European Commission on Multi-Level Marketing and Pyramid Schemes. Part 2

8/8/2019 European Commission on Multi-Level Marketing and Pyramid Schemes. Part 2

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Institut fr Europisches Wirtschafts-und Verbraucherrecht e.V.

DOOR TO DOOR SELLING PYRAMID SELLING MULTILEVEL MARKETING

CONTRACT NO. A0/7050/98/000156

A STUDY COMMISSIONED BY THE EUROPEAN COMMISSION

FINAL REPORT

VOLUME II: ANALYSIS

HANS-W. MICKLITZ BETTINA MONAZZAHIAN CHRISTINA RLER

PROJECT MANAGER: PROF. DR. HANS-W. MICKLITZ

November 1999


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I

CONTENTS

CONTENTS........................................................................................................I

PREFACE...........................................................................................................I

ANALYTICAL TABLE OF CONTENTS (OVERVIEW)............................... III

ANALYTICAL TABLE OF CONTENTS ........................................................ V

LIST OF ANNEXES ..........................................................................................XI

LIST OF ABBREVIATIONS ....................................................................... XIII

GLOSSARY OF TERMS............................................................................... XV

REFERENCES.............................................................................................XVII

PREFACE

The study seeks to provide an answer to two questions: (1) whether, and to what extent, is itfeasible to adopt a common approach to doorstep and distance selling contracts, (2) whetherand to what extent, is it necessary to have European rules on pyramid/snowball systems and

multi level marketing? The answer this study gives is based on an extensive comparativeanalysis of the way in which the Member States have implemented the Doorstep SellingDirective 85/577/EC into national law as well as of the way in which Member States dealwith pyramid/snowball systems and multi level marketing.

Numerous colleagues in the Member States have provided invaluable assistance in thecompletion of the comparative analysis. Geraint Howells produced the report on the UnitedKingdom. The evaluation of the multi level marketing system made it necessary to analysethis relatively new marketing strategy in detail. This would not have been possible without theinvaluable support of multi level marketing companies, national direct selling organisationsand their European counterparts. National consumer organisations and the European

consumer organisation did their part to promote the consumer point of view. The service ofDG XXIV has accompanied us throughout the study with helpful and encouraging comments.

We would like to thank them all.

Hans-W. MicklitzBettina MonazzahianChristina Rler

Berlin, November 1999


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ANALYTICAL TABLE OF CONTENTS (OVERVIEW)

PART I. TECHNICAL ASPECTS: ADAPTATION OF THE DIRECTIVE85/577/EEC TO THE DIRECTIVE 97/7/EC...................................................... 1

A. Directive 85/577/EEC and its Implementation into the National Laws

by the Member States.........................................................................................................1

B. Comparison of the Directive 85/577/EEC on Doorstep Selling and

Directive 97/7/EC on Distance Selling - the Technical Aspects ........................................ 43

PART II. THE NEW ASPECTS I NORMATIVE RECONSTRUCTIONAND EMPIRICAL ANALYSIS .......................................................................61

A. Methods of Analysis ....................................................................................................61

B. Overview to the Charts ................................................................................................62

C. Should-Be Analysis of Direct Selling as a Normative Reconstruction .......................... 72

D. Empirical Analysis.......................................................................................................82

PART III. THE NEW ASPECTS II - THE LEGAL SITUATION ....................89

A. Presentation of the National Laws................................................................................90

B. Methods of Sanctions...................................................................................................93

C. Comparison ...............................................................................................................168


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ANALYTICAL TABLE OF CONTENTS

PART I. TECHNICAL ASPECTS: ADAPTATION OF THE DIRECTIVE85/577/EEC TO THE DIRECTIVE 97/7/EEC......................................................1

A. Directive 85/577/EEC and its Implementation into the National Laws by the Member

States .................................................................................................................................1

I. National Laws on Doorstep Selling .............................................................................1II. Implementation of the Directive into National Laws...................................................2

1. Scope of Application ................................................................................................2a) Sedes Personae ...................................................................................................3b) Sedes Materiae ...................................................................................................3c) Circumstances of the Conclusion of the Contract ................................................5

2. Definitions ...............................................................................................................8a) Consumer ...........................................................................................................8b) Trader...............................................................................................................10

3. Notice..................................................................................................................... 10a) Requirements of the Notice...............................................................................11b) Time of Providing the Notice............................................................................13c) Protection Measures.......................................................................................... 14

4. Right of Withdrawal...............................................................................................15a) Period of Time ..................................................................................................15b) Beginning and End of the Period ...................................................................... 16c) Formal Requirements of the Notice................................................................... 17d) Restrictions of the Right of Cancellation...........................................................18e) Effects of the Cancellation ................................................................................19

5. No Contracting-out.................................................................................................196. Return of Goods and Payment ................................................................................19

a) After the Performance of the Contract............................................................... 20b) Cooling-off Period............................................................................................22

7. Stricter Regulations ................................................................................................228. General Sanctions................................................................................................... 239. Enforcement of the Law......................................................................................... 23

III. Exceptions .............................................................................................................. 241. Minimum Payment.................................................................................................25

2. Immovable Property...............................................................................................263. Supply of Goods for Current Consumption in the Household and Catalogue Sales . 274. Insurance and Securities Contracts ......................................................................... 275. Requested Visit ......................................................................................................306. Further Exceptions .................................................................................................30

IV. The Right to Withdrawal in EC Consumer Law Directives (DoorstepSelling, Distance Selling, Time Sharing, Life Insurance) ..............................................32

1. Comparison of the Four Directives ......................................................................... 322. Towards a General Right of Withdrawal in Consumer Law ?.................................. 37

a) The Four Directives and the Future Perspective ................................................37b) Doorstep and Distance Selling - From Regulation to the Management of the

Right of Withdrawal ............................................................................................. 383. Duration of the Right of Withdrawal....................................................................... 38

a) The Calculation in the Four Directives..............................................................38


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b) Merging the Two Concepts in the Doorstep and the Distance Selling Directive?394. Beginning of the Right of Withdrawal ....................................................................40

a) The Four Directives .......................................................................................... 40b) Harmonising the Beginning of the Right of Withdrawal in Doorstep and

Distance Selling Contract ? ...............................................................................40

5. Notification of the Right of Withdrawal.................................................................. 40a) Major Differences in the Four Directives .......................................................... 40b) The Two Directives - Lacking Consistency....................................................... 41

6. Legal Consequences of the Right of Withdrawal..................................................... 41a) The Four Directives - the Reluctance to Interfere into the Right of the

Member States ..................................................................................................41b) The Two Directives in Comparison - a Major Step Forward in the DistanceSelling Directive ...................................................................................................42

B. Comparison of Directive 85/577/EEC on Doorstep Selling and Directive 97/7/EC on

Distance Selling - the Technical Aspects ..........................................................................43I. Scope of Application - Sedes Materiae ...................................................................... 43

1. Comparison of the Two Directives ......................................................................... 432. Situation-related and means-related Regulation ...................................................... 443. Proposal for a Common Concept ............................................................................ 45

