Legal Advice that Makes Business Work
Direct Selling Legal Update
The Addisons difference
In a time of significant structural change in the legal profession in Australia, when many firms are growing through mergers and international alliances, Addisons has focused upon quality rather than quantity. Addisons presents a different model; a model which has proven attractive to large international brand names as well as iconic Australian companies.
Addisons practice areas include:
Property, Planning and Environment Competition/Antitrust Corporate Mergers and Acquisition Employment Gambling Intellectual Property and Media Litigation and Dispute Resolution
Direct Selling Expertise
The Addisons Direct Selling team advises on the structure of global and Australian multi-level marketing and direct selling organisations in relation to their Australian operations, taking into account all applicable laws, and the relationship with distributors and customers. We also assist on all aspects of marketing and advertising law in relation to product development, branding, packaging and promotion.
Our key areas of focus:
Independent distributor agreements Compensation Plans and Policies and Procedures Pyramid selling issues Branding and trade mark strategies Pre-vetting creative concepts Website development and e-commerce issues Marketing and pomotional materials Packaging and labelling Sponsorship, trade promotions and events Consumer protection issues Structuring and business establishment in Australia
Your Direct Selling Team
Partner Telephone: +61 2 8915 1030 Email: firstname.lastname@example.org
Partner Telephone: +61 2 8915 1027 Email: email@example.com
Partner Telephone: +61 2 8915 1045 Email: firstname.lastname@example.org
Partner Telephone: +61 2 8915 1066 Email: email@example.com
Special Counsel Telephone: +61 2 8915 1028 Email: firstname.lastname@example.org
Welcome to the June 2019 edition of the Addisons Direct Selling Legal Update. Our Legal Update contains papers published recently by Addisons concerning various issues and developments impacting upon the direct selling sector in Australia. Areas covered include new obligations in respect of regulatory and compliance matters, as well as new requirements of which marketing teams should be aware.
Regulatory & Compliance
New Modern Slavery Reporting Requirements in Australia - Is Your Direct Selling Business Prepared? On January 1 2019, the Modern Slavery Act 2018 (Cth) (the MSA) came into effect. The MSA requires reporting entities to prepare annual Modern Slavery Statements, which will be recorded on a register and accessible publicly. The MSA establishes a reporting framework that requires all relevant Australian businesses (including Direct Selling Organisations (DSOs)) to identify modern slavery risks in their operations and supply chains, and to implement appropriate measures to ensure identified risks are lessened or remediated, as necessary.
Our paper looks at DSO compliance obligations.
Time to Whet your Whistle Sailing through parliament, the impending whistleblower amendments are due to commence on 1 July 2019. But stormy seas abound for public and large proprietary companies, who will be required to amend their existing whistleblower policies to comply with the new legislation. In this paper, we look at what steps must be taken to comply with the new whistleblower requirements.
Permitted Indications in respect of Listed Complementary Medicines in Australia Significant legislative changes have recently been made to the Therapeutic Goods Act 1989 in respect of the regulation of complementary medicines in Australia. In this paper, we consider the changes relating to indications that are permitted for use in respect of complementary medicines listed on the Australian Register of Therapeutic Goods and, in particular, the deadline for making various changes of which direct selling companies should be aware.
Australian Industrial Chemicals Introduction Scheme - Big changes on the way for the regulation of chemical ingredients in cosmetics
Wide-reaching legislative changes are underway in relation to the regulation of industrial chemicals in Australia. A new regulatory scheme, the Australian Industrial Chemicals Introduction Scheme (AICIS), will commence on 1 July 2020, which will replace and simplify the current National Industrial Chemicals Notification and Assessment Scheme (NICNAS). On the same date, a ban will commence on the use of new animal test data for ingredients which are only used in cosmetics.
Our paper provides an overview of the requirements.
Australian Competition & Consumer Commission
Recent ACCC action sounds the alarm on one-way indemnities and limits on liability in small business contracts A recent media release by the ACCC has shed further light on the ACCC's view of what is "fair" when it comes to indemnities and limitations on liability in standard form small business contracts. This most recent development in the ACCC's active campaign against unfair contract terms suggests companies need to tread very carefully to ensure that any indemnities and limitations on liability in their small business contracts (such as independent contractor agreements with distributors) are fair and not in breach of the Australian Consumer Law. In this paper, we look at the ACCC's particular concerns.
Unilever all in a sweat over new player's `clinical' efficacy claims The Federal Court recently examined whether representations alleged by Unilever to have been made by Beiersdorf about Beiersdorf's Nivea `Stress Protect Clinical Strength' deodorant were false, misleading or deceptive under the Australian Consumer Law. Whilst Unilever was ultimately unsuccessful, our paper considers how this case provides useful guidance on the use of the term `clinical' as a product descriptor and what sort of scientific substantiation is required to support a `clinical' claim.
Trade Promotions: what direct selling businesses should consider before conducting a promotion in Australia A trade promotion is an activity conducted for the promotion of trade, a business or the sale of goods and services. Trade promotions include competitions, sweepstakes, contests and giveaways and are a popular way of marketing direct selling businesses and their products. Do you know what steps are required to ensure your promotion complies with applicable requirements?
Is your Direct Selling business compliant with the new Therapeutic Goods Advertising Code (No. 2) 2018? A new Therapeutic Goods Advertising Code (No. 2) 2018 (new TGAC) took effect on 1 January 2019. This impacts materially the way in which direct selling businesses may advertise their therapeutic goods. This Focus Paper looks at some of the more significant changes and the Therapeutic Goods Administration's compliance and enforcement strategy for 2019. We hope that you find items of interest in this edition of our Addisons Direct Selling Legal Update. If you have any queries or would like to provide feedback or discuss, please do not hesitate to contact any of Addisons' Direct Selling team.
