DIRECT SELLING COMPANIES CODE OF CONDUCT TOWARDS DIRECT SELLERS, BETWEEN DIRECT SELLERS AND BETWEEN COMPANIES
The Direct Selling Companies Code of Conduct towards Direct Sellers, between Direct Sellers and between Companies (hereinafter referred to as the “Code”) is adopted by the Lithuanian Direct Selling Association, which is a member of Seldia – the European Direct Selling Association, following European Direct Selling Code of Conduct towards Direct Sellers, between Direct Sellers and between Companies. The Code concerns the relations between direct selling companies and direct sellers, between direct sellers, and between direct selling companies. The Code is aimed at the protection of direct sellers, the promotion of fair competition in the framework of free enterprise, the ethical representation of the direct selling industry’s earning opportunity and the enhancement of the public image of direct selling, which is to sell quality products on fair terms and conditions to consumers.
A.b. Glossary of Terms
For the purposes of this Code:
(1) Direct selling means any selling method which is based on the explanation or demonstration of products to a consumer by a salesperson, hereinafter called ‘direct seller’, away from business premises, typically in the consumer’s home, in that of another consumer or at the consumer’s plane of work.
(2) Consumer means any natural person who buys products for purposes which can be regarded as outside his trade, business or profession.
(3) LDSA – Lithuanian Direct Selling Association is national association of direct selling companies which represents the direct selling industry in Lithuania and which is a member of Seldia.
(4) Company means any business entity which markets products associated with its trademark or service mark or identifying symbol through a distribution system based on direct selling and which is a member of LDSA.
(5) Distribution system means any organisation and methods designed for the marketing of products.
(6) Direct seller means any natural or legal person who is member of the distribution system of a direct selling company and who sells, facilitates or assists in the sale of products of that company away from business premises, typically in the consumer’s home, in that of another consumer or at the consumer’s place of work.
(7) Earnings means any income achieved by a direct seller. Earnings may be in the form of commissions, trade margins, fixed payments, overrides, rewards, bonuses or in other forms.
(8) Product means any good, tangible or intangible, or service intended for sale to consumers.
(9) Business aid means any good or service which is designed to help direct sellers to conduct and develop their business and which is:
(a) intended for sale to direct sellers or provided free of charge to them; and
(b) not intended for resale to consumers.
(10) Fee meas:
(a) any payment of cash; or
(b) any payment for the purchase of business aids;
where this payment is required from a direct seller when he enters the distribution system of a direct selling company or, on a periodic basis, as a condition for continued participation in that distribution system.
(11) Recruiting means any activity conducted for the purpose of offering a person the opportunity to become a direct seller.
(12) Code administrator means an independent person or body appointed by LDSA to monitor member companies’ observance of the LDSA Code and to resolve complaints under the Code.
Every LDSA member company pledges to abide by the Code as a condition of admission and continuing membership in the LDSA. Every LDSA member company shall be required to promote to the public its LDSA affiliation and the national codes.
A.d. Direct Sellers
Direct sellers are not bound directly by the Code, but shall be required by their companies to adhere to it or to rules of conduct meeting its standard as a condition of membership in the companies’ distribution systems.
The Code is a measure of self-regulation by the direct selling industry. It is not a law, and its obligations may require a level of ethical behaviour which exceeds existing legal requirements. Non-observance does not create any civil law responsibility. With termination of its membership in LDSA, a company is no longer bound by the Code, the provisions of which remain applicable to events or transactions occurring during the time a company was a member of the LDSA.
Companies and direct sellers are presumed to comply with the requirements of law and therefore the Code does not restate all legal obligations.
The Code contains standards of ethical behaviour for direct selling companies and direct sellers.
It is recommended that the Code be used as evidence of industry standards.
A.h. Territorial Application
LDSA pledges that it will require each member as a condition of admission and continuing membership in the LDSA to comply either with; the National Codes wherever the company is member of a national DSA; the European Codes wherever within the EEA the company is not a member of a national DSA; the World Code wherever outside the EEA the company is not a member of a national DSA.
B. CONDUCT TOWARDS DIRECT SELLERS
B.a. Direct Sellers’ Compliance
Companies shall communicate the contents of the Code to all direct sellers and require their direct sellers, as a condition of membership in the Companies’ distribution systems, to comply with the Code or with rules of conduct which meet its standards.
Companies and direct sellers shall not use misleading deceptive or unfair recruiting practices in their interaction with prospective or existing Direct Sellers.
B.c. Business Information
Information provided by the company to its direct sellers and to prospective direct sellers concerning the opportunity and related rights, obligations, typical costs and expenses shall be accurate and complete. The company’s marketing plan shall be transparent, understandable and not misleading. Companies shall not make any factual representation to a prospective recruit which cannot be verified or make any promise which cannot be fulfilled. Companies shall not present the advantages of the selling opportunity to any prospective recruit in a false or deceptive manner.
Earnings of a direct seller other than fixed payments shall relate to his own sales to consumers and to similar sales made by direct sellers for whom he has support and motivation responsibilities. Purchases in reasonable amounts for personal use or consumption made by a direct seller and the direct sellers for whom he has such responsibilities may also serve as a basis for his earnings.
Companies and direct sellers shall not misrepresent the actual or potential sales or earnings of their direct sellers. Any earnings or sales representations made shall be based upon documented facts.
Companies shall give to the direct seller, at the start of his activities, a written agreement, signed by both the company and the direct seller, or a written statement. The written agreement or statement shall contain all essential details of the relationship between the direct seller and the company. Companies shall inform their direct sellers of their legal obligations, including any applicable licenses, registrations and taxes.