II. The Contractual Concept.......................................................................................... 451. Comparison of the Two Directives ......................................................................... 452. Successive Enlargement of the Contractual Concept............................................... 473. Feasibility of a Common Concept for Both Directives ............................................ 47

III. Information and Transparency ................................................................................49

1. Comparison of Both Directives............................................................................... 492. From Means Specific Regulation to Instrumental Regulation of Information .......... 523. Proposal for a Common Concept ............................................................................ 53

IV. Performance and Payment Modalities..................................................................... 551. Comparison of the Two Directives ......................................................................... 552. Proposal for a Common Concept on Performance and Payment Modalities ............ 56

VI. Binding Character, Redress and Complaint System................................................. 571. Comparison of the Two Directives ......................................................................... 572. From Punctual Enforcement Rules to European Redress......................................... 593. Proposal for a Common Concept ............................................................................ 60

PART II. THE NEW ASPECTS I NORMATIVE RECONSTRUCTION ANDEMPIRICAL ANALYSIS.................................................................................61

A. Methods of Analysis ....................................................................................................61

B. Overview to the Charts (Charts I and II).......................................................................62

I. The Standard Sales Case as a Model for the Distinctive Character of Other Forms... 63II. Chart of Institutions .................................................................................................63III. Single Level Marketing...........................................................................................64

1. Relationship between Company and Agents ........................................................... 64

a) Pre-contractual Relations Chart III.1.1. .......................................................... 64b) Contractual Relations Chart III.1.2.................................................................65


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2. Relationship between Company and Consumers - Contractual Relations Chart III.2. .................................................................................................................663. Relationship between Agents and Consumers Chart III.3..................................... 66

IV. Multi Level Marketing............................................................................................ 671. Contractual Relations between Company and Dealer/Sponsor Chart IV.1............ 67

2. Monitoring and Surveillance Chart IV.2. .............................................................683. Relationship between Dealers and Consumers ........................................................ 68a) Dealer's Perspective Chart IV.3.1. ..................................................................68b) Consumer's Perspective Chart IV.3.2. ............................................................ 69

4. Relationship between Sponsor and Dealer in Chart - Chart IV.4. ............................ 70V. Snowball/Pyramid System - The Structure and the Business Practices of theSystems Chart V.1.-V.3. ............................................................................................ 70

C. Should be Analysis of Direct Selling as a Normative Reconstruction ........................... 72

I. Common Features of the Organisational Structure in Direct Selling........................... 72

1. Simplification of the Criteria for a Better Understanding........................................ 732. The Radius of Activities ......................................................................................... 733. Hierarchies and Differentiation of Tasks.................................................................744. Symbols and Legend .............................................................................................. 75

II. Common Features of Direct Selling as Distinguished from the Standard Case of thePurchase .......................................................................................................................76

1. Offer and Demand..................................................................................................762. The Standard Case of Purchase............................................................................... 773. Strategies to Initiate Business .................................................................................78

III. Characteristics of the Three Distribution Systems ...................................................79IV. Recruiting............................................................................................................... 81

D. Empirical Analysis.......................................................................................................82

I. Methods ....................................................................................................................82II. Remuneration Systems............................................................................................. 83

1. Marketing Structure as a Means of Personnel Recruitment ..................................... 832. Transparency of the Remuneration and Career Perspectives ................................... 84

III. Controlling Systems................................................................................................ 851. The Private Sphere .................................................................................................852. Performance and Counter-performance................................................................... 86

3. Selling into the System........................................................................................... 87

PART III. THE NEW ASPECTS II - THE LEGAL SITUATION ....................89

A. Presentation of the National Laws................................................................................90

B. Methods of Sanctions...................................................................................................93

I. Austria ......................................................................................................................931. Legislation ............................................................................................................. 93

a) Penal Law.........................................................................................................93b) Administrative Law.......................................................................................... 94c) Civil Law.......................................................................................................... 95

2. Case Law ............................................................................................................... 96a) Snowball Systems............................................................................................. 96


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b) Amateurs .......................................................................................................... 973. Conclusion ............................................................................................................. 97

II. Belgium ...................................................................................................................981. Legislation ............................................................................................................. 98

a) Elements........................................................................................................... 99

b) Proceedings ......................................................................................................992. Case Law ............................................................................................................... 993. Conclusion ........................................................................................................... 102

III. Denmark............................................................................................................... 1031. Legislation ........................................................................................................... 103

a) Good Marketing Practices............................................................................... 103b) Misleading Information .................................................................................. 104c) Public Collection ............................................................................................ 104

2. Case Law ............................................................................................................. 1053. Conclusion ........................................................................................................... 105

IV. Finland ................................................................................................................. 105

1. Legislation ........................................................................................................... 106a) Marketing Practices Act .................................................................................. 106b) Money Collection Act..................................................................................... 106c) Securities Act 495/1989.................................................................................. 107


V. France.................................................................................................................... 1081. Legislation ........................................................................................................... 109

a) Criminal Law: Art. L 122-6 Code de la Consommation................................... 109b) Criminal Law: Code Pnal.............................................................................. 112c) Law concerning the Status of the Direct seller ................................................. 112


VI. Germany............................................................................................................... 1151. Legislation ........................................................................................................... 115

a) Criminal Law.................................................................................................. 116b) Competition Law............................................................................................ 118c) Civil Law........................................................................................................ 119

2. Case Law ............................................................................................................. 119a) Snowball Systems........................................................................................... 119b) Multi Level Marketing.................................................................................... 121

3. Intermediate result................................................................................................ 127a) 1 UWG ........................................................................................................ 127b) 6 c UWG ..................................................................................................... 128

4. Conclusion ........................................................................................................... 128VII. Greece................................................................................................................. 129VIII. Ireland ............................................................................................................... 130

1. Legislation ........................................................................................................... 130a) Definition of Pyramid Schemes....................................................................... 130b) Prohibitions .................................................................................................... 131c) Return the Payment to the Participants............................................................ 132

2. Conclusion ........................................................................................................... 133

IX. Italy...................................................................................................................... 133X. Luxembourg .......................................................................................................... 134XI. The Netherlands ................................................................................................... 135


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1. Legislation ........................................................................................................... 135a) Pyramid Selling .............................................................................................. 135b) Multi Level Marketing.................................................................................... 136

2. Conclusion ........................................................................................................... 136XII. Norway ............................................................................................................... 136

1. Legislation ........................................................................................................... 137a) Marketing Control Act .................................................................................... 137b) Lottery Act ..................................................................................................... 137

2. Case Law ............................................................................................................. 1383. Consumer Council: General Remarks ................................................................... 138

XIII. Portugal ............................................................................................................. 139a) Definition of Pyramid Selling ......................................................................... 140b) Prohibition of Pyramid Selling........................................................................ 140

XIV. Spain ................................................................................................................. 1401. Legislation ........................................................................................................... 141

a) Multi Level Marketing Law ............................................................................ 141

b) Pyramid Selling.............................................................................................. 1432. Conclusion ........................................................................................................... 143

