Cultural differences create challenges and opportunities for regulators and companies
By: David Bland
European policy and decision-making are always cyclical. There are different cycles of policymaking, and we’re in different phases of policy proposals that affect the direct selling sector.
—Laure Alexandre, Executive Director, SELDIA
On Jan. 7, 2020, the European Parliament and Council of the European Union entered into force a comprehensive legislative Directive. Often referred to as the Omnibus Directive as part of the “New Deal for Consumers,” Directive (EU) 2019/2161 was crafted to bolster consumer rights within today’s modern digital landscape.
Like their counterparts in the U.S., the regulatory and legislative bodies across the Atlantic are busy crafting and implementing new directives and legislative packages that could have a significant impact on direct sellers throughout Europe as well as companies expanding into these markets.
Europe’s ‘New Deal’
Laure Alexandre, executive director of SELDIA, The European Direct Selling Association, tells SSN the scope of the Omnibus package is broad and will directly impact direct selling companies.
“European policy and decision-making are always cyclical. There are different cycles of policymaking, and we’re in different phases of policy proposals that affect the direct selling sector,” Alexandre says.
SELDIA is monitoring the Omnibus Directive closely, as it directly impacts direct selling companies in Europe by:
- Letting Member States ban or further restrict doorstep selling
- Changing the regulation of consumer information such as legal guarantees, personalized pricing or online indications of price reductions
- Setting strict rules on the authenticity of consumer reviews online
- Establishing redress and penalties for infringement of consumer law, including fines of at least 4 percent of annual turnover
The new Directive amends and updates the following consumer protection Directives:
- The Unfair Contract Terms Directive (93/13/EEC) protects consumers against unfair standard contract terms and applies to contracts for the purchase of goods and services, including financial services, both online and offline.
- The Price Indication Directive (98/6/EC) ensures that the selling price and the price per unit of measurement are indicated on all products.
- The Unfair Commercial Practices Directive (2005/29/EC) makes it easier for businesses to trade across borders by limiting a broad range of unfair business practices such as deceptive or aggressive marketing techniques.
- The Consumer Rights Directive (2011/83/EU) aligns national consumer rules across the EU. It applies to all contracts between consumers and businesses and prohibits member states from deviating from the Directive.
Alexandre explains that there are important distinctions in the degree of the EU’s authority, based on the type of activity in question.
“Consumer law is not within the exclusive competence of the European Union,” she says. “The EU harmonizes a baseline, but Member States can, and often do, go beyond. What is adopted at the EU level is called the Directive, which then has to be implemented by the member states. There are only a few areas where the EU has full power and that is competition law, the Customs Union, and trade.
“For EU consumer law, we’re in the transposition phase: Member States have until 28 November to adopt and publish measures to comply with the Omnibus Directive, the overhaul of EU consumer regulation adopted two years ago. And they will have to apply those measures by 28 May 2022.”
One example of a direct selling practice that may be affected by the Omnibus Directive is door-to-door sales. Alexandre details why this particular practice is a good example of the member states adopting differing positions on a particular direct selling practice due to varying cultural dynamics affecting their preferences and practices.
“Direct selling is more linked to local practices,” she says. “Culturally, in some countries, it’s okay for people to come knocking on your door. In others, it’s a big no-no because the home is sacred.
“When the proposal on regulating door-to-door came with the Omnibus Directive, we managed to prevent a blanket ban at the EU level. However, Member States can regulate, restrict or ban it if they see it fit. This is why having a network of robust National Direct Selling associations is important. And it currently is not the case in many EU countries.”
Commerce Digitalization Brings New Acts and New Tensions
Another central focus of representatives in the EU Parliament is shaping law to keep up with the business sector’s continued shift toward digitalization and e-commerce. On Dec. 15, 2020, the European Commission, the body responsible for drawing up proposals for new European legislation and implementing the decisions of the European Parliament and the Council of the EU, presented a legislative package called the Digital Services Act (DSA) and the Digital Markets Act (DMA).
The Digital Markets Act will seek to regulate unfair business practices of very large digital platforms and ensure fair competition standards and the openness of important digital services, such as preventing platforms from locking businesses into a service as well as ensuring that businesses can access their data when using one of the
The Digital Services Act would regulate online content, including speech, product marketing or services. While many provisions of the DSA will be of particular interest to direct selling, the scope of this Directive is very broad and will cover internet service providers, social media platforms, messaging services, cloud services, app stores, and e-commerce marketplaces such as Amazon and eBay.
This Directive will include provisions on:
- Liability of online intermediaries
- New diligence obligations to fight online illegal content
As is also common practice in Washington D.C., lawmakers in the EU often lump many pending initiatives into a single package.
However, because many of the giant digital gatekeeper companies are American, the geo-political dynamics involved in regulating them across continents have led to strain between the U.S. and EU.
These proposals were originally drafted during a time when tensions between the EU and the U.S. were more acute than they are today.
“Digital regulation projects were often perceived as an aggression by Europe against America. Currently, the rhetoric is a bit more relaxed, as the two blocks are trying to address the same issues.
“But there is still some tension on whether these proposals would give a competitive advantage to, or unduly target, American companies versus European companies,” Alexandre says.
Europe Considers First-of-Its-Kind AI Regulation
Another matter on SELDIA’s radar is the regulation of Artificial Intelligence (AI). On April 21, 2021, the European Commission published its Proposal for a Regulation on a European Approach for Artificial Intelligence, also called The Artificial Intelligence Act.
“We have a consumer liability protection system in Europe, but the question is to ensure that consumers are compensated if they are misled, or if something bad happens due to products or services using AI.
“Basically, we’re in the middle of trying to untangle privacy, consumer protection and the use of AI within the context of these upcoming proposals. It’s going to be an interesting exercise. However, given that AI is a tool that is increasingly being used by direct selling companies, this is an initiative to monitor,” Alexandre says.
Just this month, the European Commission launched a new consultation to address harms caused specifically by AI systems, such as software updates, data leaks, or even psychological harms.
The focus is discerning when an AI system is defective and thus liable, and how far regulators should go in ensuring all of the EU countries have the same rules governing AI liability.
Culture to Dictate the Direction of Direct Selling in Europe
The diverse patchwork of cultures that is the European Union, along with its neighboring countries, provides a unique landscape for a direct selling channel that relies on social interaction and personal connections. Added to this is the unstoppable wave of digitalization across all business sectors that has presented both regulators and direct selling associations with an even greater number of consumer issues to contemplate.
The unique requirements of direct selling regulation will be included in the milieu of new and existing standards, rules, and statutes that make up European consumer protection.
Global direct selling companies looking to enter the European market need to understand that these countries embrace their differences and their cultures, which inevitably translates to the need for a dynamic approach to marketing plans, recruitment strategies and compliance programs.
Alexandre sums this up when describing the trends she sees from SELDIA headquarters in Brussels.
“As a broad generalization, door-to-door sales is quite prevalent in France and the south of Europe; Germany and Western Europe are more party-plan countries; and in the north of Europe, people are more connected and digital savvy, more inclined to participate in social selling in the broader sense.”
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