If you’re a network marketer based in Australia, or doing business in Australia, you should familiarize yourself with the new Australian Consumer Law (ACL) reforms. The first part of the reforms came into effect on 15 April 2010.

The laws give the Australian Competition and Consumer Commission (ACCC) new enforcement powers to protect consumers, including the ability to seek or issue:

• civil monetary penalties
• banning orders
• substantiation notices
• infringement notices
• refunds for consumers
• public warnings.

Under the new laws, the ACCC can seek financial penalties of up to $1.1 million for corporations and $220,000 for individuals for

• unconscionable conduct
• pyramid selling and
• false or misleading conduct.

The second part of the ACL reforms, dealing with unfair contract terms, will come into effect on 1 July 2010. Further amendments to the ACL are also expected later this year.

For more information visit the Australian Competition & Consumer Commission website or contact the ACCC’s Infocentre on 1300 302 502.

What does it all mean for network marketers?

All three areas of offence can involve network marketing companies, individuals, downline organizations and leaders. The really interesting message in the new reforms is the DOUBLING of penalties for individuals, while the penalties for companies are unchanged. That suggests that there will be more intense scrutiny of individuals in future.

Unconscionable Conduct

This has traditionally been applied to large companies in their dealings with small businesses, by using their size, marketing power, connections, etc to take unfair advantage of small businesses. In the future it may be applied to MLM companies that use unconscionable practices, such as forced arbitration of disputes with their distributors (especially while witholding bonus payments and delaying hearings) — an issue recently the subject of adverse judgements in US courts against MLM companies who use the technique to disadvantage distributors.

But it could also be applied to upline leaders who abuse downline team members in a variety of ways.

Pyramid Selling

This is a really interesting one. Most network marketers believe that MLM is not at risk from anti-pyramid selling laws. As a general rule, this is true, with an occasional exception. But with more and more MLMers turning to Internet marketing methods, including affiliate programs to add more income streams, and getting involved in online publishing, training and starting their own affiliate programs, this opens up a whole new can of worms.

Internet marketing is rife with affiliate programs that breach anti-pyramid selling laws. It’s built into most of the software used to automate affiliate programs.

I’ve been wondering how long it would take authorities to pick up on this, and wrote about it in my 2007 report on PayPal (download your FREE copy from http://sellerbeware.info).

If you belong to, operate or promote a so-called “closed” affiliate program (where you have to make a personal purchase in order to become an affiliate), you are in breach of Australia’s Trade Practices Act (1974) and liable to fines of AU$220,000 for each offense. (How many affiliates did YOU recruit or refer? Each one is classed as a separate offense!)

False or misleading conduct

If you use many of the presentation and prospecting approaches common in network marketing, you are almost certainly at risk of breaching this provision of the law. Much of the hype, buzz and spin used in MLM promotion is unquestionably cause for action. Anything from dodgy income claims to medical claims for nutrition products can put you over the line and facing fines that will mean selling your home to pay them. (Banks won’t lend you money to pay court penalties.)

The BIG Stick now given to the ACCC…

The other BIG news in all this is that the ACCC no longer has to go to court in many cases. It can issue penalties of various kinds unilaterally against offenders. Yes, you can probably insist on your day in court, but the stakes will rise accordingly — and only the lawyers will win!

So what do you need to do?

You need to ensure that everything you say and do when dealing with prospects, customers and downline members (including their prospects, customers and downline members!) has to be squeaky clean and 100% above board. No more compulsory personal purchases before being eligible for commissions. No more medical claims for your products. No more flaky income claims.

In other words, be honest.

As I’ve said before… we live in interesting times!

Disclaimer: The content of this article is for information purposes only and is not offered as professional legal, financial or other advice. Before taking any kind of action on the basis of this article, you should seek competent professional advice. Neither the author nor publisher will accept any liability for any results based on the content of this article.

Author Profile  Consults to managements of direct selling companies, small business and home business owners. Writes regular columns and feature articles for various business media, online and offline. Author of several best-selling business books. Presents seminars and workshops, webinars and other training programs. Creator of Fourth Generation Thinking, Selling, Business Systems. Read more from this author

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