XV. Sweden ............................................................................................................... 1441. Legislation ........................................................................................................... 144

a) General Clause................................................................................................ 144b) Chain-letter Games ......................................................................................... 145

2. Case Law ............................................................................................................. 145XVI. United Kingdom (Geraint Howells) ................................................................... 146

1. Introduction.......................................................................................................... 1462. Legislation ........................................................................................................... 147

a) What is a Trading Scheme?............................................................................. 147b) Illegal Activity................................................................................................ 148c) Trading Schemes Regulations 1997. ............................................................... 149d) Direct Selling Association .............................................................................. 152

3. Conclusions.......................................................................................................... 153XVII. United States of America.................................................................................. 153

1. Presentation of the Laws in Tabular Form ............................................................ 154a) Federal Law.................................................................................................... 154b) State Laws ...................................................................................................... 154

2. Legislation ........................................................................................................... 156a) Criminal Law.................................................................................................. 156

b) Competition Law............................................................................................ 158c) Securities Law ................................................................................................ 159d) Referral Sales Laws ........................................................................................ 160e) Business Opportunity Statutes......................................................................... 160f) Lottery Law..................................................................................................... 160g) Anti-Pyramid Laws......................................................................................... 161h) Multi Level Marketing Law............................................................................ 161

3. Case Law ............................................................................................................. 1624. Intermediate Result............................................................................................... 1675. Conclusion ........................................................................................................... 167

C. Comparison ...............................................................................................................168I. Technical Aspects ................................................................................................... 168

1. Category............................................................................................................... 168


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2. Kind of Provision ................................................................................................. 1703. Negative or Positive Regulation............................................................................ 171

II. Substantive Aspects ............................................................................................... 1721. Legal Definitions.................................................................................................. 172

a) Pyramid Selling and Snowball Systems........................................................... 172

b) Multi Level Marketing.................................................................................... 1732. The Company....................................................................................................... 174a) Structure of the Company................................................................................ 174b) Marketing Methods......................................................................................... 175

3. Relation between the Company and the Salespersons ........................................... 176a) Recruitment .................................................................................................... 176b) Entry Requirements ........................................................................................ 177c) Investment ...................................................................................................... 178d) Financial Advantages...................................................................................... 178

4. Economic Aspects ................................................................................................ 1795. Requirements for Lawful MLM Practices............................................................. 180

a) Sales Practices ................................................................................................ 180b) Marketing Practices ........................................................................................ 181

III. Procedural Aspects ............................................................................................... 1821. Liability................................................................................................................ 1822. Right of action...................................................................................................... 1833. Sanctions.............................................................................................................. 183

IV. Conclusion: Remaining Problems of Multi Level Marketing................................. 184


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LIST OF ANNEXES

Annex I: Sources of Information (persons and organisations) ...................................... 187

Annex II: Interviewpartners and Hearings .................................................................... 189

Annex III: Questionnaire ............................................................................................... 191

Annex IV: Charts........................................................................................................... 195

Annex V: Recruiting..................................................................................................... 213

Annex VI: List of Legal Experts .................................................................................... 217


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LIST OF ABBREVIATIONS1

ABGB Allgemeines Brgerliches Gesetzbuch (Austrian civil code)AG Amtsgericht (German District Court) or Aktiengesellschaft

AnwBl. Anwaltsblatt (Ger.)

BB Betriebsberater (Ger.)BGB Brgerliches Gesetzbuch (German civil code)BGH Bundesgerichtshof (German Federal Supreme Court)BGHZ Entscheidungen des Bundesgerichtshofs in Zivilsachen (Reports of the

Federal Supreme Court in Civil Cases) (Ger.)BOE Boletn Oficial del Estado (Sp.)BT-Drs. Bundestagsdrucksache (Ger.)

CA Court d'appel (Belg., Fr.)

Cass. Civ. Arrt de la Court de Cassation civile (Fr.)Contrats Conc. Cons. Contrats Concurrence Consommation (Fr.)

D. Recueil Dalloz (Fr.)Diss. DissertationDSA Direct Selling Association

ECJ Court of Justice of the European CommunitiesECJR European Court of Justice ReportsEd. EditorEds. EditorsEuZW Europische Zeitschrift fr Wirtschaftsrecht (Ger.)

F.T.C. Federal Trade Commission Decisions (USA)FEDSA Federation of European Direct Selling AssociationsFS Festschrift (Ger.)

Gaz.Pal. La Gazette du Palais (Fr.)GRUR Int. Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil

(Ger.)

HWiG Haustrwiderrufsgesetz (Act on Doorstep Sales) (Ger.)JCP Journal of Consumer Policy (Neth.)J.T. Journal des Tribunaux (Belg.)

KG Kammergericht (Court of appeal, Berlin)KSchG Konsumentenschutzgesetz (Consumer Protection Act) (Austria)

L.ed. Lawyers' EditionL.P.C. Loi sur les pratiques du commerce et sur l'information et la protection

du consommateur (Belg.)

LG Landgericht (Court of first instance) (Ger.)1 This list mainly corresponds with the Index to Legal Citations and Abbreviations, by Donald Raistrick,

2nd edition, London 1993


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NJW Neue Juristische Wochenzeitschrift (Ger.)N.W.2d. North Western Reporter, Second Series (USA)

Bl sterreichische Bltter fr gewerblichen Rechtsschutz und Urheber-

rechtOGH Oberster Gerichtshof (Supreme Court) (Austria)JZ sterreichische JuristenzeitungOLG Oberlandesgericht (Court of appeal)

RabelsZ Rabels Zeitschrift fr auslndisches und internationales Privatrecht(Ger.)

RICO Racketeer Influenced And Corrupt Organisations Act (USA)RIW Recht der internationalen Wirtschaft (Ger.)

S. Ct. Supreme Court (USA)

StGB Strafgesetzbuch (Penal Code) (Austria, Ger.)

Trad. L. Trading Law (UK)Trib.gr.inst. Tribunal de grande instance (Fr.)

U.S. United States Supreme Court ReportsUWG Gesetz gegen den unlauteren Wettbewerb (Act Against Unfair

Competition) (Austria, Ger.)

VAT Value added taxVol. Volume

WRP Wettbewerb in Recht und Praxis (Ger.)

ZEuP Zeitschrift fr Europisches Privatrecht (Ger.)ZvglRWiss Zeitschrift fr vergleichende Rechtswissenschaft (Ger.)


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GLOSSARY OF TERMS2

Direct Selling Direct Selling is the marketing of consumer goods and services

directly to consumers in their homes (the homes of friends, attheir workplace or similar places away from shops), throughexplanation or demonstration by a salesperson, for theconsumer's use or consumption

Multi Level Marketing Multilevel Marketing is a form of Direct Selling where DirectSellers are independent (buy/sell-) dealers who may

purchase the company's products at a rebatedprice for resale or own and the family's use orconsumption,resell them to consumers and/or independent

dealers andrecruit (sponsor) other independent dealers whoin turn may recruit additional independentdealers.