Cate Sendall Editor
+61 2 8915 1028
Table of Contents
Regulatory & Compliance New Modern Slavery Reporting Requirements in Australia Is Your Direct Selling Business Prepared?.............................................................................................................................7 Time to Whet your Whistle..............................................................................................................12 Permitted Indications in respect of Listed Complementary Medicines in Australia.......................14 Australian Industrial Chemials Introduction Scheme Big changes on the way for the regulation of chemical ingredients in cosmetics ......................................................................17 Australian Competition & Consumer Commission Recent ACCC action sounds the alarm on on-way indemnities and limits on liability in small business contracts..................................................................................................20 Marketing Unilever all in a sweat over new player's "clinical" efficacy claims.................................................23 Is your Direct Selling business compliant with the new Therapeutic Goods Advertising Code (No.2) 2018..........................................................................................................26 Trade Promotions: what direct selling businesses should consider before conducting a promotion in Australia...............................................................................................31
Regulatory & Compliance
New Modern Slavery Reporting Requirements in Australia Is Your Direct Selling Business Prepared?
by Jamie Nettleton, Shanna Protic Dib and Joseph Abi-Hanna
On January 1 2019, the Modern Slavery Act 2018 (Cth) (the MSA) came into effect. The MSA requires reporting entities to prepare annual Modern Slavery Statements (Statements). These Statements are to be lodged with the relevant Minister and will be recorded on a register and accessible publicly. The MSA is reflective of international concerns in respect of modern slavery, and is modelled substantially on the United Kingdom's Modern Slavery Act. The MSA establishes a reporting framework that requires all relevant Australian businesses (including Direct Selling Organisations (DSOs)) to identify modern slavery risks in their operations and supply chains, and to implement appropriate measures to ensure identified risks are lessened or remediated, as necessary. This reporting framework is aimed at promoting transparency for consumers and potential investors, placing a business' reputation at stake if it fails to report or mitigate identified risks.
Modern Slavery Concerns for Australian Businesses
Minimising the risk of modern slavery is of particular concern because these practices occur predominantly in the Asia-Pacific region, where many Australian businesses source products, raw materials or services as part of their supply chain. Modern slavery is not defined clearly in international or domestic law. However, for the purposes of preparing a Statement under the MSA, it covers trafficking in persons, slavery and slavery-like practices and the worst forms of child labour. For example, servitude, forced labour, forced marriage, debt bondage, deceptive recruiting for labour or services, organ trafficking and using children for prostitution or dangerous work fall within its scope.
What is a Reporting Entity?
Any entity that carries on business in Australia with an annual consolidated revenue of AUD$100 million or more has an obligation to prepare a Statement. This obligation applies to both publicly listed and non-listed companies, trusts and partnerships, as well as foreign entities conducting business in Australia through a subsidiary. Entities that operate in Australia, but fall outside this parameter, may prepare voluntarily a Statement and provide it to the Minister. Commonwealth entities are also subject to the reporting requirement.
What is a Modern Slavery Statement?
Each Statement must contain the following information, in respect of a reporting entity: its identity; its structure, operation and supply chains; the potential modern slavery risks in its operations and supply chains; and the process for assessing and addressing any modern slavery risks which it has identified,
including due diligence and remediation processes and processes for assessing the effectiveness of its actions. Generally, whether information should be included in a Statement is likely to be determined (having regard to confidentiality requirements) by factors, such as the industry sector in which the reporting entity operates, the complexity of the reporting entity's group corporate structure and supply chains, and/or the jurisdictions in which the reporting entity's suppliers conduct business. When preparing a Statement, reporting entities should consider developing various business practices to complement its obligations under the MSA and to ensure that a fulsome Statement is prepared. Those practices could include the following: engaging with internal and external stakeholders (including third parties with expertise in modern slavery, such as Non-Government Organisations) to develop a deeper understanding of the modern slavery concerns in the jurisdiction in which the business' supply and operation chains exist, and to assess accurately those jurisdictions in which there is the highest risk of modern slavery; establishing policies and procedures for suppliers to reduce the risk of modern slavery, including grievance and whistleblowing procedures; establishing management systems for supply and operation chains, including due diligence checks prior to the appointment of suppliers to confirm the supplier's credibility and ability to manage the rights of its employees. Statements should be tailored to reflect accurately a business' particular circumstances and should consider how the business can make ongoing, tangible improvements in identifying and mitigating modern slavery risks.
Example - Qantas Under the United Kingdom's Modern Slavery Act, Qantas is required to prepare and submit annual Modern Slavery Statements. Qantas, in its 2017 Statement, communicated the business' salient human rights priorities, which included a commitment to the introduction of its Supply Chain Assurance Program (the Program) to identify, assess and mitigate any risk of modern slavery in its supply chains. In its 2018 Statement, Qantas indicated that it had begun drafting a comprehensive statement of its commitment to human rights. In its 2018 Statement, Qantas indicated that, in implementing the Program, it had identified a specific issue in Malaysia where foreign workers were required to pay excessive recruitment fees, placing the workers in a situation of bonded labour. Qantas took steps to ensure that all relevant workers had their bonds repaid in full. Subsequently, the facility has since been audited twice to improve work practices. By 2021, Qantas aims to have assessed all new and recontracted suppliers through the Program.
A Statement can be submitted by a single reporting entity or by a corporate group of entities in the form of a joint Modern Slavery Statement. This allows a holding company to submit a Statement on behalf of its subsidiaries and other entities in its group. Certain governance requirements apply to the lodgement of a joint statement. This includes ensuring that the joint statement is approved by the principal governing body of the holding entity, and is signed by a responsible member of that entity (for example, a director or secretary). If an entity is required to report in multiple jurisdictions (for example, in the UK and Australia), a single Statement can be prepared and lodged in each jurisdiction, to the extent that the Statement complies with the requirements in all of those jurisdictions. Notably, the requirements under the MSA are more rigorous than those in the UK.
Reporting entities must lodge a Statement within 6 months of the conclusion of each financial year. The first reporting period will commence on 1 July 2019. Accordingly, entities with a standard Australian financial year (period ending 30 June) will be required to lodge their first Statement by 31 December 2020. Alternatively, entities with a calendar financial year (period ending 31 December), which will be the case for many Australian subsidiaries of a US corporate group, will be required to lodge their first Statement by 30 June 2021.
The Modern Slavery Statement Register
All Statements lodged with the Minister will be published on a public register. One of the objectives of the Statements being available for public inspection is to seek to ensure the transparency of businesses in Australia and to encourage businesses to improve risk management practices in respect of modern slavery. However, the collection and retention of information relevant to a Statement will be regulated carefully to ensure that only limited information is required to be disclosed.
Mechanisms to Address Non-Compliance
No penalties are prescribed in the MSA in respect of non-compliance with the MSA. However, the MSA establishes various mechanisms to address non-compliance. These mechanisms are concerned predominantly with reputational repercussions. For example, the Minister has the power to require suspected non-compliant entities to explain their reasons for non-compliance and to undertake specified remedial action. Also, the Minister may publish information about entities that fail to comply with a request (including the name of the non-compliant entity, the date and details of the requests made and the reasons why the Minister is satisfied that the entity has failed to comply). The MSA will be subject to a three-year review to consider whether there is a need for additional measures, such as penalties, to improve compliance.
