Guide to documents for MLM company’s site

Table of contents:

• A guide to legal documents for an MLM company website
• Why should legal documents be placed on an MLM company website?
• What documents should be placed on MLM company’s website?

MLM Company is not quite a classic organization, so they need the proper legal documents: a user agreement (partner agreement), an agreement for compensated marketing services, a privacy policy, a cookie policy, an exchange and return policy (if the company is selling goods, not providing services). This documentation should be posted on the company's website. The importance of documents is stipulated by the fact that with them the company is protected from all sorts of risks that could harm its reputation and subsequent activities.

Why should legal documents be placed on MLM company website?

In Russia, at the present moment there is no legal and regulatory framework that would regulate the sphere of network marketing. But, despite this, companies should do everything possible to build legally competent and logical relationships with partners. As we mentioned in the article "What kind of documents are necessary for the MLM project site?", the package of legal documentation is compulsory to be placed on the site of the company, because they establish the rules of the site, the order of interaction between the company and its partners (distributors), they minimize the risk of misuse of information on the MLM company site, and also protect the company from any claims related to the use of personal data.

There is no legal regulation of the MLM activity in the Russian Federation yet. However, if you own an MLM company, for example in the USA, US law requires website owners to comply with privacy and cookie laws. This is also required by Google if the company uses Google Analytics or Google AdWords, and Facebook if the organization advertises there. Posting a privacy policy is also required by the GDPR, the EU General Data Protection Regulation, for all EU visitors.

What documents should be placed on MLM company’s website?

1. Privacy and cookie policy. First and foremost, a privacy and cookie policy should be drafted, as users consent to personal data processing when they log on to the site. This is usually done with one click in a pop-up window. So, in our previous article " What kind of documents are necessary for the MLM project site?" it was described that the purpose of the cookie policy is to record the date and time when a user visits their site. This document regulates the collection of information about site visitors. The purpose of the privacy policy is to regulate the collection and processing of that data that has been collected by the company during the user authorization or during the application process. By registering, the user gives his/her name, email, phone number, etc., for collection and processing. The availability of this document is necessary because it minimizes the risk of a claim against the company for illegal use of personal data. User automatically gives their consent to their use, also putting a tick "I agree" in the pop-up window.
2. Partnership Agreement. Answering the question of what document regulates the relations between the company and the partner, it's worth mentioning the partnership agreement. The partnership agreement is an agreement between the company and the partner that defines their mutual rights and obligations, requirements for the partner, partner's privileges, growth prospects in the company, and also describes what levels of partnership exist and how the partner will be trained to promote the company's product. In the multilevel marketing, there are several ways to structure how a company and partners interact:
   1. A contract for compensated services^[1];
   2. Agency agreement^[2];
   3. Distribution agreement^[3].

The company can choose one of the most suitable structures for it.

It is very important to include in the partnership agreement a requirement to register as a self-employed or individual entrepreneur. This provision in the agreement will avoid the risk of recognition this relationship as an employment.  For more details on what risks arise when agreement is drafted incorrectly, see the article "How to legally pay remuneration to partners of an MLM company?".

The partnership agreement should be structured as follows:

1. Introduction
2. Terms and Definitions
3. Requirements imposed on the partner
4. Rights and obligations of the parties
5. Warranties
6. Partner’s Responsibility
7. Rules on presentation of the company's goods/services
8. Use of intellectual property
9. Sanctions

There is no Russian court practice concerning qualification of the partnership agreement. It can be assumed that the agreement may be qualified as a contract for compensated marketing services/agency agreement/distribution agreement or a mixed contract if the dispute arises.

The marketing plan is one of the most important documents, because it regulates the procedure, terms and amount of remuneration of the partner for providing marketing services to the MLM company. As we previously wrote in the article " How to legally pay remuneration to partners of an MLM company?", MLM companies do not enter into an employment relationship with partners. Otherwise they would have to pay income tax (13%), make contributions to the Pension Fund (22%), Federal Compulsory Medical Insurance Fund (5,1), Social Security Fund (2,9%), which is costly and inconvenient for the company, where the number of partners may exceed 1000 and more people.

MLM companies and partners are more profitable to work on the basis of the civil contract. The partner works independently from the company, at convenient time for him, he is not subject to the rules of internal labor regulations, and the company, in turn, does not provide guarantees to partners in accordance with employment law.

It is also necessary to clarify an important detail - the partner renders intermediary services for the company, i.e. is not a middle link between the company and the referral (article 4 of the Federal law from 27.11.2018 N 422-FZ "On the experiment of establishing a special tax regime "Tax on professional income").  It is necessary to specify in the marketing plan and in the partnership agreement that the partner is providing marketing services, and the referral, on the basis of the information he received from the partner, makes purchases or applies to the company for its services.

Thus, the home page of MLM company's site should contain privacy and cookie policy, partnership agreement, marketing plan, as well as terms of delivery and return policy (for companies involved in commodity business). The A4 specialists will prepare all the necessary documents, taking into account the features of your MLM company.

[1] https://www.amway.ru/legal/rules-of-conduct#r3.

[2] https://www.enagic.com.ru/pdf/ru_agency_agreement_legal_entities_residents.pdf.

[3] https://armelle.world/files/distributor_contract.pdf.