They receive overrides based upon their own sales (orpurchases) of such products as well as upon the sales (orpurchases) of independent dealers in their direct recruiting lineto the extent defined by the company marketing plan.

Company = Direct Selling companysupplying the consumer products, owning the brand name andutilising a sales organisation

Direct Sellers = sales people= sales persons= salesmen and saleswomenincluding the representatives, agents, dealers, managers,distributors and MLM participants.

Representatives = repsemployed Direct Sellers selling in the name of the company and

earning salaries which are subject to withholding taxes andsocial security charges.

Agents = commission sales peopleindependent Direct Sellers selling in the name of the companyand earning commissions

Dealers independent Direct Sellers buying from the company and sellingin their own name to consumers, earning margins.

Managers = sales managers

2 The definitions are taken from the FEDSA.


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independent Direct Sellers in an agent organisation selling toconsumers and assisting a number of agents and/or othermanagers, earning commissions and overrides

Distributors = dealer-distributors

independent Direct Sellers in a dealer organisation buying fromthe company and selling in their own name to consumers and/ordealers (or other distributors), earning margins and overrides.

Participants = multilevel marketing (MLM) participants including dealersand distributors.

Independent Contractors free, independent and self-employed Direct Sellers (agents,managers, dealers, distributors) paying their own expenses andtaxes, being responsible for times of illness, unemployment andold age.

Selling includes contacting of potential customers, explaining anddemonstrating products person-to-person or at parties, advisingand taking of orders.

Recruiting Negotiating with an individual to make it join a Direct Sellingcompany's sales organisation by signing a Direct Seller'sagreements.

Sponsoring recruiting in MLM organisation,including the training, motivating and assisting or theindependent dealers in the direct recruiting line.A sponsor (usually part of an upline chain) sponsors a newparticipant (sponsorship) and thereby starts a recruiting line(sponsorline), the downline chain of sponsorships orgenerations.

Earnings include salaries of representatives,commissions of agents,margins of dealers,overrides of managers, dealers and distributors,

rewards as incentives for Direct Sellers.Levels buying and/or selling parties in dealer organisations including

the company, distributor, dealer and the final consumer.


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REFERENCES

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Baeumer Ludwig, Das Recht des unlauteren Wettbewerbs in den Mitgliedstaaten derEuropischen Wirtschaftsgemeinschaft, Niederlande, (ed. P. Ulmer), Mnchen 1967

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1998v. Bernstoff Christoph, Wirtschaftsrecht in den EU-Staaten, Bremen 1998

Blse Joachim, Die strafrechtliche Erfassung von Schneeballsystemen, insbesondereKettenbrief und System der progressiven Kundenwerbung, Diss. Tbingen, 1997

Brammsen Joerg, Leible Stefan, Multi-Level Marketing im System des deutschenLauterkeitsrechts, BB 1997, Beilage 10

Brodie St. A., Self-Employment Dynamics of the Independent Contractor in the Direct SellingIndustry A thesis submitted in partial fulfilment of the requirements of the University ofWestminster for the degree of Doctor of Philosophy, manuscript unpublished, 1999.v. Bunnen Dominique, A propos de la vente "en boule de neige", J. T. 1984, p. 245 et seq.

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Pfeiffer Thomas, Ein zweiter Anlauf des deutschen Brgschaftsrechts zum EuGH, NJW 1996,p. 3297Pichler Rufus, Kreditkartenzahlung im Internet, NJW 1998, p. 3234Plogell Michael, Werberecht in Schweden, in: Peter Schotthfer (ed.), Handbuch desWerberechts in den EU-Staaten, Kln, 2nd edition, 1997, p. 528 et seq.

Puech Marcel, Jurisprudence de parrainage en matire de vente multi-niveaux, Gaz. Pal.1995, p. 46 et seq.

Ranke Fritz, Werberecht in Frankreich, in: Peter Schotthfer (ed.) Handbuch des Werberechtsin den EU-Staaten, 2nd edition 1997, Kln

Reich Norbert, A European Constitution for citizens: Reflections on the Rethinking of Unionand Community Law, ELJ 3 (1997), p. 131

Reich Norbert, Die neue Richtlinie 97/7/EG ber den Verbraucherschutz beiVertragsabschlssen im Fernabsatz, EuZW 1997, p. 585

Richter Hans, Strafloses Betreiben eines Kettenbriefsystems, wistra 1987, p. 276Riedler Andreas, Die Anpassung des KSchG an das EWR-Abkommen, ecolex 1994, p. 87 et

seq. Roth Wulf-Henning, Brgschaftsvertrge und EG-Richtlinie ber Haustrgeschfts, berSchwierigkeiten im Umgang mit dem Gemeinschaftsrecht, ZIP 1996, p. 1285

Scherpe Jens, Haustrgeschfte in Dnemark, ZEuP 1997, p. 1078 et seq.Schlenker Susanne, Haustrgeschfte in Spanien, ZEuP 1997, p. 1109 et seq.Schnherr Fritz, Wiltschek Lothar, Gesetz gegen den unlauteren Wettbewerb, Wien, 6th

edition 1994Snyder Francis, Constitutional Dimensions of European Economic Integration, 1996v. Staudinger J., Kommentar zum Brgerlichen Gesetzbuch, 13th edition, Berlin 1998Stuyck Jules, La loi du 14 juillet sur les pratiques du commerce: application et perspectivesdans l'intrt du consommateur, in: Droit des consommateurs, Brussels 1982, p. 171 et seq.

Thvenoz Luc, Le projet de directive sur la commercialisation distance des servicesfinanciers, in: Hildegard & Bernd Stauder (eds.), La protection des consommateurs acheteurs distance, Etude de droit de la consommation, vol. 6, 1999Thume Karl-Heinz, Multi-Level-Marketing, ein stets sittenwidriges Vertriebssystem ?, WRP1999, p. 280 et seq.Treis Michael, Recht des unlautere Wettbewerbs und Marktvertriebsrecht in Schweden,Mnchen 1991

Ulmer Peter, Direktvertrieb und Haustrwiderrufsgesetz, WRP 1986, p. 445 et seq.Ulrich Gustav-Adolf, Die Laienwerbung, FS Piper, Mnchen 1996

Willett Chris, From reindeers to confident consumers: UK bodies and the unfair termsdirective, in: H.-W. Micklitz, N. Reich (eds.), Public Interest Litigation before EuropeanCourts, 1996Willingmann Armin, Sittenwidrigkeit von Schneeballsystem-Gewinnspielen undKonditionsausschlu, NJW 1997, 2932Wohlgemuth Frank K., Das Recht des unlauteren Wettbewerbs in Belgien, WRP 1992, p. 457et seq.