New South Wales (NSW) Requirements
On 21 June 2018, the Modern Slavery Act 2018 (NSW) (NSW Act) was passed by the NSW Parliament. The NSW Act is expected to commence on 1 July 2019. In a manner similar to the MSA, the NSW Act requires reporting entities to prepare annual Modern Slavery Statements (NSW Statement) detailing the steps undertaken by the entity to address modern slavery risks within its operations and supply chains. For the purposes of the NSW Act, a reporting entity is an entity which: supplies goods and services in New South Wales; has employees in New South Wales; and has a total revenue exceeding AUD$50 million in its financial year. It is likely that the NSW Act will provide entities with an exemption if those entities are subject to the MSA. Thus, the NSW Act will likely apply only to entities that satisfy the above criteria, but do not have an annual total revenue of over AUD$100 million. However, the position under the NSW Act relating to entities that are required to comply with the MSA is not clear. NSW Government entities will also be subject to the reporting requirements under the NSW Act. No guidance has been released yet as to the specific content required to be included in the NSW Statement. However, it is likely that a NSW Statement will be required to contain information similar to that required in a Statement. This will include details of the following in respect of each reporting entity: its structure, business and supply chains; its due diligence processes in relation to modern slavery in its business and supply chains; the parts of its business and supply chains where there is a risk of modern slavery taking
place, and the steps taken to assess and manage that risk; and the training about modern slavery available to its employees. The most significant difference between the MSA and the NSW Act is that, under the NSW Act, a maximum penalty of 10,000 penalty units (AUD$1,100,000) may be imposed on a reporting entity that fails to prepare a Statement, fails to make its Statement public, or provides information which it knows, or ought reasonably to know, is false or misleading. Interestingly, the NSW Act is the first statute globally to impose monetary penalties for failure to identify and manage modern slavery risks.
How Should Businesses Prepare?
Reporting entities will need to act promptly to prepare for the new modern slavery reporting requirements. Australian businesses will need to consider whether they will be subject to compliance with the MSA or the NSW Act, and gather information accordingly about modern slavery risks in their supply chains and set out the measures that they utilise to mitigate best any risks. Failure to comply with the MSA or the NSW Act may damage significantly an entity's reputation, harm investor confidence and undermine its ability to do business with other entities. However, if prepared in compliance with the relevant laws and regulations, an entity can use its Statement as an opportunity to advance its brand and reputation, creating a sustainable competitive advantage.
The reporting requirements are intended to form part of an ongoing process of continuous improvement. This enables entities to minimise progressively any risks within their supply chain to eliminate modern slavery. Additionally, Australian businesses will need to consider, in any commercial transaction or dealing moving forward, modern slavery risks. For example, when entering into commercial transactions, such as mergers and acquisitions, or commercial dealings, such as supply or distributor arrangements, businesses should ensure that they have an opportunity to conduct due diligence on matters relating to modern slavery requirements and broader corporate social responsibilities. Regular priorities to ensure compliance should also be included. Addisons has already been approached by one DSO to address modern slavery concerns. We anticipate that all leading DSOs will take steps, as part of their corporate social responsibility practices, to put in place practices that enable these concerns to be identified and addressed. It is expected that many DSOs will prepare Statements and lodge them with the relevant Minister, irrespective of whether they are required to do so. If you would like further information or wish to discuss how these legislative changes may affect your business and what your business can do to prepare to address these requirements, please do not hesitate to contact us.
Time to Whet your Whistle
by Laura Hartley and Julie Allen
Sailing through parliament, the impending whistleblower amendments are due to commence on 1 July 2019. But stormy seas abound for public and large proprietary companies, who will be required to amend their existing whistleblower policies to comply with the new legislation.
Federal Whistleblowing legislation was introduced into the Australian landscape in 2013 to provide protection for an insider (being an officer, an employee or a contractor) after they notified their organisation of alleged misconduct within their organisation. There has been considerable dissatisfaction within the rank and file over the years as to the shortfalls within the legislation. After a long debate and considerable public consultation, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 was introduced, to plug the holes in the legislative suite. The amendments expand the protection for whistleblowers in the private sector, and increase penalties applicable if retribution is meted out against whistleblowers. There are also new obligations which must form part of whistleblower policies for any regulated entity.
Who is an eligible whistleblower now?
The expanded definition of "whistleblower" is quite broad to include any person who is, or has been: an officer or employee (paid or unpaid); an individual who supplies goods or services (paid and unpaid). It also includes any relatives of those individuals. Anonymous disclosures are now also allowable.
The legislation allows eligible whistleblowers who make a "protected disclosure" to an eligible recipient (which is defined as an officer, senior manager, auditor, actuary, lawyer, regulator or other person who is authorised by the entity) to be eligible for protection provided they are reporting about "misconduct or an improper state of affairs or circumstances". This term is not limited to particular types of conduct and is much broader than the previous protection, which was limited to Corporations Act breaches. Interestingly, the Senate has amended the original Bill to exclude certain "personal work related grievances" from protection. This was largely in response to concerns that disgruntled employees would otherwise be overly empowered by the legislation for matters which concerned their own employment issues and performance. This exception however, does not include victimisation which may have occurred due to being a whistleblower, which is clearly within the scope of the legislation.
The legislation also removes the requirement to act in good faith. This means the motivation of the whistleblower is no longer relevant to determining as to whether a disclosure is protected. To be protected, a whistleblower only needs to have "reasonable grounds to suspect" wrongdoing.
Penalties and Legislation
Something that always commands attention of companies is the increase in penalties that may be payable. Notably, penalties for retaliation against whistleblowers and publishing the identity of a whistleblower have had a significant hike. An individual who either retaliates or discloses the identity of a whistleblower can be penalised up to $1.05m or three times the benefit derived or detriment avoided and a company can be penalised up to $10.5m, three times the benefit derived or detriment avoided or 10% of annual turnover (up to a maximum of one million penalty units). The requirement to have a whistleblowing policy is a strict liability offence with a penalty of 60 penalty units (currently $12,600).
What do I need to do?
If you are working within a public or large proprietary company and you work in legal or compliance, you're almost certainly going to need to update your whistleblowing policy to comply with the reforms. 1. Update your policy
Your policy should be reviewed and provide information about protections available to all whistleblowers, how to make a disclosure and how your company will ensure fair treatment for affected employees who are mentioned in the disclosure. The policy should also detail the procedures for investigation and how the policy will be communicated. 2. Communicate your policy Making employees and officers aware of your policy is a vital step in ensuring an effective policy. Putting the updated policy in a prominent place on the intranet, or any supplier portals may also assist and following up with appropriate training. 3. Start now Although the requirement for a compliant whistleblowing policy commences on 1 January 2020, employers must comply with the legislation from commencement on 1 July 2019. Accordingly, to ensure that any whistleblowing complaints are dealt with in accordance with the legislation, reviewing your policy and updating the procedures now is advisable. Feel free to contact us if you need help in implementing any of these steps.
