Don’t We All Have the Same Goal?
Word has spread quickly about directselling411.com! After just a few short days with our “doors” open to the public, the buzz is beginning.
A quick Google search today uncovered a blog post questioning not only the motivations behind this site, but also the Direct Selling Association’s credibility. I think the directselling411.com mission has been made very clear – to provide accurate information about direct selling, as well as a forum for dialogue about direct selling. Don’t agree with the information provided? Then let’s talk about it. There aren’t many other sites about direct selling out there that provide a two-way street for the dialogue. It’s fine if, in the end, you disagree with the information on the site, but at least engage in the conversation.
I’ll be the first to admit that the direct selling industry is not without its issues – if it were perfect you wouldn’t be reading this blog. But contrary to what industry critics would have you believe, the vast majority of participants in this industry are honest, ethical human beings.
The part most critics choose to ignore is that the good guys are working hard to address the industry’s issues – as well as change outdated stereotypes kept alive only through the misinformation spread by those who refuse to understand direct selling is an honorable and time-tested method of product distribution that helps millions of people achieve their goals.
Do the good guys ever err? Of course – that’s one of the reasons the Direct Selling Association’s Code of Ethics, enforced by an independent Code Administrator, is a great consumer protection vehicle. Anyone who has encountered a problem with a DSA member company is invited and encouraged to file a Code complaint. Complain to your friend or neighbor if you choose, but to get a resolution, file a Code complaint. DSA member companies are required to resolve all issues to the satisfaction of the Code Administrator – their membership depends on it.
I was hoping this post wouldn’t get too long, but quickly I want to respond to some of the specific statements from the aforementioned post.
- “Most of the direct selling that is done by direct selling companies are to their distributors.” FALSE! What’s true is that more than 50% of Americans have purchased through direct selling in the past year. In addition, there are a significant number of people who sign up only to purchase the products at a discount – they never intend to sell a single thing (or make a single dollar for that matter!). Some companies have a fairly high percentage of people in this category – often called discount buyers. However, certainly anyone reading this post knows more than a handful of people with kitchens outfitted with direct selling products, homes accented with direct selling products and even jewelry boxes, well, you know…
- “In past years the FTC has taken a dim view of [sales made to participants in the plan, a.k.a. internal consumption].” FALSE! While the FTC maintains an interest in making sure bad actors do not use internal consumption as a cover for inventory loading, and has looked closely at this issue with regard to specific companies (and in some cases has imposed requirements specific to those companies based on their findings), there is no FTC rule regarding internal consumption. In fact, in a 2004 staff advisory opinion, the FTC specifically states that the amount of internal consumption does not determine whether a plan is illegal; such a determination is instead dependent on the source of funds for commissions.
- “The DSA operates to keep direct selling businesses in business.” TRUE! That’s the nature of a trade association. But what’s also true is that DSA helps keep its companies in business by making sure they operate in a legal and ethical manner. And through the work of the Direct Selling Education Foundation (DSEF), direct sellers work with consumer protection groups around the world to advance the rights of consumers everywhere. (Incidentally, the post in question also asserts “the DSA probably manages to put mucho cashola in Senate and Congressional pockets very effectively.” Anyone who believes legislators and regulators are influenced by DSA’s money vs. being on the right side of the issue should check here to get the real picture.)
The bottom line is this:
Anyone who asserts DSA is doing anything that is not open and honest clearly hasn’t spent too much time on this site. The facts are here for all to see – with an invitation to comment. Sure, we can be accused of “whitewashing MLM,” making an “attempt to paint [the] business with respectability,” and “treating the public like small children,” but in the end, DSA’s goal is to make sure all direct selling companies are operating ethically and fairly. I would encourage those who share this goal to work with DSA to improve the industry.
Tags: Blog, direct selling, Direct Selling Association, DSA, DSA critics, MLM, multi-level marketing
April 23rd, 2008 at 10:07 am
Amy…
Your responses to some of my statements were very well done. I have high regard for professionalism and do not necessarily disagree with all of your responses as you agreed with me on at least one point.
I am somewhat skeptical about your organization doing anything to reign in abuses among some of your members. Isn’t the DSA like the fox being put in charge of guarding the chicken coop?
Is the DSA going to take any kind of public stance against the “bad players” in MLM?
Just how is DSA going to combat recruitment abuses, mostly the selling of success dreams? The totally unrealistic claims made at recruitment meetings which lead people to believe they can become fabulously wealthy working 2 to 3 hours a week for 2 to 3 years?
Maybe I shouldn’t paint all DSA members with the same black brush. Some direct selling companies actually manage to retail some product. I don’t believe that direct sales from company to consumer is necessarily a bad thing as a buying club might work.
I do think there is something wrong with companies that mostly recruit and sell their over priced products to distributors who are the only real customers. This isn’t a buying club situation. These people buy these products and self consume them in an effort to remain “plugged in” to their upline and keep their mostly unachievable “dreams” of success alive. Quixtar/Amway Global happens to fall into this category. What does the DSA propose that Amway do to reign in their abuse? Aren’t the Amway fox and the DSA fox one and the same?
April 24th, 2008 at 2:22 pm
First, thank you for engaging in this conversation. Many of the points you make underscore exactly what we are trying to address with this Web site and blog.
