It’s different in Canada, really.
If you thought the laws applicable to multilevel marketing companies in Canada are the same or similar to those in the USA, you’d be mistaken!
In the USA, there are no “multilevel” federal statutes. Instead, states have pyramid laws that regulate different elements of direct selling businesses while the Federal Trade Commission (FTC) focuses on protecting consumer interests with broad, far-reaching powers to act to prohibit “unfair or deceptive acts or practices in or affecting commerce.”
In the USA, you cannot obtain an advisory opinion on your compensation plan from federal or state governments.
Most direct selling attorneys in the USA advise their clients not to make earnings representations until there is history to back them up. Canada has taken a different approach.
In Canada, the Competition Bureau regulates earnings representations and buy-back provisions while prohibiting required purchases of products for participation, payments for recruiting, and excessive inventory purchases. The Competition Act contains the applicable regulations. If you don’t have a copy of this act, contact us for details.
From the Competition Bureau, you can obtain an advisory opinion on your compensation plan in Canada. While it’s not required federally, several of the provinces in Canada require a provincial license before operating there. To obtain such a license, an advisory opinion may be required. It can take up to 3 months or longer to obtain an advisory opinion.
To obtain an advisory opinion, the compensation plan must be submitted with earnings representations of participants. If the company is not yet in business in Canada but it is in operation outside of Canada, the earnings representations can be those of the business outside of Canada.
On the other hand, if the business is new and not in operation elsewhere, earnings representations are still required. It is expected that the company will provide the average earnings of participants from companies with similar compensation plans. This can be a challenge!
In addition to provincial corporate registration and licensing requirements, there are dual language (English/French), retail sales tax, harmonized sales tax, GST, provincial and federal income taxes, corporate entity, and in a few provinces, independent direct seller licensing issues to be addressed.
Do you have any questions about doing business in Canada? If so, call Jay or Victoria at 503.244.8787.
Jay Leisner, the President of Sylvina Consulting, is a top compensation plan and direct selling expert, a trusted adviser to new and established network marketing and party plan companies. For more than 30 years, Jay has enjoyed assessing and improving network marketing, party plan and referral marketing companies across the globe.
Leave a Reply