Permitted Indications in respect of Listed Complementary Medicines in Australia Update
by Tim Clarke, Cate Sendall and Joseph Abi-Hanna
As we reported in October 2018, significant legislative changes1 have been made to the Therapeutic Goods Act 1989 (TG Act) in respect of the regulation of complementary medicines in Australia.2 In this paper, we consider the changes relating to indications that are permitted for use in respect of complementary medicines listed on the Australian Register of Therapeutic Goods (ARTG). Before 6 March 2018, sponsors were permitted to enter "free text" in relation to listed medicines. However, by 6 March 2021, sponsors must replace any "free text" with permitted indications that are prescribed by the Therapeutic Goods (Permissible Indications) Determination (No.1) 2019 (Cth) (PID). Importantly, there is a "fee free" period for sponsors to transition to using permitted indications in respect of their listed medicines. The "fee free" period ends on 6 September 2019.
Summary of changes in respect of permitted indications
The relevant section of the Therapeutic Goods Amendment (2017 Measures No. 1) Act 2018 (Cth) (the TG Amendment Act) came into effect on 6 March 2018. The TG Amendment Act establishes a 3 year transition period for sponsors of listed medicines to comply with changes made in respect of indications. During the transition period, sponsors: must select those indications set out in the PID which are most relevant to their listed med-
icines; must not enter any "free text" in respect of indications for listed medicines; and may apply for new indications to be added to the PID.
The following table sets out the key dates in the transition period.
6 March 2018
6 September 2019 6 March 2021
The PID reform came into effect and commencement of the "fee free" period for sponsors to transition existing listed medicines to comply with the PID. End of "fee free" period. End of the transition period for listed medicines to comply with the PID. ARTG entries that are non-compliant with the PID will be cancelled.
6 September 2019 is a key date in the transition period. After this date, any changes made to indications in respect of listed medicines will incur a fee.
Background for listed medicines, indications and the implementation of the PID
Listed complementary medicines (for example: vitamins and minerals) are considered to be "low risk" medicines with "low risk" ingredients. Each active ingredient is, generally, unscheduled and has a substantial history of safe use. Indications are statements that describe the therapeutic use of a complementary medicine. In other words, they represent the claimed purpose or health benefit for the complementary medicine. Indications can be specific or non-specific in nature. Examples include the specific claim: "relieves coughs" and the non-specific claim: "for general health and wellbeing".3 Prior to the TG Amendment Act, sponsors could draft their own indications. These indications could be recorded as "free text" entries in the ARTG in respect of any listed complementary medicine. Following the commencement of the TG Amendment Act, any indication that is now used in respect of a listed medicine must be selected from the PID. In other words, sponsors are no longer permitted to draft their own indications. Sponsors of listed complementary medicines will still be required to hold evidence of the efficacy of their products at all times. Each sponsor must still hold evidence that substantiates the indication(s) relating to a complementary medicine listed on the ARTG. Importantly, a listed medicine cannot include any indication that refers to the prevention, cure or alleviation of any diseases, ailments, defects or injuries. Further, indications must not refer to prohibited representations or restricted representations, as specified in Part 4 of the Therapeutic Goods Advertising Code (Code).4
How are "permitted indications" determined?
Listed medicines may only comprise low level indications that are consistent with their "low risk" status. Currently, a number of permitted indications have been determined by the TGA subject to specific criteria; others can be added. The TGA will consider a possible indication for entry onto the PID if the indication is: a "low level" indication; consistent with a treatment paradigm (i.e. based on scientific or traditional evidence); capable of complying with the Code and the TG Act; and
not included in a "non-permitted" indication list (should one exist). It is open to sponsors or others to apply for new indications to be included in future editions of the PID on the basis that they meet the relevant criteria and are approved by the TGA.
Use of permitted indications on medicine labels and advertising
Sponsors do not need to replicate permitted indication entries on the ARTG for their products, "word for word", on any product packaging or labelling (absent any specific requirement to do so). That said, the wording of indications utilised on the product packaging/labelling must convey the same meaning as the permitted indication detailed on the ARTG. In other words, the ARTG entry and the product packaging/labelling must have an equivalent therapeutic target and action. In this respect, a sponsor may amend the order or structure of the elements of a permitted indication and use therapeutic action terms such as "maintain" or "support" interchangeably.
Permitted indications and treatment paradigms
All permitted indications must accord with the relevant treatment paradigm. In other words, scientific indications must not adopt traditional medicine terminology and vice versa. This is particularly relevant to sponsors of complementary medicines. In this case, traditional indications (or indications supported by evidence of traditional use) must not: adopt terminology that belongs to a different paradigm or conventional medicine; use terminology that requires scientific substantiation; reference diagnostic findings or biological or pharmacological effects that are not
reasonably contemplated by that paradigm; and/or refer to conditions that a paradigm is incapable of properly diagnosing. Sponsors of complementary medicines must ensure that any references to permitted indications, particularly when referring to a combination of any permitted indications, accord with the PID and the relevant ARTG entry (or entries) for the relevant product and are consistent with the relevant treatment paradigm.
Impact on Your Business
Up until 6 September 2019, sponsors have the ability to transition existing listed medicines to comply with the PID for no fee. Any listed medicine that transitions after this date will incur a fee. Accordingly, businesses should be proactive in ensuring that listed medicines comply with the PID before this date to minimise costs. Importantly, any ARTG entry that is non-compliant with the PID on 6 March 2021 (the end of the transition period) will be cancelled. The cancellation of an ARTG entry is likely to be detrimental to a sponsor's business in Australia. If you would like more information about the TG Amendment Act in respect of the PID (or otherwise) and how the TG Amendment Act affects your complementary medicine business, please do not hesitate to contact us.
1. Therapeutic Goods Amendment (2017 Measure No. 1) Act 2018 (Cth). 2. Please see our previous focus paper, "Recent TGA Changes to Permitted Ingredients in Listed Complementary Medicines" 3. Permitted Ingredients for Listed Medicines Guidance, TGA, March 2018. 4. For information on the recent changes to the Therapeutic Goods Advertising Code, please see paper "Is your Direct Selling Business compliant with the new Therapeutic Goods Advertising Code (No.2) 2018?" on page 26.