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Studies

PriceWaterhouseCoopers, Socio-Economic Impact of the Direct Selling Industry in theEuropean Union, Bruxelles 1999

Study prepared on behalf of the Federation of European Direct Selling Associations byOppenheimer Wolff & Donnelly LLP with the support of the Amway Corporation, Brussels,March 16, 1999EC-Study "Doorstep-Selling and Financial Services" by Verein fr Konsumenteninformation,September 15, 1997


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PART I. TECHNICAL ASPECTS: ADAPTATION OF THE DIRECTIVE85/577/EEC TO THE DIRECTIVE 97/7/EC

A. Directive 85/577/EEC and its Implementation into the National Lawsby the Member States

In this part, it will be explained how the Member States have implemented Directive85/577/EEC into their national legislation. This is a first step for determining whether theDirective shall be modified because it shows the reaction of the States towards theDirective. The Directive allows the Member States some margin as to the extent they wantto regulate doorstep selling and by which measures. That means, the States can provide forstricter regulations if they deem it necessary or extend the scope of application. As theStates execute the laws, they can adapt the law to the legal needs. Therefore, the legal

situation in the Member States must be considered, to see which modifications andalterations they have made in order to meet the requirements of effective consumerprotection.

First, the national laws are listed in a table. Then, the provisions of Directive 85/577/EECare presented and the implementation into the national laws is explained. Modificationsand differences between the Directive and the national law are commented upon.

I. National Laws on Doorstep Selling

Most of the Member States had regulated doorstep selling by national laws beforeDirective 85/577/EEC came into force. They have adapted their national laws to therequirements of the Directive. In other Member States, new laws have been enacted inorder to implement the Directive.

Member State Act Enactment dateAustria Konsumentenschutzgesetz

1979January 1, 1994

Belgium Loi sur les pratices ducommerce et surl'information et la

protection duconsommateur, July 14,

1991

July 14, 1991

Denmark Door Sales Act of 23 of December, 1987

1994

Finland Consumer Protection Act1978

January 8, 1993

France Loi no. 72-1137 1972 June 23, 1989Since 1993: Code de la

Consommation

Germany Haustrwiderrufsgesetz1986 No implementation

Greece Regulation on Doorstep July 16, 1990


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Selling 1990 Since 1994: ConsumerProtection Act

Ireland European Communities(Cancellation of Contracts

Negotiated away from

Business Premises)Regulations 1989

November 15, 1989

Italy Decreto legislativo, January15, 1992 no. 50

January 15, 1992

Luxembourg Loi concernant lecolportage, la vente

ambulante, l'talage demarchandises et la

solliciation de commandes

March 26, 1997

Netherlands Colportagewet 1973 July 3, 1989Portugal Decreto-lei no. 272 of July

3, 1987July 3, 1987

Spain Ley 21 Noviembre 1991,26/1991, Ventas fuera de

establecimiento

November 21, 1991

Sweden Door-to-Door Sales ActSFS 1981:1361

January 1, 1993

United Kingdom Consumer Protection(Cancellation of Contracts

concluded away fromBusiness Premises)

Regulations 1987

July 1, 1988

II. Implementation of the Directive into National Laws

The provisions in Directive 85/577/EEC are now enumerated one after another and thenthe national legal situation in the Member States is explained. A table shows briefly if therelevant content of the Directive has been adopted in each state. If the national situationcorresponds to the requirements of the Directive, this will be indicated by an "x" in the

table.

1. Scope of Application

Art. 1

1. This Directive shall apply to contracts under which a trader supplies goods or servicesto a consumer and which are concluded: - during an excursion organised by the traderaway from his business premises, or - during a visit by a trader (i) to the consumer'shome or to that of another consumer; (ii) to the consumer's place of work; where the

visit does not take place at the express request of the consumer.


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2. This Directive shall also apply to contracts for the supply of goods or services otherthan those concerning which the consumer requested the visit of the trader, providedthat when he requested the visit the consumer did not know or could not reasonablyhave known, that the supply of those other goods or services formed part of the trader'scommercial or professional activities.

3. The Directive shall also apply to contracts in respect of which an offer was made by theconsumer under conditions similar to those described in paragraph 1 or paragraph 2although the consumer was not bound by that offer before its acceptance by the trader.

4. The Directive shall also apply to offers made contractually by the consumer underconditions similar to those described in paragraph 2 or paragraph 3 where the consumeris bound by his offer.

a) Sedes Personae

aa) Directive 85/577/EEC

The Directive applies to contracts between traders on one side and consumers on the other.

bb) Legal Situation in the Member States

Directive 85/577 EEC Consumer TraderAustria x IndustrialistBelgium x Professional delivererDenmark x xFinland x MerchantFrance x CanvasserGermany Customer Other contracting party

Greece x SuppliersIreland x xItaly x Commercial operatorLuxembourg x xNetherlands Singular person PedlarPortugal x SalesmanSpain x EntrepreneurSweden x xUnited Kingdom x xDirective 85/577 EEC Consumer Trader

Almost all States make use of the term "consumer". OnlyGermany and the Netherlandsemploy different terms. The terms for the other contracting party, "trader", differ from onestate to another. However, the definition of those terms presented below shows that thereare almost no differences in the meaning between the terms used by the Directive andthose which the Member States employ.

b) Sedes Materiae


The Directive covers contracts between a consumer and a trader, a non-binding offer madeby the consumer under the condition that the contract has been concluded and a bindingoffer declared by the consumer. The consumer must make his offer under circumstances


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similar to those listed in the Directive. The aim of Directive 85/577/EEC is to cover allsituations in which the consumer enters a contractual obligation under the circumstancesdescribed below under c) Circumstances. Therefore, the ECJ interprets the scope ofapplication extensively.3

bb) Legal Situation in the Member StatesWhether it is necessary to include offers by the consumer or not depends on the nationalcontractual law. In some countries, the offer is not binding before it has been accepted.4 Asthe consumer is not bound by his offer, there is no necessity to protect him by granting hima right of withdrawal.

Directive 85/577 EEC Contract OfferAustria xBelgium xDenmark x xFinland x xFrance xGermany xGreece x xIreland x xItaly x xLuxembourg xNetherlands xPortugal xSpain x xSweden x x

United Kingdom x xDirective 85/577 EEC Contract Offer

The German law only applies to contractual declarations by the consumer which aredirected to a contract involving payment. This means, that unpaid services or goods orobligations for which the consumer is not paid are not within the scope of application. Aslong as it concerns the situation that the consumer receives goods or services without anyobligation of payment there is no need to protect the consumer. However, the wording ofthe law also covers the situation where the consumer is bound by a contractual obligationwithout being paid himself, for example if he enters into a association or a club or if he

furnishes a guarantee.

3 One example of the wide interpretation of the ECJ is the Case C-45-96Bayerische Hypotheken- und

Wechselbank AG vs. Dietzinger (1997) I ECJR 1199, March 17, 1998. This preliminary decisionconcerns the question referred by the German Supreme Court whether the Directive applies toguarantees. The ECJ has decided that guarantees are covered by the Directive if they are furnishedfor consumer obligations

4 In Ireland, Spain and the United Kingdom, the consumer can revoke his offer any time as long as thetrader has not accepted it yet; in Belgium, France, Germany, Luxembourg, the Netherlands and the

Scandinavian countries the offer can only be revoked until the addressee receives it(J.BasedowZEuP 1997, p. 1075 et seq.; v. Bernstorff, Wirtschaftsrecht in den EU-Staaten, p. 54 et seq.).Therewould not have been a necessity to include offers made by the consumer in Ireland, Spain and theUnited Kingdom.


