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 Sweden United Kingdom United States

 

INTERNATIONAL LEGAL ISSUES IN DIRECT RESPONSE MARKETING: SWITZERLAND Pachmann Hofer Schwarz PO Box 3112 CH-8021 Zurich 1 Switzerland Tel: 41.1.225.6464 Fax: 41.1.225.6425 Email: peterhofer@compuserve.com Website: www.phslaw.ch

1. Lobbying 1.1 How can an association like ERA successfully lobby in your country to maintain a friendly regulatory environment? Switzerland is still not member of the European Union. Lobbying has to take place through the main Swiss advertising and marketing associations (like BSW or ASW) and with the help of specific members of the Swiss Parliament. 2. Laws and Regulations 2.1 Are any forms of direct response marketing prohibited in your country? Generally spoken: NO. Direct response marketing is allowed as long as it is clear for the customer what the implications of his response are. The same regulations that apply for specific products do also regulate direct response marketing with some exceptions. For instance tobacco advertising is not allowed on TV and Radio but is possible via the internet or direct mail (not to minors of course). 2.2 What are the major restrictions in your country on direct response marketing, which sellers should be aware of? No specific regulation exists. The most important regulation in this field of advertising is probably the Law on Protection of Personal Data (Datenschutzgesetz) which regulates the handling of personal data collected. There are specific regulations for TV and Radio especially on the duration of spots or teleshopping. 2.3 Are there any laws or regulations pending in your country that could have an impact on direct response marketing? No. The EU E-Commerce Directive will lead to certain changes in Swiss law, but this will take another 2 or more years. 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. Any new regulation will be decided by the Swiss Parliament as the main legislatory body in our country 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? There is a discussion about complete ban of tobacco advertising. 2.5(b) Explain briefly what types of penalties may be imposed on marketers by these agencies for violating the laws. Usually no penalties can be imposed for violations except in very specific cases (for instance violating the Lottery Law). Damages may be awarded upon request of a private plaintiff (our legal system only accords curative, simple damages). 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. The company may start a procedure to cease and desist the advertising. No penalies but damages if occurred and proved. 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? Our legal system does not have a concept of "class action", although consumer protection organizations and professional organizations are competent to file complaints. In fact, the reality comes near to the one of a class action. Class actions are not frequently filed. Again, penalties upon a successful 'class action' lawsuit are small. Damage has to be proven. Punitive damages are not accepted. 3. Consumer Privacy Issues 3.1 What is the current law in your country relating to privacy of personal information? The Law on Protection of Personal Data. 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 Privacy Act distinguished between several types of personal information, such as for instance on health issues or religious believes or financial background . Any personal information fall under the scope of the Act and for some categories of personal information (e.g. medical, religious or financial information) the obligations are stricter. Any collection or treatment of personal information, including the mentioned financial information falls under the scope of the Act. 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? Opt out. But: consent needs to be granted specifically before personal information may be collected, treated, disclosed or transferred outside of this country. This the first phase in any private data collection. Some information may not at all be collected, treated or disclosed without the specific consent of the person involved. 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. No problem if the implication is clear for the customer. 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 4.1. Continuity Plan Offers have to grant consumers the right to terminate the membership to the Plan and normally have to grant it each time a product is received by the consumer during a period of 7 working days following the receipt of the product. The participating consumer has to receive particular warning texts about her or his rights to cancel at all times in a business-to-consumer relationship. 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 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. See 4.1. It is not possible to pass-on credit card numbers without the specific prior consent thereto. 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 Due to health protection, advertising for food, dietary supplements, diet and/or weight loss products, biologically produced food, alcohol, beverages, tobacco, spices, coffee, tea, is regulated. The special regulations are very diverse and apply to very specific products. In essence, direct marketing of dietary products that are not to be qualified as drugs is allowed. Special attention is to be given to the regulatory side before marketing is conducted and to the labeling and description of the ingredients, as well as of the nutritional value and quantities of every ingredient. You may not say that such a product is "healthy" or "prevents from a certain disease" 5.1.2 Diet/Weight Loss products See answer 5.1.1 5.1.3 Drugs See 5.1.1 aboveAdvertising for drugs is regulated by the Law on Drugs and Medicines. In general, advertising for drugs is allowed, but regulated. No advertising is possible for drugs which are only available with prescription. 5.1.4 Electro-muscle stimulators No specific regulations 5.1.5 Health and fitness products See 5.1.1. 4. 5.1.6 Beauty products No restrictions except the general rules 5.1.7 Travel offers Possible. Certain aspects of travel offers are regulated by the Law on All-in Tours. 5.1.8 Magazine subscriptions Possible. The general regulations apply. 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? In principle the advertiser will be held responsible for false or misleading advertising. In addition the then the publisher, the producer or the printer or maker may be held responsible. Finally, the distributor or any person who has help to assure that the advertising had any effect may be held responsible. This is called "Cascade-Liability" 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? Make the advertising as clear as possible and give the customer a chance to return the product without specific reason within at least 7 days.