Australian Industrial Chemicals Introduction Scheme Big changes on the way for the regulation of chemical ingredients in cosmetics
by Jamie Nettleton, Cate Sendall and Despina Bouletos
Wide-reaching legislative changes are underway in relation to the regulation of industrial chemicals in Australia. A new regulatory scheme, the Australian Industrial Chemicals Introduction Scheme (AICIS), is being implemented. AICIS will replace and simplify the current National Industrial Chemicals Notification and Assessment Scheme (NICNAS). AICIS will commence on 1 July 2020. On the same date, a ban will commence on the use of new animal test data for ingredients which are only used in cosmetics.
In May 2015, the Australian Government announced its intention to implement reforms to the way in which industrial chemicals are regulated. The reforms are intended to streamline the process of assessing industrial chemicals to reduce the regulatory burden and to make regulatory effort more proportionate to risk. The new legislative regime is contained primarily in the Industrial Chemicals Act 2019 (the Primary Act), the draft Industrial Chemicals (General) Rules (the General Rules) and the draft Industrial Chemicals Categorisation Guidelines (the Categorisation Guidelines).
The Primary Act contains provisions which establish the new regulatory scheme, AICIS. The critical difference between AICIS and its predecessor, NICNAS, is that AICIS places greater emphasis on self-regulation for chemicals which are classified as "low-risk". Key changes include: When a new chemical is being introduced into Australia (whether for use in the course of
manufacturing or as an ingredient, for example, in a cosmetic), the manufacturer or importer of the chemical or the end product (eg the cosmetic) will need to notify AICIS. The Australian Inventory of Chemical Substances, which contains details of existing chemicals, will be replaced by the Australian Inventory of Industrial Chemicals (AIIC). Under AICIS, all industrial chemicals will fall within one of six categories. These categories are determined by the level of risk posed to the environment and human health. Chemicals falling within the risk categories at the lower end (exempted and reported introductions) can be introduced without assessment. The only requirements for `exempted introductions', which pose the lowest risk, will be record keeping and an annual statement of compliance. No notification fee will be required to be paid
to AICIS. As there is no assessment, chemicals in this category will be able to be introduced more quickly to market. NICNAS considers that this reform will be an incentive for safer, new chemicals to be introduced, in place of more hazardous chemicals currently in use. NICNAS is anticipating that the number of industrial chemicals requiring a pre-introduction assessment will decrease by more than 70%. The draft General Rules and the draft Categorisation Guidelines provide further detail about how the scheme will operate: The General Rules contain details about how the importation and manufacture of industrial
chemicals in Australia will be regulated. This includes: - the categorisation of industrial chemical notifications (eg what is exempted or reported); - the reporting and record keeping requirements; - Confidential Business Information notifications and applications; and - criteria for Commercial Evaluation Authorisations. The Categorisation Guidelines set out the technical details and requirements to which importers and manufacturers must have regard when categorising their chemicals. Where a chemical is imported or manufactured under a permit, exemption or assessment certificate as part of the current regulatory system, the chemical will need to be categorised using the processes and criteria contained in the General Rules and Categorisation Guidelines. When the draft General Rules and Categorisation Guidelines are finalised, guidance material will also be made available. There are also draft Industrial Chemicals (Consequential Amendments and Transitional Provisions) Rules 2018 (the Transitional Rules) which set out the basis upon which the transition from NICNAS to AICIS will be managed. The Transitional Rules will address how various certificates and permits granted by NICNAS and processes under the current law will operate once the new laws take effect.
Ban on Animal Test Data
Another key change introduced by the Primary Act is a ban on the use of animal test data for the introduction of new industrial chemical ingredients to be used solely in cosmetics. Instead, the development and use of alternative test methods will be encouraged via government funding. Like AICIS, this ban will commence on 1 July 2020.
Impact on Your Business
Each of the above changes in respect of the categorisation of new industrial chemicals is important and must be adhered to by business owners in the cosmetic and personal care industry. AICIS imposes classification requirements for industrial chemicals which differ significantly from those that exist under NICNAS, so care must be taken to ensure full compliance. Businesses should be reviewing their processes now to ensure compliance by 1 July 2020. If you would like more information about AICIS and/or how it affects your business, please do not hesitate to contact us.
Australian Competition & Consumer Commission
Recent ACCC action sounds the alarm on one-way indemnities and limits on liability in small business contracts
by Renee Shipp
A recent media release by the ACCC has shed further light on the ACCC's view of what is "fair" when it comes to indemnities and limitations on liability in standard form small business contracts. A standard form contract is one where the terms and conditions are set by one party and it is provided to the other party on a "take it or leave it basis" with no scope to negotiate its terms. In a direct selling context, for example, a company's independent contractor agreement with its salesforce is likely to be a standard form small business contract. This most recent development in the ACCC's active campaign against unfair contract terms suggests companies need to tread very carefully to ensure that any indemnities and limitations on liability in their small business contracts are fair and not in breach of the Australian Consumer Law. On 2 April 2019, the ACCC announced that three container stevedore companies have amended their standard form contracts following the ACCC having raised concerns that certain terms in those contracts were likely to be considered `unfair' in breach of the Australian Consumer Law. This follows a string of investigations and proceedings by the ACCC in this area1. What is interesting about this particular case is the nature of the clauses that were considered likely to be `unfair' by the ACCC. Unilateral variations, automatic renewals and one-sided termination rights have been consistently targeted by the ACCC when investigating unfair contract terms. Interestingly, in this case, the ACCC raised concerns in relation to the unfairness of terms that provided for: limitations on liability for loss and damage that were not reciprocal for both parties; and indemnities for loss or damage that were not reciprocal for both parties. The ACCC's guidance on indemnities up to this point has largely been focussed on a failure to carve out liability for loss or damage caused by the indemnified party. In other words, it would be unfair for a party to receive the benefit of an indemnity for loss or damage it had itself caused. In the case of limits on liability, the ACCC's guidance has generally focussed on overly broad or unreasonable limits on liability. However, this most recent announcement suggests that the ACCC requires complete reciprocity for indemnities and limits on liability. Unfair terms are not currently illegal, but they may be declared by a Court to be void and unenforceable. Whilst this might be the current legislative state of play, the ACCC has made no secret of its desire for these laws to be strengthened by the imposition of substantial financial
penalties2. Following a review of these laws by Treasury in late 2018, the Morrison Government announced plans to further strengthen protections to small business by reforming these laws in March of this year. The Government's reforms were announced subject to further consultation with key stakeholders, but the package included a proposal to make unfair contract terms illegal and to attach unspecified civil penalties for breaches in order to provide a stronger deterrence factor. If you are concerned about whether or not your standard form small business contract is compliant with the Australian Consumer Law, please do not hesitate to get in touch with us.
