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 France

Germany Ireland Italy Spain

Sweden Switzerland United Kingdom United States

 

INTERNATIONAL LEGAL ISSUES IN DIRECT RESPONSE MARKETING: SINGAPORE prepared by Jack Tsen-Ta Lee Chorpee I.P. Pte Ltd Advocates & Solicitors 9 Penang Road, #11-08 Park Mall, Singapore 238459 Tel: (65) 3329522 Fax: (65) 3362282 Email: info@chorpee.com

1. Lobbying 1.1 How can an association like ERA successfully lobby in your country to maintain a friendly regulatory environment? By making submissions to parliamentary select committees considering relevant legislation, providing press releases to the media, and writing letters to the press. 2. Laws and Regulations 2.1 Are any forms of direct response marketing prohibited in your country? Yes - certain forms of multi-level marketing and pyramid selling are prohibited. 2.2 What are the major restrictions in your country on direct response marketing, which sellers should be aware of? (1) Restrictions on multi-level marketing and pyramid selling. (2) Prohibitions against false trade descriptions. 2.3 Are there any laws or regulations pending in your country that could have an impact on direct response marketing? Over the past two years there have been numerous calls by the Consumers Association of Singapore (CASE) and Members of Parliament for the Ministry of Trade and Industry (MTI) to support the introduction of a Fair Trading Act. MTI has suggested the formation of a task force led by MTI and CASE to discuss ways of strengthening consumer protection laws in Singapore and empowering CASE to carry out its role more effectively, including the possibility of enacting a Fair Trading Act. 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 main government agency regulating this area is the Ministry of Trade and Industry (MTI). Non-governmental organizations with interests in this area include: (1) Consumers Association of Singapore (CASE). CASE informs and educates consumers on consumer-related matters by printing consumer guide booklets and educational brochures and organizing seminars and worshops on topical consumer issues, gives suggestions on consumer problems and helps aggrieved members obtain redress, conducts price surveys on household goods and disseminates information through the mass media, represents consumers in various national committees and councils responsible for input on consumer policies, and lobbies for consumer protection legislation. The Advertising Standard Authority of Singapore (ASAS), an Advisory Council to CASE, is a self-regulatory body of the advertising industry. It was set up to promote ethical advertising in Singapore and to protect the public from advertisers whose advertisements mislead, misrepresent or offend. The ASAS Council consists of volunteers from the advertising industry, various associations and government ministries. ASAS's general guidelines for advertisements in the media are spelt out in the Singapore Code of Advertising Practice (SCAP) that it publishes. (2) Direct Marketing Association of Singapore (DMAS). DMAS is a non-profit organisation managed by direct marketing professionals in Singapore that seeks, among other things, to facilitate the development of a direct marketing infrastructure necessary to advance its members' businesses and to share knowledge on direct marketing know-how. The DMAS has a code of practice regulating its members' marketing activities. 2.5 Explain briefly what types of penalties may be imposed on marketers by these agencies for violating the laws. Fines, imprisonment or both. 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. Singapore law recognizes the torts of malicious falsehood (also known as injurious falsehood, trade libel, slander of goods or disparagement of goods), passing off, and breach of trademarks and service marks. 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? No. However, it is possible for several persons who have the same interest in any proceedings to apply to court for the proceedings to be continued by any one or more of them as representing all the parties (representative proceedings). If a suit against a marketer is successful, the marketer can be ordered to pay damages, interest and legal costs. 3. Consumer Privacy Issues 3.1 What is the current law in your country relating to privacy of personal information? The common law provides limited protection of personal information through the torts of breach of confidence, negligence and nuisance. There is currently no legislation regulating privacy of personal information. 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. 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? The law does not distinguish between different types of personal information. There are currently no restrictions on the transfer of credit card or bank account information 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? Not applicable. 