Main provisions:

Effective activity in the field of direct sales is possible only under condition of its proper legal support. The rules of law governing activities in the field of direct sales can be classified as follows:

• legislative and regulatory acts, as well as certain provisions of regulatory legal acts;

• self-regulatory standards set out in the Code of Professional Ethics.

In Ukraine, as in other countries of the world, including the member states of the European Union, there are no special regulations governing the activities in the field of direct sales as such, because in essence such activity is a type of retail trade. At the same time, since there are certain features of the activity in the field of direct sales, namely, the conduct by sellers (distributors) of product demonstrations to consumers, the nature of legal relations between sellers (distributors) and companies that are owners or legitimate users of trademarks under which goods are sold, such features settled by current legislation.

The Constitution enshrines the following general principles, which, in particular, relate to activities in the field of direct sales:

• property should not be used to the detriment of man and society (art. 13);

• the state ensures the protection of the rights of all subjects of property and economic rights, the social orientation of the economy. All subjects of property rights are equal before the law (Article 13);

• the right of private property is acquired in the manner determined by law (art. 41);

• no one may interfere in his personal and family life (art. 32);

• collection, storage, use and dissemination of confidential information about a person without his consent is not allowed (art. 32);

• everyone has the right to business activities not prohibited by law (art. 42);

• the state protects competition in business activities (art. 42);

• the state protects the rights of consumers, monitors the quality and safety of products and all types of services and works (art. 42);

• everyone is guaranteed the right of free access to information on the state of the environment, on the quality of food and household items, as well as the right to disseminate it (art. 50).

Economic Code of Ukraine

The Economic Code of Ukraine contains a number of general provisions for ensuring economic diversity and equal state protection of all business entities, freedom of business, free movement of capital, goods and services in Ukraine, restrictions on state regulation of economic processes due to the need to ensure the social orientation of the economy, fair competition in business, environmental protection of the population, consumer protection and safety spine of the society and state, the prohibition of illegal interference by public authorities and local governments and their officials in the economic relations, protection of the rights of producers and consumers of monopoly restriction and protection against unfair competition and the like.

The Law of Ukraine “On the Protection of Economic Competition” (defines the legal framework for supporting and protecting economic competition, limiting monopolism in economic activity and aims to ensure the effective functioning of the Ukrainian economy based on the development of competitive relations), the Law of Ukraine “On Protection from unfair competition” (aimed at establishing, developing and providing trade and other honest practices of competition redprinimatelskoy activity in market conditions).

Distributors’ activity is based on the following principles of the Economic Code of Ukraine: independent formation by an entrepreneur of a program of activity, selection of suppliers and consumers of products, attraction of material, technical, financial and other resources, commercial calculation and own commercial risk, free disposal of profits that remain with the entrepreneur after payment taxes, fees and other fees required by law. It should be noted that special laws prohibit the circulation of certain goods in Ukraine, for example, well-defined narcotic drugs, psychotropic substances and precursors (the Law of Ukraine “On Narcotic Drugs, Psychotropic Substances and Precursors”).

The Civil Code of Ukraine and the Law of Ukraine “On the Protection of Rights to Marks for Goods and Services” regulate, in particular, the ownership of the trademark and commercial name. Thus, sellers (distributors) have the right to use the corresponding trademarks and commercial names only within the limits granted to them on the basis of an agreement with the company whose goods they sell. Sales promotion as one of the elements of direct sales is also subject to legal regulation. Thus, the basis of advertising activity in Ukraine and the relations arising in the process of production, distribution and consumption of advertising, defines the Law of Ukraine “On Advertising”. This law has two main objectives. First, the prevention of unfair advertising, compliance of advertising with the principles of fair competition. Secondly, consumer protection, consideration of ethical, moral, humanistic norms and rules of decency.