1. Addisons has published articles in relation to the ACCC's proceedings against Servcorp and Uber. 2. This was the subject of a recent article by Addisons: "Penalties looming for unfair small business contracts".
Unilever all in a sweat over new player's `clinical' efficacy claims
by Laura Hartley and Sarah Best
The Federal Court recently examined whether representations alleged by Unilever to have been made by Beiersdorf about Beiersdorf's Nivea `Stress Protect Clinical Strength' deodorant were false, misleading or deceptive under the Australian Consumer Law1. Whilst Unilever was ultimately unsuccessful, the case provides useful guidance on the use of the term `clinical' as a product descriptor and what sort of scientific substantiation is required to support a `clinical' claim. Unilever specifically challenged Beiersdorf's use of the word `clinical' in its Nivea product name and alleged Beiersdorf had made false, misleading or deceptive representations via marketing its products like other `clinical' antiperspirants on the market by packing it in a box with a leaflet and selling it at a higher price point to standard, non-clinical products. Unilever alleged that via these means Beiersdorf had made the following representations: the Nivea range had similar antiperspirant efficacy to other clinical antiperspirants on the market (similarity representations); the Nivea range had greater antiperspirant efficacy than all other non-clinical antiperspirant deodorants (superiority representations); and the Nivea range provided particularly strong protection against stress sweat (stress sweat representations). Beiersdorf justified its claims by submitting scientific evidence which it argued showed that the Nivea range was on par in terms of efficacy with other clinical products on the market in Australia. The Federal Court found that Beiersdorf didn't expressly make the similarity or superiority representations at all. The Court also found that whilst Beiersdorf had `adopted the cues' of a `clinical' product, this did not amount to an implied similarity or superiority representation. It found that all the marketing get-up conveyed to ordinary consumers was that the Nivea range was a highly effective product for heavy sweaters and not that it was better at reducing perspiration than other products in the broader antiperspirant deodorant category or the clinical subcategory. Whilst Beiersdorf admitted it made the stress sweat representation, the Court found that Unilever had not proved the falsity of the claim as it had `misconceived' the representation and the scientific testing and therefore had limited the conclusions that could have been drawn from the evidence.
The Court went on to consider whether, if the purported similarity and superiority representations had been made, they would have been false. The Court's discussion is instructive in relation to necessary scientific substantiation. The Court took into account various pieces of evidence including: laboratory tests - `head-to-head' comparative tests which Unilever relied on and which both
parties' experts conceded were the most reliable and useful means of assessing whether one product is more efficacious than another; and `absolute tests' on overall efficacy of individual products which both parties relied on and in relation to which the Court conceded it would be problematic to rely on due to potentially differing test protocols, subjects and climatic conditions; blind home user tests conducted by Beiersdorf to support the inference that consumers could not readily perceive differences in efficacy between Unilever's Rexona products and Beiersdorf's Nivea products and `to bolster Beiersdorf's pre-existing and reasonable understanding of the efficacy' of the Nivea range2, complaints about the Nivea range as well as evidence of the poor market performance of the range and marketing of the range in the UK as non-clinical products. The Court conceded that whilst the laboratory test results indicated that the Rexona product range was more effective in reducing sweat than the Nivea products, the way the consumer would have understood the similarity and superiority representations was extremely important and that they would have seen these representations in terms of how the products worked for them. `They would be unlikely to consider that two products were dissimilar, in terms of antiperspirant efficacy, simply on the basis of statistically significant differences between the amounts of sweat reduced in the laboratory tests. In that context, consumer perceptions may be as important as, if not more important than, laboratory tests. If consumers were unable to perceive any difference between the products, in terms of their antiperspirant efficacy, they would be likely to consider them to be similar, or at least not dissimilar'3. The final technical point to make about the case relates to the onus of proof. Under the ACL, where a person makes a representation as to `future matters' or a prediction about something happening (eg. you'll sweat less), the representation is deemed to be misleading unless the maker had reasonable grounds to make the representation. The onus was therefore on Beiersdorf to establish it had a reasonable basis to make the representations found to have been made. The Court found there was evidence that showed Beiersdorf had reasonable grounds to make the future stress sweat representation. This was on the basis that its laboratory tests confirmed that the Nivea range did in fact have a high degree of antiperspirant efficacy against stress sweat regardless of how the range performed as against other clinical products. However, the Court found that if Beiersdorf had made the similarity and superiority representations, it would not have satisfied its evidentiary burden because its scientific testing did not include head-to-head tests of the Nivea range against the Rexona range. The Court criticised in particular the fact that Beiersdorf management only knew `top line marketing information' about the scientific testing and didn't dig deeper to make sure the claims made matched the support. Unilever has appealed the decision!
Learnings for marketers
Use of a descriptor term like `clinical' will require a higher standard of scientific support than more general, non-specific claims.
The descriptor `clinical' has to be viewed in the particular context in which it is used. In the context of `clinical' antiperspirant deodorants, the term was found to mean `high strength' and efficacy and that it was not representative of a baseline benchmark which all products marketed in that `clinical' subcategory had to meet. Caution is required when using this term though as it may mean something very different in another context.
When a product is promoted as being part of an established market category, ordinary consumers may take this to mean that the product has certain features or attributes that are standard in this market. So when designing this style of marketing campaign, you should have a good knowledge of the products in the competitive set to work out how your product compares to these other products and establish whether the category has a quantitative benchmark for a descriptor term like `clinical'.
Consumer perceptions of efficacy may be more important than scientific data that technically substantiates claims.
Product performance claims in advertising and marketing often include representations as to future matters. This makes it all important for the business making the claim to be able to establish that it has reasonable grounds for making the claim by way of contemporaneous evidence that substantiates any representations.
Scientific tests that are intended to support claims must support the actual claims being made and be checked to make sure they are supportive.
