INTERNATIONAL LEGAL ISSUES
IN
DIRECT RESPONSE MARKETING

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:

Australia Belgium Canada Germany

Ireland Italy Singapore Spain

Sweden Switzerland United Kingdom United States

 

INTERNATIONAL LEGAL ISSUES IN DIRECT RESPONSE MARKETING: FRANCE BERNARD HERTZ BÉJOT Société d'Avocats 8 RUE MURILLO - 75008 PARIS By Michel Béjot and Isabelle Setton

1. Lobbying 1.1 How can an association like ERA successfully lobby in your country to maintain a friendly regulatory environment? Join existing professional lobbies; prepare supplemented positions concerning sensitive issues. 2. Laws and Regulations 2.1 Are any forms of direct response marketing prohibited in your country? Yes. The Distance Sales Directive 97171EC has been implemented into French consumer law by an ordonnance dated August 23, 2001 enacted by the French government. Further, specific regulations may apply for issues such as sales and/or rebate offers. 2.2 What are the major restrictions in your country on direct response marketing, which sellers should be aware of? All of the Distance Sales provisions applicable throughout the EU apply also in France. These regulate information which the consumer must be given before a contract becomes binding, the need for written confirmation of the contract, usually a 7 day period during which the contract may be cancelled by the consumer, the prohibition of any supply of goods and/or services requiring payment without prior order by a consumer, [ ... ], the prohibition of the use of certain techniques without prior approval of the consumer, and criminal sanctions in case of non-compliance. These consumer rights are inalienable. Consequently, if a Distance Sale Contract contains a provision under which the law of a State other than an EU Member State is applicable, such provision is void if the consumer usually resides within the territory of an EU Member State. 2.3 Are there any laws or regulations pending in your country that could have an impact on direct response marketing? Not to our knowledge. 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 Direction Ginirale de la Concurrence, de la Consommation et de la Ripression des Fraudes (DGCCRF) of the French Ministry of Commerce and Industry also in charge of most business sectors with a consumer dimension. 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? Internet issues. Penalties for violation of the laws may be civil and/or criminal and thus lead to damages, fines and even in some instances imprisonment. 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? Yes, a company may sue a competitor directly for false or deceptive advertising. Sanctions if the suit is successful can lead to the suspension of the misleading advertisement. Civil damages compensating the prejudice suffered by the plaintiff may be incurred as well as a fine and/or imprisonment. Additional penalties, such as publication of the decision, can also be decided by the judge. 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? Class actions are not admitted under French procedural law. However, professional unions may file a suit when the interest of their profession are at stake. Similarly, since the implementation of the 981271CE Directive on August 23, 2001 organisations or bodies representing the collective interest of consumers are entitled to initiate proceedings inter alia before civil courts on the grounds of consumers' protection to require the end of illegal practices. 3. Consumer Privacy Issues 3.1 What is the current law in your country relating to privacy of personal information? Personal data protection has been ensured in France since the law of January 6, 1978 was enacted This law provides for the regulation of the creation, possession and content of databanks containing personal data. Further, a draft law has recently been issued which will modify the content of the current French regulations in view of implementing the provisions of the 1995 E. U. Directive on personal data protection. Other French regulations provide for the protection of privacy (e.g., section 9 of the French civil code) and of the secrecy of correspondence. 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? French law does not distinguish Internet information and information collected through other marketing methods. 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? French law does distinguish between different types of data: some information such as the political opinion or the racial or ethnical origins are considered as sensitive information and their treatment is thus different from the treatment of other personal data. French law does not make a distinction concerning financial information which should thus be treated in the same way as the name and address. From a general standpoint, the person must be able to oppose the transfer of his/her personal data, for marketing purposes. 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? No definite answer can be given to this question; indeed to this date the law does not provide a clear answer, neither does case law to our knowledge. 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. These types of offers would be subject to the European Distances Sales contract regulations described above under which the validity and enforceability of such contracts is regulated. The unsolicited supply of goods and/or services is prohibited Thus, the legality of such practices requires that the consumer enters into a Distance Sales Contract prior to the delivery of the products and/or services. The contract has to be in writing, comprehensible and must contain the minimum terms under the EU Directive. For instance, it could provide for a free trial period and must include the statutory right of the consumer to benefit from a period during which he/she may cancel the contract (usually 7 day). 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. This type of continuity plan does not appear as illegal per se. However, some issues have to be carefully looked into with one concern : has the consumer been in a position to fully understand what he/she entered into (e.g., price of items, nature, frequency, difficulty to cancel the plan, etc.). Further please note that a Commission has been working on the definition of rules that could be added to existing French regulations in order to regulate these practices and make them more transparent for the consumers (e.g., explicit specification of the products provided under the plan, of the price paid for each product sale, maximum duration of the plan, etc.). 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. A consumer contract will not be invalid merely because it is for an open ended term but see remark in 4.2 inter alia on the possibilities to cancel the plan. 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 explained above, the EU directive that will be implemented into French law states that the individual person must be able to oppose the transfer of his/her personal data, for marketing purposes. Further, the directive provides that, aside from the distance sale techniques which require I prior approval by the consumer, other distance sale techniques may be used provided the consumer does not express his/her opposition to them. 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: We assume that the products/services at stake comply with French regulations and that the question concerns only the existence of specific provisions applicable to the distance sale of the listedproducts1services. Reminder: classification often differs from country to country, inter alia on the basis of the exact composition of a product. For instance, what may qualify as a mere dietary supplement in the US may qualify as a drug in France. Consequently, the answers detailed below depend in most instances of the qualification given to the product at stake. 5.1.1 Dietary supplements Depends on the composition and consecutive exact qualification. 5.1.2 Diet/Weight Loss products Depends on the composition and consecutive exact qualification (Code de la sant? publique). 5.1.3 Drugs Code de la santé publique. 5.1.4 Electro-muscle stimulators Unclear whether there is separate specific regulation. 5.1.5 Health and fitness products Depends on the composition and consecutive exact qualification (Code de la santé publique). 5.1.6 Beauty products Depends on the composition and consecutive exact qualification. May also raise selective distribution issues. 5.1.7 Travel offers Nothing specific for distance contracts but please note that this sector is heavily regulated inter alia by the Law of 92-645 of July 13, 1992. 5.1.8 Magazine subscriptions Different regulations apply depending on the exact type of magazine, offer and/or subscription. 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 advertiser on the account of whom the misleading advertisement is made is liable. The head officer having participated in the making of the misleading ad may also be found personally liable. So can the distributor and/or the agent in some instances (e.g., when taking a personal part in the operation). The media used for the misleading ad may also be found liable. Please note that specific regulations apply to Internet medium. 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? Take local advice.