My MLM is legal in the U.S., Does that mean it is legal in Canada?
If your MLM company is legal in the United States, it might feel safe to assume you’re in the clear everywhere else, but that’s not necessarily the case. Canada has its own laws, regulatory bodies, and consumer protection standards that govern multi-level marketing businesses, and they don’t always mirror U.S. rules. What qualifies as a legitimate direct selling opportunity in one country could raise compliance issues in another. Before expanding your MLM across the border or recruiting Canadian participants, it’s important to understand how Canadian regulations differ and what that means for your business.
What are the differences between MLM laws in Canada and in the USA?
Canada and the United States regulate MLM business in significantly distinct ways. Simply put, what is legal in the United States may not be legal in Canada, and what is legal in Canada, may not be legal in the United States. In some ways, Canada is less strict. This blog will set out some of the main differences, and highlight what your direct selling business can do to make sure you are legal in both countries.
Canada requires licensing, while the United States does not
Generally speaking, MLMs require two sets of “licenses” to operate in Canada. The first set is federal licensing. While not strictly licensing, this is known as a Written Opinion, which is given out by the Competition Bureau of Canada. Think of the Competition Bureau of Canada as the Canadian version of the FTC. The second set of licensing is provincial licensing. Read more about what a Written Opinion is by checking out our blog post, How to Legally Start an MLM in Canada: Incorporation, Licensing, and Compliance.
Canadian products can sometimes make bigger health claims than in the United States
If natural wellness products in the United States are treated as “food plus”, the same products in Canada are treated as “pharmaceutical lite”. Canadian health products, such as vitamins and other supplements, are regulated by the Food an Drugs Act. Once product licensing has been obtained, Canadian products can make many more approved claims. For example, if your product contains a certain amount of Vitamin A, you can automatically claim that your products aids with night vision. Typically, these types of claims are not allowed to be made in the United States.
Canada does not have an “internal consumption rule”
Broadly speaking, American law sets out that MLM companies must not exceed 30% internal consumption. In other words, only 30% of sales should be made to participants of the compensation plan. Canada does not have such a restriction, and this does not yet form part of the analysis of what may be considered a pyramid scheme.
Leg recruitment requirements are different
MLM businesses in Canada may require minimum leg recruitment, but only if they follow a very strict set of guidelines. Almost all American or international MLM companies that operate a binary, or hybrid compensation plan will need to make tweaks.
Looking for guidance?
Is your business looking to launch Canada? Or is your business already operating in Canada, and you are looking for peace of mind? Feel free to schedule a free consultation with mlmcanada.com.