1. Unilever Australia Ltd v Beiersdorf Australia Ltd  FCA 2076, per Wigney J 2. Ibid, para 430. 3. Ibid, para 321.
Is your Direct Selling business compliant with the new Therapeutic Goods Advertising Code (No.2) 2018?
by Tim Clarke, Cate Sendall and Joseph Abi-Hanna
A new Therapeutic Goods Advertising Code (No. 2) 2018 (new TGAC) took effect on 1 January 2019. This impacts materially the way in which direct selling businesses may advertise their therapeutic goods.1 This Focus Paper looks at some of the more significant changes and the Therapeutic Goods Administration's (TGA) compliance and enforcement strategy for 2019. Many of the provisions in the new TGAC impose more stringent requirements than the corresponding provisions in the previous Therapeutic Goods Advertising Code 2015 (previous TGAC). Care must be taken by all businesses (including direct selling businesses) to ensure full compliance. This is particularly the case in respect of testimonials and weight management claims. The TGA has signalled that it will take a pragmatic approach to its enforcement and compliance activity during 2019. In any event, businesses should review their advertising and marketing activities now that the new TGAC has come into force and provide compliance training for their salesforce. We understand that Direct Selling Australia is having high level meetings with the TGA to obtain clarification about how the changes to the use of testimonials, in particular, will apply to independent sales people and generally to the direct selling channel.
Testimonials are used extensively in the direct selling industry. Under the previous TGAC, testimonials were simply required to be documented, genuine, not misleading and illustrate only typical cases.2 The new TGAC provides more detailed requirements.3 The person making the testimonial cannot have any involvement in the production, sale, supply or marketing of the goods. Accordingly, Distributors and Consultants must not make testimonials. The testimonial must also be typical of the results expected from the use of the goods in accordance with their directions for use (or purpose) of the goods. This may impact upon the use of, for example, dramatic before and after weight loss photos. Testimonials must also disclose: whether any valuable consideration has been given or will be given to the person providing
where another person takes the place in the advertisement of the person providing the testimonial; and
where the person providing the testimonial is an immediate family member of an individual involved in the production, sale, supply or marketing of goods. An `immediate family member' of a person is that person's parent, grandparent, spouse, de facto, child or ward. We would recommend that direct selling organisations (DSOs) inform their Distributors and Consultants of this requirement.
Care must be taken in using social media (such as Facebook, Instagram and Twitter) to promote products through testimonials. To the extent that the DSO (or its agents, such as Consultants) post testimonials from, for example, their customers on social media, they are responsible for ensuring that the testimonials comply with the new TGAC requirements. If reasonable steps are not taken to block or remove an unsolicited testimonial, the failure to do so has the effect that the testimonial will be considered to have been `used' in an advertisement. DSOs may wish to consider having a social media acceptable use policy which addresses the posting of testimonials. The policy would include guidelines to ensure testimonials are not misleading or deceptive and do not encourage excessive or inappropriate use of products. In addition to the requirements under the TGAC, testimonials must always comply with the requirements of the Australian Consumer Law.
Some DSOs have medical or scientific advisory boards, which may include a range of consultants (who may or may not endorse the therapeutic goods supplied by the DSO). The requirements under the previous TGAC and the new TGAC are largely the same in respect of endorsements by: a government agency, hospital, or healthcare facility; an employee or contractor of one of the bodies above; or a health practitioner, health professional, medical researcher or a group of any of
these persons, However, the new TGAC has different requirements in respect of the use of endorsements (whether express or implied) by any of the following: an organisation representing the interests of healthcare consumers; an organisation representing the interests of health practitioners, health professionals, or
medical researchers; an organisation which conducts or funds research into any disease condition, ailment or
defect; or an employee or contractor of any of these bodies. Under the new TGAC, advertisements containing endorsements of this nature must include the name of the organisation, the nature of the endorsement and whether valuable consideration was received for the endorsement. Under the previous TGAC, the fact that valuable consideration had been received did not need to be disclosed if the endorsement was based upon an objective assessment of available scientific data supporting the use of that product. DSOs should check whether changes are required to their websites and marketing collateral.
Weight management products are often the bestselling products of DSOs. Under the previous TGAC, advertisements containing claims for weight management were required to have an appropriate balance between the claims and references to a healthy energy-controlled diet and physical activity. Under the new TGAC, the requirements are more stringent. Advertising for therapeutic goods that contain any weight management claim must: balance the claims with the need for a health energy-controlled diet and physical activity; not include any suggestion that the therapeutic goods will correct the effects of
over-consumption of food or drink;4 and not feature visually individuals or use individuals' statistics or testimonials (eg before and
after photos) unless the results achieved by those individuals would be expected to be typical of users of the goods.5 Atypical testimonials and statistics are not permitted. This is significantly broader than the requirement under the previous TGAC which stated only that weight loss advertisements had to balance any claims with the need for a healthy energy-controlled diet and physical activity. Weight management is defined to include any claim about: weight loss; weight control; weight maintenance; measurement reduction; clothing size reduction; and/or hunger suppression. Whether a claim is a weight management claim depends on the presentation of the advertisement.
Under the previous TGAC, any scientific information in an advertisement was required to be presented in a manner that was accurate, balanced and not misleading. Scientific terminology had to be appropriate, clearly communicated and able to be understood readily by the audience to whom it is directed. Publication of research results was required to identify the researcher and financial sponsor of the research. Similar requirements exist in the new TGAC; however, the new TGAC goes further by requiring any scientific or clinical representation to be consistent with the body of scientific or clinical evidence applicable to the relevant therapeutic goods. Further, where an advertisement contains a reference to scientific or clinical literature, whether express or implied (eg "clinically proven"), the advertisement must identify the researcher and financial sponsor if they know (or ought reasonably to have known) that information. Finally, the research must be referred to in such a way that consumers can locate it accordingly, research which is confidential should not be cited.
Many DSOs include complementary medicines in their product portfolios. Under the previous TGAC, the advertising of complementary medicines was not expressly addressed. Under the new TGAC, if an advertiser is relying on traditional evidence to support an advertised claim for a complementary medicine, the advertisement must state that it is "traditionally used" and refer to the applicable paradigm in a prominent manner (for example: "Traditionally used in Western herbal medicine to improve or enhance digestion").7 The disclosure must be displayed prominently or communicated in the relevant advertisements. Paradigms include, for example, traditional Chinese medicine, Ayurvedic medicine and Western herbal medicine. For a single ingredient, an inappropriate claim under the new TGAC would be, for example, "Traditionally used to relieve sleeplessness and restlessness".8 An appropriate claim, which complies with the new TGAC, would be "Traditionally used in Ayurvedic medicine to relieve sleeplessness. Traditionally used in Western herbal medicine to soothe restlessness".9 In other words, each indication must be attributed appropriately to the relevant paradigm in the context of the claim. Complementary medicines are, generally, listed (or registered) on the Australian Register of Therapeutic Goods (ARTG). It remains a requirement that product claims must comply with the sponsor's relevant ARTG entry for the product as well as the Therapeutic Goods Act 1989 and the Therapeutic Goods Regulations 1990.