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c) Circumstances of the Conclusion of the Contract


The Directive protects the consumer when he concludes contracts in a special situation: at

places outside the business premises of the trader. The Directive lists circumstances whichhave in common that the consumer does not expect to conclude a contract, that means heusually is surprised by the contractual negotiations and not prepared for it. Besides, he doesnot have the possibility to compare the goods or services of the trader with those of othertraders. First of all, the Directive is applicable when the contract is concluded during anexcursion outside the business premises of the trader. Next, it applies to an unsolicited visitto the consumer's home or place of work. A visit following a special request by theconsumer is covered by the Directive if this request has been made for other products orservices than those which are finally subject of the contract. The Directive protects theconsumer also when he makes an offer under circumstances similar to those mentioned inthe Directive.


Directive85/577 EEC

Excursions Unsolicitedvisit

Visit upon aspecial request

Similarcircumstances

Austria Outside thebusinesspremises

Outside thebusinesspremises

x Outside thebusinesspremises

Belgium x x xDenmark Outside the

businesspremises

x x Outside the

businesspremisesFinland Outside the

businesspremises

x x Outside thebusinesspremises

France x x x Other situationsmentioned

Germany Recreationalevents

x x Prohibition of circumvention

Greece Outside thebusiness

premises

x x Outside thebusiness

premisesIreland x x x xItaly x x x Other situations

mentionedLuxembourg x x x xNetherlands Outside the

businesspremises

x x Outside thebusinesspremises

Portugal x x xSpain Outside the

businesspremises

Outside the

businessPremises

x Outside the

businesspremises


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Sweden x x x Other situationsmentioned

UnitedKingdom

x x x x

Directive

85/577 EEC

Excursions Unsolicited

visit

Visit upon a

special request

Similar

circumstances

(1) Outside the business premises: InAustria,Denmark, Finland, Greece,Netherlands andSpain there is no positive description of the scope of application. The law applies to allsituations in which the contract is concluded "away from the business premises of thetrader".

(2) Excursions: InAustria, even excursions or promotion tours which lead the customers tothe business premises of the trader are within the scope of application. In Germany,excursions are included in the term "recreational events", which means trips, sports events,parties or excursions organised by the trader or in his interest.

(3) Unsolicited visit: In Portugal, demonstrations of the goods for a group of persons at thehome of one consumer (home-parties) are mentioned in particular.

(4) Visit upon a special request: The consumer is in most of the Member States onlyprotected if he requests the visit of the trader for special goods but then concludes acontract concerning other goods. France andItaly do not distinguish between a visit upona request and a visit without express request. In these two countries, the consumer isprotected even if he invites the trader and concludes a contract concerning exactly theproducts for which he had asked for a visit.

(5) Similar circumstances: This criteria is not mentioned explicitly in all national laws.However, most of them provide situations, in which the consumer is surprised by thecontractual situation and where he has no possibility to compare the products with others.The German law prohibits the circumvention of the Act. That means, the trader is not ableto avoid the situations listed in the German law by concluding the contract in similarsituations to those mentioned explicitly. If the trader tries to circumvent the application ofthe law intentionally, the German law applies to the contract and the consumer is protected.The Court of Appeal Stuttgart5 has recently stated that the Act also applies if the customermakes the offer at his home and the contract is later concluded in the office of a notary.The court declared that the contractual circumstances surrounding the conclusion of the

contract may not be split in two different situations (one in which the Doorstep Sales Actapplies and one in which the Act is not applicable).

Irelandand the United Kingdom do not provide a list with other situations in which the lawapplies. They have transferred the general term "under similar circumstances" of theDirective.

5 OLG Stuttgart, 6 U 169/98, June 29, 1999, VuR 1999, p. 308 et seq.


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Other Circumstances listed up in the National Laws:

Publicplaces

Publictransport

Meetings Places ofwork,

studies or

cure

Telephonecall

Catalogue

Austria xBelgiumDenmark xFinlandFrance xGermany x x xGreeceIrelandItaly x x x x

LuxembourgNetherlands

x x

PortugalSpain x xSweden x x xUnitedKingdom

Publicplaces

Publictransport

Meetings Places ofwork,

studies orcure

Telephonecall

Catalogue

All these other circumstances mentioned in the national laws describe places of contractwhere the consumer is as surprised and unprepared for a contract as he is at his home orplace of work.

(1) Public places and public transport: InAustria, the act applies if the trader contacts theconsumer on the street and takes him then to his business premises. InFrance, theconsumer is protected when concluding contracts at "any place not normally used for

commercial affairs".

6

It is unclear whether sales in public places and on the street arecovered by that term.7 So far, the French courts have not ruled on this question. InGermany, the situation "at public places or public transport" requires that the tradercontacts the consumer (and not vice versa) and the consumer has not expected theapproach.

(2) Meetings: The term meetings means meetings organised by the trader.

6 The French Cour de Cassation has ruled that trade fairs and exhibitions are places which are

destined to put goods on the market (Cour Cass., July 10, 1995, D. 1995, 191).7 J. Calais-Auloy, F. Steinmetz, Droit de la consommation, p. 99 supports to include contracts

concluded on public places.


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(3) Places of work, studies or cure: The consumer is protected when he concludes acontract at places where he is found because of work, studies or cure, unless he is thereonly temporarily.

(4) Catalogue: Italy and Sweden go further than the Directive by including contracts of

correspondence on basis of a catalogue. Catalogue sales are excluded from the scope ofapplication by the Directive.

2. Definitions

Article 2

For the purposes of this Directive: "consumer" means a natural person who, in transactionscovered by this Directive, is acting for purposes which can be regarded as outside his tradeor profession; "trader" means a natural or legal person who, for the transaction in question,acts in his commercial or professional capacity, and anyone acting in the name or on behalfof a trader.

a) Consumer


The Directive defines consumer as a natural person, acting for purposes outside his trade orprofession.


Directive85/577 EEC

Natural person Legal person8 Acting outsideof trade orprofession

Final recipient

Austria x x9 xBelgium x x xDenmark x xFinland x xFrance x x xGermany x x10 xGreece x x x xIreland x xItaly x xLuxembourg x x

8 The coloured elements are not mentioned by the Directive.9 Krejci 1 KSchG no. 7..10 Whether the term "customer" also means legal persons is unanimously answered by the German

legal literature:O. Werner(in : Staudinger), 1 HwiG no. 14 restricts the term to natural persons.