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. There is no legislation regulating this form of marketing. However, unless the consumer has expressly contracted with the marketer to continue being bound to accept and pay for goods or services unless affirmative action is taken to decline them, his inaction may not be held to be an acceptance of the marketer's offer. 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. See answer to paragraph 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. See answer to paragraph 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. There is no legislation regulating this form of marketing. 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 The Sale of Food Act (Chapter 283, 1985 Ed). The Act contains prohibitions against the sale of food which is not of the quality, nature or substance demanded by the purchaser, and which is labelled or advertised in a manner that is "false, misleading or deceptive or is likely to create an erroneous impression regarding its value, merit or safety". The Act also prescribes detailed regulations concerning the proper labelling of food packages. In particular: Labels cannot contain any nutrition claim unless they also include a nutrition information panel. False or misleading statements, words, brands, pictures or marks purporting to indicate the nature, stability, quantity, strength, purity, composition, weight, origin, age, effects or proportion of the food or any ingredients of it are prohibited. Food cannot be labelled as 'pure' or with any word of the same significance unless it is free from other added substances or is of the stipulated composition, strength and quality. Words claiming therapeutic or prophylactic action; advice of a medical nature; implications that food will prevent, alleviate or cure any disease or condition affecting the human body; and implications that health or an improved physical condition may be achieved by consuming the food are prohibited. Food packages and labels may only have claims that the food is a source of energy or protein if the quantity of food to be consumed in one day is stated and the food contains prescribed levels of nutrients. Similarly, no claim based on the presence of a vitamin or mineral or implying the presence of a vitamin or mineral may be made; and no label shall claim that any food is enriched, fortified, vitaminized or in any way imply that the food is a source of one or more vitamins or minerals unless the food contains prescribed levels of the vitamins or minerals. 5.1.2 Diet/Weight Loss products See answer to paragraph 5.1.1. 5.1.3 Drugs The Medicines Act (Chapter 176, 1985 Ed), Medicines (Advertisement and Sale) Act (Chapter 177, 1985 Ed) and the Sale of Drugs Act (Chapter 282, 1985 Ed). These statutes prohibit the issuance of false or misleading advertisements and representations relating to medicinal products; and advertisements which claim or suggest that the medicine advertised will prevent, alleviate or cure certain specified diseases or conditions. Any person who wishes to issue a medical advertisement or conduct any sales promotion involving medicines must first obtain a permit. 5.1.4 Electro-muscle stimulators No special laws or regulations known. 5.1.5 Health and fitness products May be regulated by the legislation mentioned in paragraph 5.1.3, or by the Medicines (Cosmetic Products) (Labelling) Regulations (Chapter 176, 1997 Ed, Rg 11) and Medicines (Cosmetic Products) (Licensing) Regulations (Cap 176, 1997 Ed, Rg 12). Certain products, including anti-dandruff preparations, anti-wrinkle or rejuvenation substances, sunscreens, face cleansers, mouthwashes, and certain foods such as garlic pills, ginseng tea, herbal tea drinks, and high protein preparations or substances used for slimming, are not regulated as medicines: Medicines (Non-Medicinal Products) (Consoliation) Order (Chapter 176, 2000 Ed, O3). Food substances are, however, regulated by the legislation mentioned in paragraph 5.1.1. 5.1.6 Beauty products See answer to paragraph 5.1.5. 5.1.7 Travel offers No special laws or regulations. However, persons carrying on the business of travel agents are required to be licensed under the Travel Agents Act (Chapter 334, 1998 Ed) and their activities are subject to regulation. 5.1.8 Magazine subscriptions No special laws or regulations. 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? Under legislation relating to multi-level marketing and pyramid selling and false trade descriptions, when criminal offences committed by a body corporate are proved to have been committed with the consent and connivance of, or are attributable to any neglect on the part of, any director, manager, secretary or any other similar officer of the body corporate, or any person purporting to act in that capacity, both he and the body corporate and guilty of the offence. 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? If in doubt, seek legal advice.