As the only body representing direct selling in UK, we provide a unified voice to engage and lobby with government and other bodies in the UK. This means advocating on behalf of our members and advocating ethical business practices and consumer protection.
There are many benefits to Membership of the DSA, including permission to use the DSA logo which is a tool for growing a business in the Direct Selling industry. Any size business can apply to join, provided they are prepared to adhere to the Code of Practice. This includes start-up enterprises, to whom the DSA provides basic advice free of charge. Applicants and their businesses are assessed against a range of criteria aimed at promoting industry professionalism and consumer protection. Consumers and Direct Sellers can be confident that any business that is a Member of the DSA is ethical and professional.
Member Companies benefit from many aspects of our work:
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5 Key Considerations for Direct Selling Brands Looking to Launch into the UK Market
By Jonathan Riley.
Jonathan Riley is a Partner at law firm Memery Crystal, and specialises in commercial law and commercial contracts work, where his focus is on sales and marketing, agency, distribution, licensing, franchising, sponsorship, merchandising, e-commerce, and related regulatory areas including data protection and consumer protection. He is also highly experienced in managing and exploiting intellectual property rights, particularly in the technology, brands and consumer goods sectors.
Jonathan has a strong international client base, with a particular focus on North America and Europe, and also provides legal expertise to the Direct Selling Association and its member companies.
1. Business Model
There are no UK Government or regulatory processes that companies need to be aware of in relation to the launch of a direct selling business in the UK, by which I mean that there are no registration or formal approval processes required in relation to the business opportunity either in terms of the company itself or its compensation plan and accordingly there are no ‘hard wired’ dates in the pre-launch or launch process. There is, of course, a regulatory regime governing the conduct of the business, including the company’s relationships with both its distributors and its retail customers, and registrations/licences/Government approvals may be needed for other reasons e.g. for the sale of certain types of products.
There is no requirement for a UK corporate entity, branch, or permanent establishment; if a business outside of the UK wishes to do business remotely (for example online) into the UK, including contracting with direct sellers and selling products, then it is legally free to do so.
The appropriate operating structure is therefore usually driven by a combination of commercial, logistics and tax considerations. However, where a direct selling company is considering conducting business in a number of countries including the UK (for example, a European expansion program) then consideration should be given as to whether one consistent model can be adopted across each of those countries.
That said, even if a local entity is not required for the operation of the selected business model, a UK entity may still be of practical benefit, for example as a name protection company and/or for the convenience of operating a local bank account.
2. Company / Distributor Relationship
The contract between a company and its direct sellers is a ‘regulated’ contract, with the key regulation being the Trading Schemes Regulations which primarily lays down certain matters which must be included in the contract and certain matters which cannot be included in the contract.
One aspect of UK regulation which is unique to the UK is the £200/7 day rule. The Trading Schemes Regulations impose a limit of £200 on the amount which a new direct seller can pay or undertake to pay (whether to the promoter or to their sponsor or to any other participant in the trading scheme) in the first 7 days of becoming a direct seller. This is known as the “cooling off period” and is one of the main legal controls in the UK. This means that any starter kit (if it is to be paid for or agreed to be paid for straightaway) cannot cost more than £200, and in the first 7 days the aggregate cost of the starter kit, administration charges, membership fees, replicated website fees etc. and any product purchased (or anything else purchased or agreed to be purchased relating to the scheme including post and packing charges made by the promoter) must not exceed £200.
Other issues likely to be addressed in this contract include the employed versus self-employed status of the direct seller and the impact of the Commercial Agents Regulations.
3. Company / Customer Relationship
When products are sold away from retail premises then special rules apply to that sale. The underlying rationale for these rules is to seek to put the customer into the same position as they would have been had they made the purchase at retail premises, although the specifics of the rules often lack a ‘retail premises’ equivalent and, in some cases, grant the customer better rights than they would have had when making a purchase on retail premises.
The company/customer relationship is generally harmonised at the EU level and the UK’s regulations implemented pre-Brexit continue, so the same regulations apply e.g. the information to be provided to a customer before the sale and at the time of the sale, the 14 days cancellation rights etc. This means that a company already operating in the EU or proposing to operate in both the UK and the EU will not find material differences between the UK and the EU in terms of the legal aspects of the company/customer relationship.
4. Product Regulation
- Cosmetic Products: product registration is required at the Office for Product Safety & Standards (OPSS) with a safety report, and a Responsible Person in the UK must be appointed.
- Food supplements: no product registration is required, but the business may need to register as a food business operator with its local authority (which is free and cannot be refused).
- Medicinal products need a marketing authorisation and are subject to significant legal requirements.
5. DSA
The UK Direct Selling Association is a good source of information regarding the key aspects of the launch and conduct of a direct selling business in the UK and provides a range of Advisory Notes to its members as well as running regular legal seminars and training events.