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Netherlands x xPortugal x xSpain x x x xSweden x x

UnitedKingdom

x x

Directive85/577 EEC

Natural person Legal person11 Acting outsideof trade orprofession

Final recipient

France, Germany, Netherlands, Portugal, Spain and Sweden do not provide a legaldefinition for the term "consumer" in the Act on Doorstep Selling. Most countries restrictthe term "consumer" to non-merchants, that means persons acting for private purposes. Inother countries, this term has been interpreted more widely. In France several courts havedecided that in special situations business persons also fall within the scope of applicationof the law. They have established three criteria in order to distinguish between tradersprotected by the Code de la Consommation (Consumer Code) under the specific situationand traders not protected by the Consumer Code. The Code applies to traders, if (1) there isno connection between the specialisation of the trader and the specific contract12, (2) no"rapport direct" between the business activity and the specific contract13 or (3) thecontracts are not supposed to be for the needs of the trader's business14. Another broadlegal definition exists inGreece, where a "consumer" is any person for whom the productsand services offered on the market are intended or the person which uses the products andservices as a final recipient.15 In Spain, the Act refers to the Consumer Protection Act 16,which considers a consumer as any final buyer or user whether or not the product/service is

used for non-commercial or professional purposes.17

11 The coloured elements are not mentioned by the Directive.12 Cour Cass., April 28, 1987, D. 1988, p. 1(a land agent installing an alarm device or purchasing a fire

extinguisher in order to protect his shop is considered a consumer).13 Cour Cass., January 3, 1996, D. 1996, p. 228 (a bottle company purchasing water is not considered a

consumer); Cour Cass., January 30, 1996, D. 1996, p. 229 (a company borrowing money for theinstallation of a computer system in order to service it to its clients is not considered a consumer;Cour Cass., January 24, 1995, D. 1995, p. 327 et seq. (a printing company concluding a contractwith lectricit de France about electrical energy is not considered a consumer).

14 The Commission des Clauses Abusives, September 14, 1993, Contrats Conc. Cons. 1994, no. 92 (acompany concluding a contract on a telephone connection) and the Cour Cass., February 21, 1995,Contrats Conc. Cons. 1995 no. 84 (a trader renting a car to do business) have denied the protectionof the Consumer Code because the contracts have been concluded for the needs of the trader'sbusiness.

15 E. Alexandriou GRUR Int. 1996, p. 400 et seq., states that persons acting as final recipients of goodsor services in connection with their business do not need specific protection as they are protected bycivil and commercial provisions. If, however, they conclude contracts for their private needs, thenthey are regarded as normal consumers and therefore protected under consumer law. She doubts

whether there exists any situation where the buyer would not be deemed to be a consumer for thepurposes of this act.

16 Ley General para la Defesa de los Consumidores y Usarios, BOE no. 176, 24 of July 1984.17 SeeM.-A.Lpez Snchez JCP 1994, p. 83 et seq.


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b) Trader


The trader is defined as a natural or legal person acting in his commercial or professional

capacity and anyone acting in the name or on behalf of a trader.


Directive 85/577EEC

Natural or legalperson

Someone acting inthe name of a

trader

Someone acting onbehalf of a trader

Austria xBelgium xDenmark x x xFinland xFrance xGermany xGreece xIreland x x xItaly x x xLuxembourg xNetherlands xPortugal xSpain x xSweden x

United Kingdom x x xDirective 85/577EEC

Natural or legalperson

Someone acting inthe name of a

trader

Someone acting onbehalf of a trader

In Austria, business transactions of natural persons who are just about to start theirbusiness, are excluded from the scope of application. Denmark, France, Germany,Portugal, Spain and Sweden do not provide any legal definition for the term "trader". InGermany, the meaning of the term "other contracting party" becomes clear in the contextof 6 Haustrwiderrufsgesetz (Doorstep Sales Act) which states that the Act only applies

if the other contracting party is acting for commercial purposes. That means, only abusinessperson is considered "other contracting party" in this Act.

3. Notice

Art. 4

In the case of transactions within the scope of Art. 1, traders shall be required to giveconsumers written notice of their right of cancellation within the period laid down in Art. 5together with the name and address of a person against whom that right may be exercised.

Such notice shall be dated and shall state particulars enabling the contract to be identified.It shall be given to the consumer:a) in the case of Article 1(1), at the time of conclusion of the contract;


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b) in the case of Article 1(2), not later than the time of the conclusion of the contract;c) in the case of Article 1(3) and 1(4), when the offer is made by the consumer.Member States shall ensure that their national legislation lays down appropriate consumerprotection measures in cases where the information referred to in this Article is notsupplied.

a) Requirements of the Notice


The trader must hand over to the consumer a written and dated notice. The notice mustcontain information about the right of cancellation, state the period of 7 days, name andaddress of a person against whom that right may be exercised and details in order toidentify the contract.


These provisions have been enhanced in many details by the Member States. They mainlydemand higher standards concerning the notice requirement than the Directive. Theperquisites will be presented in two tables, the first one demonstrating the form of thenotice or the contract, the second one the content of the notice.

(1) Formal Requirements

Directive85/577 EEC

Written Clear andlegibleprint

Signed bythe

consumer

Pre-scribed

cancella-tion form

Pre-scribedclause

Pre-scribedmodel

contract

Austria xBelgium x xDenmark x x xFinland x xFrance x x xGermany x x xGreece x xIreland x x xItaly x x xLuxembourg xNetherlands x x xPortugal x xSpain x x x xSweden x x xUnitedKingdom

x x x

Directive85/577 EEC

Written Clear andlegibleprint

Signed bythe

consumer

Pre-scribed

cancella-tion form

Pre-scribedclause

Pre-scribedmodel

contract

In Belgium, Denmark and France, the trader must provide a special clause in thecancellation form. This clause informs the consumer about his right of cancellation. InFinland, the trader must use a special model contract form and inIreland, Greece, Spain,


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12

Sweden and the United Kingdom a special cancellation form.18 In France, the contractmust contain a detachable notice of the cancellation form. In theNetherlands, the contractmust be registered and dated at the local Chamber of Industry and Commerce.19

(2) Substantive Requirements

Directive85/577 EEC

Date Right of cancella-

tion

Name andaddress

Characteristics

Delivery Payment

Austria x x xBelgium x x x x x xDenmark x x xFinland x x x x xFrance x x x x x xGermany x x

Greece x x x x x xIreland x x x xItaly x x x xLuxembourg x xNetherlands x x x xPortugal x x x x x xSpain x x x xSweden x xUnitedKingdom

x x x

Date: In Austria and Germany the trader does not need to date the notice. This is not inconformity with the Directive, which states that the notice must be dated. As the consumermust know when the period of time for his right of withdrawal expires (usually seven daysafter the conclusion of the contract) it is necessary to date the notice. Besides, it serves toprove the day of the conclusion of the contract.

Characteristics for the identification: InBelgium, France, Greece, Italy and Portugal it isrequired to indicate the place where the contract has been signed in order to identify thecontract, in Portugal also the necessary elements to identify the company which hasproduced the products must be included.

Name and address: In Portugal, name and address of both contracting parties or itsrepresentatives and inItaly name and address of the person to whom the product can begiven back must be included in the contract. InAustria, Belgium,Finlandand France thetrader is obliged to give his address. The provision must be interpreted in conformity withthe Directive in such a way that the trader is the person to whom the cancellation form canbe sent.20

18 M.Blz ZEuP 1997, p. 1094 et seq. refers to the costs which result for the trader from this

requirement.19 The Chambers of Industry and Commerce also administer the commercial registry.20 See G. Graf in: H.-G. Koppensteiner, sterreichisches und europisches Wirtschaftsprivatrecht,

1997, p. 84 et seq..


