect of trade promotion travel offers. 5.1.8 Magazine subscriptions None of which we are aware. 6. Extended Liability 6.1 If direct response advertising is found to be false or misleading, what parties, in addition to the marketer making the offer, are liable? The marketer's agents (including advertising agents and the media proprietor) can be in breach of the TPA for aiding and abetting or directly or indirectly knowingly concerned in the contravention. 7. Advice to Foreign Marketers 7.1 What is the most important advice you would give to a marketer that wishes to market a product through direct selling in your country? Obtain local legal advice.