By: Laure Alexandre, SELDIA, The European Direct Selling Association.
The EU (European Union) is on a constant regulatory cycle. As direct selling companies transitioned to being omnichannel, we now follow, inform and represent our members in more policy areas than ever before.
Seldia (The European Direct Selling Association) is currently active on proposals regarding employment status, consumer rights online and alternative dispute resolution (rules framing the robustness of our codes of ethics and consumer complaints).
Current sustainability proposals are also directly impacting all EU businesses supply chain, and new rules for VAT (value-added tax) in the digital age have just been published.
As in many other regions of the globe, the status of independent workers is challenged. The EU is working on it under the angle of “fair conditions for platform workers.” Platform workers and direct sellers share some common characteristics (flexible work facilitated by apps), but are fundamentally different as direct sellers do not work on demand.
Independent Contractor Status in the EU
The European Commission put out a proposal last year with a definition and criteria that would avoid confusion for direct selling. However, the EU text is in constant flux. The European Parliament and the Council of the European Union (representing the EU Member States) are now negotiating their own position to amend the proposal.
Divergences and tensions are high in both institutions. The wording of the definitions being negotiated could end up capturing direct sellers, even unintentionally. If this happens, independent contractors may under certain conditions be reclassified as employees.
On 12 December, Members of the European Parliament (MEPs) of the Employment Committee voted on the report by S&D MEP Elisabetta Gualmini. They adopted many compromise amendments to our relief, but the current text is still not optimum.
Shedding light on divergences of views in the European Parliament, the vote on the negotiating mandate itself was postponed to February.
Even if Parliament concludes to go ahead, trialogue negotiations won’t start imminently: EU countries are still deadlocked on their position. Member State Ministers did not manage to agree on the final compromise text presented by the Czech Presidency on 8 December. As a result, it will be up to the Swedish Presidency of the Council, that took office on 1 January 2023, to try and reach an agreement among Member States.
At Seldia, we had constructively engaged with the European Commission in the drafting phase of the proposal. In the negotiations phase, we dynamically reached out with Members of the European Parliament (MEPs) and Member States representations in Brussels, with satisfactory results for direct selling. But the risk of being caught in a net not aimed at us remains until the final text is adopted.
How European Commission Protects Consumers
There is a constant dialogue, both structured and informal between the FTC (U.S. Federal Trade Commission) and the European Commission. They work together and influence each other. The Commission is reviewing rules concerning consumer protection online, to adapt to post pandemic consumption habits. Two reviews are ongoing.
Firstly, The European Commission is looking into dark patterns (on which the FTC is working on too), the definition of vulnerable consumers, and influencer marketing under the “Digital fairness – Fitness Check.”
The Commission is considering clarifying the definition and the obligations of traders vis-à-vis consumers, with a direct impact of direct selling company duties and obligations.
Secondly, the Commission is starting to review the Omnibus Directive, regulating out-of-premises and door-to-door sales among others. While the directive was only just implemented by Member States, the European Commission is already preparing the next text.
Door-to-door is still substantial for direct selling in many EU countries. While we avoided an EU-wide door-step selling ban in 2019, the current Directive allows Member States to restrict door-to-door sales at national level, and mandated the Commission to carry out a review to identify if EU-wide restrictions are needed. The Commission is about to choose an external contractor to carry out this study
The outcome of the two review processes is expected to be announced in spring 2024, but we will be active in 2023 to anticipate it.
European Commission’s View on Self-Regulation in Direct Selling
The European Commission positively recognises self- and co-regulation as complementary mechanisms to the law, but only under certain conditions of transparency and efficiency.
The Commission had put in place criteria in the Alternative Dispute Resolution Directive in 2013. They are now undertaking a substantial review of these benchmarks. It is fair to say that as of now, many direct selling self-regulatory systems in the EU do not meet the 2013 benchmark.
The European direct selling sector will have to work jointly to upgrade our collective complaints handling system if we want our self-regulatory offer to remain relevant. The Commission proposal is expected in Q2 of 2023.
The EU’s ‘Twin Transition’ to a Green and Digital Economy
The current European Commission will hold its mandate until spring 2024, when new European elections will be called. Any proposal that stands a chance to be adopted on time has to come out by the end of Q1 2023.
With the proposal for a Directive on corporate sustainability due diligence (laying down rules for companies operating in the EU to respect human rights and environment in global value chains) and the adopted Corporate Sustainability Reporting Directive which entered into force on 5 January (modernising and strengthening ESG reporting rules), the EU is taking global leadership.
A broader set of companies, approximately 50 000 including listed SMEs (small and medium-sized enterprises), will now be required to report on sustainability under an established methodology, the European Sustainability Reporting Standards (ESRS). The CSRD also makes it mandatory for companies to have an audit of the sustainability information that they report.
On 30 March 2022, the European Commission presented a proposal on “empowering consumers in the Green transition.” This initiative bans practices where traders make generic green claims, e.g. “environmentally friendly,” “eco” or “green” when environmental performance cannot be demonstrated.
On 30 November 2022, the European Commission came forward with its long-awaited proposal on packaging and packaging waste. These proposals are currently being examined by the co-legislators.
By Spring 2023, we expect more measures such as a proposal on the right to repair, common substantiation methodology for environmental claims and reducing the impact of microplastic pollution—all relevant for direct selling companies.
Recent Changes Regarding Tax and VAT
On 8 December 2022, the European Commission published a legislative proposal regarding VAT in the digital age. Currently, companies who want to take advantage of the Single Market have to grapple with up to 27 different national VAT systems, each with their own separate reporting obligations.
This fragmentation can incur a considerable administrative burden and financial costs for companies trying to dip their toes or grow in EU markets. The proposal aims to modernise VAT reporting obligations and facilitate e-invoicing, moving towards one single VAT registration in the EU. It would be a significant improvement for businesses, including direct selling companies.
Traders who operate cross-border could opt to register in only one Member State for their sales to consumers across the EU, and for their transfers of goods for storage in other Member States.
After registration in one Member State, they will then be able to fulfill their VAT obligations via a single online portal and interact solely with the tax administration of that Member State in one language, even though their sales are EU-wide.
The proposal also makes it mandatory for online platforms to register for the Import One Stop Shop which will further improve VAT compliance. The provisional application is expected for early 2024.
Laure Alexandre is Executive Director of SELDIA,
The European Direct Selling Association.
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