Under the previous TGAC, advertisements for therapeutic goods were only permitted to refer to a serious disease, condition or ailment identified in Appendix 6 of the previous TGAC, where prior approval had been obtained from the Secretary of the Department of Health. Unlike the previous TGAC, the new TGAC does not include a list of diseases and conditions for which advertising is restricted. Accordingly, there is potentially a larger pool of serious diseases about which representations are restricted. If businesses intend to refer to diseases which may be considered "serious", caution should be exercised to ensure that prior approval for the use of a restricted representation is obtained from the Secretary of the Department of Health.
Vitamin and Mineral Supplements
Under the previous TGAC, advertisements for mineral supplements were not regulated. Under the new TGAC, the requirements which applied to vitamins under the previous TGAC will now apply to mineral supplements. Advertisements for vitamin or mineral supplements must not claim or imply that the supplements are a substitute for good nutrition or a balanced diet; or are in any way superior to or more beneficial than dietary nutrients. The objective is that consumers should assess the value of these supplements in an appropriate nutritional context when considering whether to make their purchase.
How will the new TGAC be enforced?
Stakeholders have asked the TGA about compliance actions that the TGA may take regarding advertising that was in place at 1 January 2019 which complied with the previous TGAC, rather than the new TGAC. The TGA has stated that, when assessing advertisements for compliance, it will take into account a number of factors including the risk posed to public health and safety.
The TGA considers that, where an advertisement is published which does not comply with the new TGAC but would have complied with the previous TGAC (in respect of, for example, testimonial disclosures and scientific citations), it is unlikely to pose a significant risk to public health. If a complaint is received, the TGA has indicated that: in the first half of 2019 regarding a breach of this type, the TGA will simply send a
reminder to the advertiser regarding obligations under the new TGAC (provided there is no other non-compliance). in the second half of 2019, the TGA will seek information from the advertiser, such as details of the processes being applied to correct advertising and the date corrective action was commenced, before making a decision as to whether to use its enforcement discretion. Further information about compliance and enforcement is available on the TGA's website.10
The changes to the TGAC are part of a wider package of reforms to the regulatory framework relating to the promotion of therapeutic goods. Other relevant changes relating to the regulation of therapeutic goods which will affect DSOs include: increased sanctions for non-compliant advertising; a streamlined complaints handling system which will now be handled by a single body, the
TGA (and the abolition of the Therapeutic Goods Advertising Complaints Resolution Panel); and from 1 July 2020, the abolition of the requirement for certain advertisements to be pre-approved in favour of a system of self-regulation.
Impact on Your Business
Each of the above changes in respect of the promotion of therapeutic goods is important and must be adhered to by DSOs and their salesforces. Many of the provisions in the new TGAC impose requirements more stringent than those covered in the corresponding provisions in the previous TGAC. Caution must be exercised by DSOs to ensure full compliance. This is particularly the case in respect of testimonials and the use of before and after weight loss photos. DSOs should review their advertising and marketing activities now to ensure compliance as soon as possible (given that the new TGAC is in force) and provide compliance training for their salesforce. If you would like more information about the changes to the TGAC and/or how it affects your direct selling business, please do not hesitate to contact us.
1. These changes reflect the recommendations made by the Expert Panel Review of Medicines and Medical Devices Regulation in July 2015. New TGAC available at https://www.legislation.gov.au/Details/F2018L01524. 2. Therapeutic Goods Advertising Code 2015 (previous TGAC), s 4(7), available at https://www.legislation.gov.au/Details/F2018C00596. 3. Therapeutic Goods Advertising Code (No. 2) 2018 (new TGAC), s17, available at https://www.legislation.gov.au/Details/F2018L00976. 4. New TGAC, s26 5. New TGAC, s26 6. Complementary medicines (also known as `traditional' or `alternative' medicines) include vitamin, mineral, herbal, aromatherapy and homoeopathic products. Complementary medicines may be either listed or registered, depending on their ingredients and the claims made. 7. New TGAC, s23 8. TGA, Therapeutic Goods Advertising Code 2018: Guidance on applying the Code when advertising therapeutic goods to the public (Guidance), Version 0.1, March 2018, page 30. 9. Guidance, p.30 10. https://www.tga.gov.au/therapeutic-goods-advertising-update-29-october-2018#compliance
Trade Promotions: what direct selling businesses should consider before conducting a promotion in Australia
by Jamie Nettleton, Cate Sendall and Joseph Abi-Hanna
A trade promotion is an activity conducted for the promotion of trade, a business or the sale of goods and services. Trade promotions include competitions, sweepstakes, contests and giveaways and are a popular way of marketing direct selling businesses and their products. A trade promotion falls typically into one of two categories: a game of skill, in which the winner is determined wholly by skill. For example, requiring
each entrant to "describe your dream holiday in 25 words or less". The entrant who submits the most creative response wins; or a game of chance, in which winners are determined wholly or partly by chance (for example, a draw). A promotion must be conducted in accordance with the laws of those States and Territories in which it is being conducted, that is, each jurisdiction whose residents can enter the trade promotion. The legal requirements concerning the conduct of a trade promotion differ across all Australian jurisdictions. Other areas of Australian law, for example, consumer protection law and advertising law (including applicable advertising codes), also apply to trade promotions, irrespective of whether the trade promotion constitutes a game of skill or a game of chance. There are several issues which must be taken into account when planning a trade promotion.
Failure to address these issues can result in, for example: lengthy delays and engagement with gambling regulators prior to the issue of a permit for
the promotion in certain jurisdictions; for failing to conduct the trade promotion in accordance with applicable laws, enforcement
action; unwanted scrutiny from consumer protection authorities; where the promoter is dependent on a third party in respect of any aspect of the trade
promotion, for example, a prize supplier or a social media platform, damage to the relationship between the promoter and this third party; and
from a public relations perspective, damage to the reputation and image of the promoter, and more importantly, the promoter's brand.
Checklist for Promoters
While trade promotions may appear to be a simple and cost effective way to promote goods and services associated with a direct selling business, direct selling businesses should be mindful of the legal issues which may arise and should apply the same level of care as they would apply when undertaking any other significant marketing or promotional activities to ensure compliance with the law. To assist, we have prepared a flowchart and checklist to help in identifying and addressing these issues. For a copy of the flowchart and checklist, please contact a member of Addisons' Direct Selling Team.
Addisons Level 12, 60 Carrington Street Sydney NSW 2000 Australia +61 2 8915 1000 www.addisonslawyers.com.au Find us at linkedin.com/company/addisons