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Delivery or supply: The trader inBelgium, France and Greece must fill in the date ofdelivery or supply and in France and Portugal other modalities of delivery. InBelgium,Finland, France, Greece, theNetherlands and Portugal it is obligatory to list the price andconditions of payment.

Prohibition: In France any clause about the legal jurisdiction and inGermany any otherinformation in the contract are prohibited.

Exceptions: In Portugal, all the requirements must only be met for contracts with a valueof more than 9.000 Escudos. Contracts with a lower value only have to be signed by theconsumer.

Provision of the notice: In Belgium, Netherlands, Portugal and Spain each contractingparty must get one copy of the notice.

b) Time of Providing the Notice


The trader has to give the notice to the consumer either when the contract is concluded orwhen the consumer makes an offer.


Directive 85/577EEC

Conclusion of thecontract

Offer made by theconsumer

Delivery or supplyof goods

Austria xBelgium xDenmark x xFinland x X xFrance xGermanyGreeceIreland x XItaly xLuxembourgNetherlands xPortugal x XSpain x XSweden xUnited Kingdom x X

In Belgium the trader can hand over the notice to the consumer at latest on delivery orsupply. InDenmark, for contracts on specially produced goods or subscriptions, the noticemust be given to the consumer when the goods are supplied or delivered. In Finlandthetype of contract determines the time when the trader has to hand over the notice. If hedelivers goods, the notice must be given to the consumer at latest on the delivery of the

goods or the first partial delivery. In any other case, the consumer must receive the noticewhen he makes or accepts an offer. In Germany,Greece andLuxembourg it is not legallydefined when the trader must deliver the notice to the consumer. In Germany, the


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cancellation period only starts when the consumer has received the notice. This periodexpires one month after the mutual contractual obligations have been fulfilled.

c) Protection Measures

aa) Directive 85/577/EECAccording to the Directive, the Member States are obliged to introduce adequate measuresof protection if the trader fails to give the notice or gives a notice which does not containall the necessary information.


The Directive leaves the States a margin of discretion relating to the means with which theconsumer shall be protected and the trader be sanctioned. The Member States have adopteddifferent measures ranging from the nullity of the contract to imprisonment.

Con-

tractvoid

Contract

not en-forceable

Cancellati

on periodextended

Re-

strictionof the con-

sumer'sliability

Fine Imprison

ment

Austria x xBelgium x xDenmark xFinland x xFrance x x xGermany x x

Greece xIreland xItaly x x xLuxembourg x xNetherlands xPortugal x xSpain xSweden x xUnitedKingdom

x

Con-tractvoid

Contractnot en-forceable

Cancellation periodextended

Re-strictionof the con-

sumer'sliability

Fine Imprisonment

Contract void or not enforceable: If the trader fails to hand the notice to the consumer, thecontract in Belgium, Denmark, France, Ireland, Netherlands and Portugal is not binding.In Denmark this right can only be claimed for a specific time, afterwards it is lost. InFinland, Greece, Luxembourg, Sweden and the United Kingdom the contract is notenforceable for the trader. The trader is not entitled to invoke the contractual obligations of

the consumer, whereas the consumer can if he wishes to do so. If the consumer in Swedenwants to cancel the contract he has to inform the trader within one year after the consumerhas received the goods or has been rendered the services. Otherwise the consumer will lose


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his right to cancel the contract. By this means the period of time for the right ofcancellation is extended to one year. In Spain the consumer can bring an action against thetrader with the purpose that the contract will be declared void by the court.21

Cancellation period extended: InAustria and Germany, the cancellation period does not

begin to run during that time. However, one month after both contracting parties haveperformed their mutual obligations, the right of withdrawal expires.22 In Germany there isno period of time to send the cancellation form, but the right of cancellation expires onemonth after the contract has been performed. In Italy the period of time is extended to 60days after the contract for services has been signed or after delivery for a contract forsupply of goods.

Fine: If the trader inAustria misinforms the consumer and writes false statements in thenotice he commits an administrative offence and can be punished with a fine. InBelgium,

Italy and Portugal the trader can be punished with a fine if he violates his obligationregarding the notice, that means if he either does not hand out the notice at all or if he

notice does not contain all the necessary information. In Portugal, a violation of this Act isa punishable offence. If the trader in Finlandfails to hand out the notice intentionally hecan be punished with a fine.

Restriction of liability: In Germany and Spain the liability of the consumer is restricted ifthe trader fails to inform him about his cancellation right. If he cancels the contract andgives the goods back to the trader, he is only liable for damages caused by neglecting thediligence he usually employs in his own affairs.

4. Right of Withdrawal

Art. 5

1. The consumer shall have the right to renounce the effects of his undertaking by sendingnotice within a period of not less than seven days from receipt by the consumer of thenotice referred to in Article 4, in accordance with the procedure laid down by nationallaw. It shall be sufficient if the notice is dispatched before the end of such period.

2. The giving of the notice shall have the effect of releasing the consumer from anyobligations under the cancelled contract.

a) Period of Time


The consumer must cancel the contract within 7 days.

21 M.-J.Blanco Ledesma RIW 1992, p. 971 et seq. doubts whether this provision constitutes a adequate

protection measure as required by the Directive. The consumer is forced to bring a legal actionwhich might have a deterrent effect on the consumer in the light of the overburdened Spanishjudicial system.

22 I.Dessulemoustier-Bovekercke, KSchG-Novelle - Lcken und Tcken im Lichte der EU, AnwBl.1994, p. 669 et seq. regards the provision (based on the German law) as not in accordance with theDirective. The Austrian legislator, however, declares, that the conformity with the Directive hasnever been doubted,A.Riedlerecolex 1994, p. 87 et seq.


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The Directive leaves open whether it means only working days or not. Several MemberStates have explained whether they count working days or not, others have extended thetime.

Directive85/577 EEC

7 days More than 7days

7 working days More than 7working days

Austria xBelgium XDenmark xFinland xFrance xGermany xGreece xIreland x

Italy xLuxembourg x xNetherlands xPortugal xSpain xSweden xUnitedKingdom

x

Directive85/577 EEC

7 days More than 7days

7 working days More than 7working days

In Greece, the period of time is ten working days. Except for Portugal, all States regardSaturday as a working day. In Luxembourg, the period of time depends on whether thegoods are delivered (15 days), or if not 7 days. In theNetherlands, the period is 8 days.

b) Beginning and End of the Period


The period of time begins when the consumer receives the notice. The time-limit isobserved if the notice of cancellation is posted during that time.


Directive 85/577EEC

Receipt of thecontractualdocument

Conclusion of thecontract

Supply of goods

Austria xBelgium xDenmark x xFinland x xFrance x

Germany xGreece xIreland x

8/8/2019 European Commission on Multi-Level

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European Commission on Multi-Level Marketing and Pyramid Schemes. Part 2