Companies and direct sellers shall not misuse a direct seller’s private sphere, social, intellectual or emotional sensitivities resulting in exploitation.
Companies and direct sellers shall not require Direct Sellers or prospective Direct Sellers to assume unreasonable high entrance fees, fees for promotional materials or other fees related solely to the right to participate in the company’s business.
Any fee shall represent reasonable value.
Companies and their direct sellers shall not permit practices whereby a direct seller pays a fee to participate in the distribution system of a direct selling company, and receives earnings based on fees paid by additional direct sellers introduced by him into that distribution system.
Any fees charged to become a Direct Seller shall relate directly to the valuže of the materials, products or services provide in return.
B.g. Right of Withdrawal
The direct seller shall have a period of at least 14 calendar days in which to withdraw from his agreement without penalty and without giving any reason.
The period for exercise of this right shall begin from the day of conclusion of the agreement. The direct seller shall inform the company in writing of his decision to withdraw from the agreement.
Where the right of withdrawal has been exercised by the direct seller, the company shall buy back all products and business aids that the direct seller purchased at the start of his activities. The company shall reimburse free of charge all sums paid by the direct seller. The company shall however not be obliged to buy back products and business aids if they are not in their original, new and unused condition.
B.h. Buy back
Notwithstanding the direct seller’s right of withdrawal (B.g), should a direct seller decide to put an end to his relationship with the company, the company shall buy back all products purchased by the direct seller within the previous twelve months.
The terms of this buy-back will be that the direct seller will receive a minimum of 90% of the purchase price, less any earnings or benefits received by the direct seller based upon the purchase of the products being returned. The company shall however not be obliged to buy back products if they are not in their original, new and unused condition.
B.i. Product Inventory
Companies shall not require or encourage direct sellers to purchase a product inventory in unreasonably large amounts nor to purchase products on a regular basis where the quantity of products is unlikely to be sold or consumed within a reasonable amount of time. The following should be taken into account when determining the appropriate amount of product inventory: the relationship of inventory to realistic sales possibilities, the nature of competitiveness of the products and the market environment, and the company’s product return and refund policies.
Companies shall provide direct sellers with periodic accounts concerning, as applicable, sales, purchases, details of earnings, commissions, bonuses, discounts, deliveries, cancellations and other relevant data, in accordance with the company’s arrangement with the direct sellers. All monies due shall be paid and any withholdings made in a commercially reasonable manner.
B.k. Education and Training
Companies shall provide adequate education and training to enable direct sellers to operate ethically, including information on the applicable codes of ethics and on the market concerned and the product. Training may be accomplished by training sessions, written manuals, guides, or audio-visual material supplied at a reasonable price or free of charge.
B.l. Other Materials
Companies shall prohibit Direct Sellers from marketing or requiring the purchase by others of any materials that are inconsistent with Company policies and procedures.
Direct Sellers who sell company approved promotional or training literature, whether in hard copy or electronic form shall: (1) utilize only materials that comply with the same standards to which the Company adheres, (2) refrain from making the purchase of such sales aids a requirement of downline Direct Sellers, (3) provide sales aids at a reasonable and fair price, equivalent to similar material available generally in the marketplace, and (4) offer a written return policy that is the same as the return policy of the Company the Direct Seller represents.
Companies shall take diligent, reasonable steps to ensure that sales aids produced by Direct Sellers comply with the provisions of this Code and are not misleading or deceptive.
C. CONDUCT BETWEEN COMPANIES
Member companies of LDSA are requested to act fairly towards other members.
Companies and direct sellers should not entice away or solicit any direct sellers by systematic enticement towards other companies’ direct sellers.
Companies shall neither denigrate nor allow their direct sellers to unfairly denigrate another company, its products, its sales and marketing plan or any other feature of that company.
D. CODE ENFORCEMENT
D.a Companies’ Responsibility
The primary responsibility for the observance of the Code shall rest with each individual company. In case of any breach of the Code, companies shall make every reasonable effort to satisfy the complainant.
Each member company and pending member company is required to designate LDSA Code Responsibility Officer. The Code Responsibility Officer is responsible for facilitating compliance with the Code by their company and responding to inquiries by the LDSA Code Administrator. He or she will also serve as the primary contact at the company for communicating the principles of the LDSA Code of Ethics to their independent salespeople, company employees, customers and the general public.
D.b. DSA’s Responsibility
LDSA shall provide a person responsibility for complaint handling. LDSA Shell make every reasonable effort to ensure that complaints are settled.
D.c. Code Administrator
LDSA shall appoint an independent person or body as Code Administrator. The Code Administrator shall monitor companies’ observance of the Code by appropriate actions. The Code Administrator shall settle any unresolved complaint of direct sellers based on breaches of the Code and shall furnish an annual report on the operation of the Code.
Actions to be determined by the Code Administrator against a company regarding complaints of a direct seller concerning breaches of the Code may include
termination of the direct seller’s contract or relationship with the company, refund of payments, issuance of a warning to the company or its direct sellers, or other appropriate actions and the publication of such actions or sanctions.
D.e. Complaint Handling
Companies, LDSA and Code Administrators shall establish complaint-handling procedures and ensure that receipt of any complaint is confirmed within a short time and decisions are made within a reasonable time.
D.f. Companies’ Complaints
Complaints of a company about another company or LDSA shall be resolved either by the Code Administrator or an independent arbitrator, according LDSA procedures.
LDSA shall publish the Code and make it known as widely as possible. Printed copies shall be made available free of charge to the public.