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DIRECT SELLING & CONSUMER PROTECTION

REGULAR REVIEW FOR COMPLIANCE WITH PROVINCIAL RULES RECOMMENDED

Provinces and Territories across Canada have consumer protection laws in place to protect consumers purchasing elsewhere than at a traditional retail store. Among other things, these laws set out certain informational disclosure requirements in sales contracts/order forms of direct selling companies (“DS Contracts”).

Recently there has been an uptick in enforcement action by provincial regulators concerned about DS Contracts which don’t comply with their laws. It is advisable for businesses to review their own contracts for compliance before the regulators come knocking!

Failure to comply with these requirements may grant consumers increased cancellation rights or may result in the regulator imposing fines against the business!

Mandatory Consumer Protection Requirements

While consumer protection laws may vary slightly from province to province (and territories!), the mandatory requirements for DS Contracts are basically harmonized across Canada.

In general, businesses will need to ensure that their DS Contracts contain certain required information, such as:

• The business’ name, address, telephone number, the salesperson’s name, and signatures of buyer and seller;
• A description of the goods or services purchased;
• The exact statutory wording of the Buyer’s Right to Cancel; and
• Terms of payment (including an itemized price of the goods or services).

The above list is not exhaustive, and contracts that are entered into online will also have slightly different requirements.

Non-Compliance with Consumer Protection Requirements

Failure to include mandatory information in a DS Contract, or to ensure the accuracy of the same, can result in negative consequences for businesses.

For one, customers may receive extended cancellation rights under provincial/territorial consumer protection laws (see e.g., s. 28(2)(b) of Alberta’s Consumer Protection Act (“CPA”)). If businesses fail to refund all money paid under such contracts, then customers may have a right to recover the amount owed as a simple debt contract (see e.g., s. 33(3) of Alberta’s CPA).

Even more problematic for businesses, in certain instances non-compliance with DS Contract informational requirements may be considered “misleading consumers”, and an unfair practice (see e.g., s. 6(4)(a) of Alberta’s CPA), which is an offence (see e.g., s. 161(a) of Alberta’s CPA). Such offences can carry steep fines, or even a term of imprisonment!

The Importance of Compliance Reviews

While most direct sellers start off with DS Contracts which are compliant, it is not uncommon to find over time that various departments within a business make “tweaks” to the DS contract. Without appropriate knowledge of consumer protection requirements it is easy for the DS contract to unintentionally become non-compliant with provincial/territorial consumer protection laws.

Given the potential consequences at stake, DS Contracts should be reviewed regularly (ideally in advance of proposed changes) to ensure compliance with the relevant laws.

Takeaways

Regular reviews of DS Contracts is an important protective step businesses should take to ensure compliance with provincial/territorial consumer protection laws. Businesses in need of help conducting such reviews should contact experienced legal counsel for assistance!

For help with direct sales contracts, please click here.

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