The most significant in the field of direct sales is the regulation of direct sales companies and sellers (distributors) with consumers. So, the main legal acts regulating relations with consumers, in particular, in the field of direct sales, are the Civil Code of Ukraine and the Law of Ukraine “On Protection of Consumer Rights”. The law regulates relations between consumers of goods, works and services and producers and sellers of goods, executors of works and services of various forms of ownership, establishes the rights of consumers, and also recognizes the mechanism of their protection and the basics of implementing state policy in the field of consumer protection. In particular, according to the provisions of the Law of Ukraine “On Protection of Consumer Rights”, consumers during the purchase, order or use of products sold in Ukraine to meet their personal needs are entitled to protection of their rights by the state, proper quality of products and services, product safety, necessary, accessible, reliable and timely information about the product, its quantity, quality, assortment, as well as its manufacturer (performer, seller), the right to return or exchange War of good quality (the list of goods to be returned or exchanged is determined by the Resolution of the Cabinet of Ministers of Ukraine “On the implementation of certain provisions of the Law of Ukraine” On Protection of Consumer Rights” ), compensation for property and moral damage caused by product deficiencies (defect in products). The right to reliable information is of particular importance in the activities of direct sales, because it is important that sellers (distributors) do not provide false information, exaggerating the properties of goods. Moreover, the Law of Ukraine “On Protection of Consumer Rights” prohibits dishonest business activities, namely, the performance of actions that qualify as legislation as a manifestation of unfair competition, any activity (action or inaction), misleads the consumer or is aggressive. If business practice encourages or may encourage the consumer to agree to a transaction that he would otherwise disagree with, this practice is misleading as to the basic characteristics of the product, such as:

• Its availability, advantages, hazard, composition, methods of use, warranty service, method and date of manufacture or supply, delivery, quantity, specification, geographical or other origin, expected results of consumption or results and main characteristics of tests or checks of goods;

• Any reservations regarding direct or indirect support by the manufacturer of the seller or product;

• Pricing or method of calculating the price or availability of discounts or other price advantages;

• Service, replacement, or repair needs;

• The nature, attributes and rights of the seller or his agent, in particular, information about his personality and assets, qualifications, status, license availability, affiliation and rights of intellectual or industrial property, its distinctions and awards;

• Consumer rights or danger that threatens him.

Business practice is such that it is misleading if during the supply of products to the consumer is not provided or is provided in a fuzzy, incomprehensible or ambiguous way the information necessary for making a conscious choice.

Prohibited as misleading:

• proposal for the sale of products at a certain price, if there are grounds to believe that the seller or executor will not be able to provide such products at such a price or in such quantities that it can be foreseen considering the proposed price and product characteristics;

• offer for the purpose of selling one product to another;

• refusal to present to the consumer the goods that are being offered and to accept the order or not to deliver the goods within a reasonable time or to demonstrate a defective sample of the goods;

• an inaccurate report about the presence of a limited number of goods or with the aim of encouraging consumers to make a quick decision of depriving them of a sufficient period of time to make a conscious decision;

• offer for free sale of products withdrawn from circulation or in relation to circulation of which there are restrictions;

• false assertion that there will be a threat to the personal safety of the consumer or his family if he does not purchase or order products;

• creating, operating or promoting the development of pyramid schemes, when the consumer pays for the possibility of obtaining compensation provided by attracting other consumers to such a scheme, and not by selling or consuming products;

• use of the sale message in connection with the termination of the business entity, its structural subdivision or termination of the corresponding type of economic activity, whereas this is not true and the like. It is considered entrepreneurial practice that actually contains elements of coercion, harassment, or undue influence and significantly affects or may affect the freedom of choice or consumer behavior regarding the purchase of products.

Как агрессивные запрещаются такие формы предпринимательской практики:

• Creating the impression that a consumer cannot leave the seller’s (performer’s) premises without a contract or payment;

• Conducting lengthy and / or periodic visits to the consumer’s housing, despite the consumer’s demand to stop such activities or leave the housing;

• Realization of permanent telephone, facsimile, electronic or other messages without the consent of the consumer;

• The requirement to pay for the products supplied by the seller (performer), if the consumer did not give a direct and unequivocal consent to purchase them, and the like. Economic entities, their employees are responsible for unfair business practice in accordance with the law. For violation of consumer protection laws, administrative liability is provided.

The legal status of personal data as a type of information, as well as provisions for the protection of personal data are defined by the Civil Code of Ukraine, the Laws of Ukraine “On Information” and “On the Protection of Personal Data”.
About ethical aspects of activity and self-regulation in the field of direct sales can be found in a separate section “Ethics and self-regulation”.