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 Singapore

Spain Switzerland United Kingdom United States

 

INTERNATIONAL LEGAL ISSUES IN DIRECT RESPONSE MARKETING: SWEDEN Michael Plogell Wistrand AdvokatbyrOE Lilla Bommen 1 S-411 04 Goteborg Sweden Tel: +46 (0) 31 771 21 22 Fax: +46 (0) 31 771 21 50 michael.plogell@wistrand.net

1. Lobbying 1.1 How can an association like ERA successfully lobby in your country to maintain a friendly regulatory environment? It is possible for a business organization to enter into a voluntary agreement with the Consumer Agency, for instance on marketing rules in specific product areas. 2. Laws and Regulations 2.1 Are any forms of direct response marketing prohibited in your country? For instance advertising directed to persons that has indicated that they do not want to receive direct marketing, television advertising directed to children under the age of twelve etc. 2.2 What are the major restrictions in your country on direct response marketing, which sellers should be aware of? All marketing must be in accordance with the Marketing Practices Act. Marketing shall be consistent with generally accepted marketing practices and shall otherwise be fair with respect to consumer and undertakings. All marketing shall be formulated and presented in such a way that it clearly appears that marketing is involved. The party responsible for the marketing must also be clearly indicated. Advertising must not be misleading. 2.3 Are there any laws or regulations pending in your country that could have an impact on direct response marketing? No, not that I am aware of. 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 Swedish Consumer Agency/Consumer Ombudsman regulates all business sectors. 2.5(a) What are the current hot issues among regulators and enforcement agencies in your country that could have an impact on direct response marketers? Advertising directed to children, alcohol and tobacco advertising, lotteries, advertising/sales on the Internet. 2.5(b) Explain briefly what types of penalties may be imposed on marketers by these agencies for violating the laws. Advertising in violation of the Marketing Practices Act may be subject to prohibition by injunction or in cases of severe violations of the Marketing Practices Act a fine of a maximum 5 million SEK may be imposed. 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, it is possible for a company to sue a competitor for advertising in violation of the Marketing Act. An advertiser that violates the Marketing Act may be liable for damages towards competitors. 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, the concept of "class actions" is not recognized under Swedish law. However, according to the Marketing Practices Act proceedings in respect of an order or injunction may be commenced by an organization of consumers, undertakings or employees. The penalties are the same as described under 2.5. 3. Consumer Privacy Issues 3.1 What is the current law in your country relating to privacy of personal information? Personal Data Act, 1998. 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? The Personal Data Act, 1998 does not distinguish between information collected on the Internet and information collected otherwise. 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? No, all information that is related to a living person is protected by the Personal Data Act, 1998. 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? The "opt in", informed consent, is required for the consumer to grant consent to disclosure of their personal information. 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 marketing method involves a risk of being considered as in violation of the marketing act. The Marketing Practices Act contains a specific ban on unsolicited products. This means that an undertaking may not deliver products to a person who has not expressly ordered them and thereby mislead the recipient as to that persons obligation to pay. As a consequence of this the advertising must be very clear and state the terms and conditions of the offer. The rules in the law on Distant Selling regarding mandatory information must also be considered if the offer is an agreement negotiated at distance. 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 kind of offers may be used on the Swedish market. The advertising must however contain all information regarding the offer required by the Marketing Practices Act or other relevant legislation, such as the law on distant selling if the offer is negotiated at distance. 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. Automatic renewal offers are commonly used in Sweden for instance in connection with magazine subscription agreements. The consumer must be informed of the terms of the subscription, cancellation etc. before entering into the agreement. 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. These kinds of offers are not commonly used in Sweden. 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 Food Act, 1971; Medicinal Products Act, 1992; Marketing Practices Act, 1995 5.1.2 Diet/Weight Loss products Food Act, 1971; Medicinal Products Act, 1992; Marketing Practices Act, 1995 5.1.3 Drugs Medicinal Products Act, 1992; Marketing Practices Act, 1995; Rules Governing Drug Information (1994, ethical rules adopted by the pharmaceutical industry) 5.1.4 Electro-muscle stimulators Marketing Practices Act, 1995 5.1.5 Health and fitness products Marketing Practices Act, 1995 5.1.6 Beauty products Marketing Practices Act, 1995 5.1.7 Travel offers Marketing Practices Act, 1995, The Act on Package Tours, 1992; Travel guarantees Act, 1972 5.1.8 Magazine subscriptions Marketing Practices Act, 1995 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? According to the Marketing Practices Act the undertaking, or any person that acts on be undertaking, may be held responsible for violations of the Act. 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? Sweden has a long tradition in consumer protection especially through the work of the Consumer Agency and the Consumer Ombudsman whose main task is to help the Swedish general public with consumer affairs. Over the years a number of government authority regulations and an extensive amount of precedence from the Marketing Court supplements the legislation in this area. Therefore our advice to marketers that wishes to market their products in Sweden is to seek local advice.