I am not alone in the direct selling community in agreeing that there are absolutely things taking place out there that need to be addressed, but the key is not throwing the baby out with the bath water. As I stated in my original post, for example, there is nothing wrong with internal consumption, but when people take advantage of it, that’s where the issue lies. For some, the tendency is to say it must be all bad; for DSA, the key is making sure everyone understands what’s OK versus what’s not, and addressing the issues accordingly.
So, how do we address these issues, and how do we effectively police our own? Forgive me in advance for a long post, but this is such a critical topic, I think it’s worth the words to get into details.
First, you have companies that are just outright scams from the top down. Their leaders promote unethical behavior and there’s no way to see them but as a scam. Luckily, these egregious scams usually collapse quickly, either by imploding or thanks to law enforcement officials.
What is much more common, however, is individual sellers, affiliated with perfectly legitimate and ethical companies, who go outside company policies, some knowingly, some not, and create questionable situations. In DSA’s view (as described in our Code of Ethics) this is absolutely not an excuse – companies cannot disavow responsibility for the actions of their sellers under the DSA Code. However, that doesn’t make it any easier for the companies to make it stop.
In a salesforce of more than 15.2 million independent, entrepreneurial spirits, it’s not surprising that the boundaries are sometimes tested. And companies have a huge stake in making sure their sellers follow the rules – especially in an age where consumers demand and deserve the best. Companies know there are issues to be addressed and are trying to do so, and at the same time it’s important to educate the public about direct selling to dispel myths and separate hype from reality.
There’s no doubt you’ll find a lot of pro-direct selling information on the directselling411.com site, but it’s about more than the benefits of direct selling; we want consumers and sellers to be able to recognize and report legal and ethical violations. DSA has a very strong Code of Ethics, but it’s only effective if people report the problems they are having. Believe it or not, DSA considers it a success when a Code complaint is filed because it means a company has the opportunity to make things right for someone who has had a problem.
Direct selling companies bear a huge part of the responsibility to make sure things are operating properly, but that can’t happen in a vacuum - there are two critical things that need to happen out in the field, too.
First, DSA members are required to make their field aware of their rights and responsibilities under the Code of Ethics. In return, the field sellers have a professional and ethical responsibility to make sure they follow the rules their company has committed to on their behalf. Policies are only as good as their implementation, and in the case of direct selling, doing the right thing for the consumer is a partnership between the company and the seller.
Second, sellers and consumers who feel ANY of the provisions of the Code have been violated need to speak up! DSA takes these complaints seriously and each one is investigated thoroughly. The decision of the Independent Code Administrator, who is not on the DSA staff and has no affiliation with any company, is final and binding on the company in question.
I know, you’re probably sitting there feeling like you’ve heard this all before. But the sad truth is, many people who have had a problem don’t realize they have rights or how to exercise them – and they may even erroneously assume the companies don’t care. Even worse, they often find “relief” by complaining about their situation to people who can’t help them get a resolution. In the end, I think that only makes them feel worse, and still doesn’t result in a resolution.
So, what I can tell you is that the DSA membership fully supports the honest, open and transparent approach this web site and blog is taking. We have a mechanism for dealing with ethical issues, but we need the help of people like you, who have encountered problems, to work with us in a constructive way to make things better. That’s why we’re taking it public.
DSA obviously believes, when done right, direct selling is great way to sell products and services, as well as a great income opportunity. That’s why we’re committed to addressing problems where they exist. That may not mean broadcasting every transgression on the nightly news, but it does mean being responsive when there’s a problem. So, I encourage you and others out there to use your networks to promote knowledge about the protections the DSA offers. Our members have made a commitment to the highest ethical standards – make them back it up, both to avoid problems and address them.
April 27th, 2008 at 3:53 pm
Amy…
Your response to my comment was very well thought out and written. You make a very good case for the DSA.
It is really a buyer beware situation for anyone considering a Direct Sales Business. As you put it, the worst of these usually fail quickly (but not without victims).
I agree that it is many times not the direct sales company that make the unrealistic success claims to new recruits. Secondary motivational organizations are also involved, and even then, it is the individual distributor making the pitch.
Dream selling has brought people into MLM and keep people working the business. Many times people are taught that retail sales aren’t necessary, even when this is not the company’s written policy. Aren’t distributors more under the influence of motivational organizations than the company itself? Do folks like World Wide Dream Builders do more to influence unacceptable behavior than the Amway company itself?
Where does the DSA stand on recent “tool” scandals? Does the DSA believe that these sales constitute an illegal pyramid since these items have no real end consumer like a product might?
Aren’t too many distributors self consuming their own products for this to be coincidence? Surely these behaviors are induced by “upline” over-sight.
Distributors make the best customers of not only products but of the tools as well. Since the products are many times overpriced, doesn’t this approach a money extracting scheme rather than legit business? The victims here are not consumers or customers, but the distributors themselves.
Your public stance on these issues is important, not just to me, but everyone considering Direct Sales as a potential opportunity.
April 29th, 2008 at 2:41 pm
This is a very interesting topic - one that both current and prospective sellers should be educated about.
Company-produced tools, training materials, sales kits and similar materials can be an important and valuable part of a direct selling business, and some companies do make these available to members of their salesforce. Sometimes, members of the salesforce will also produce their own training materials and make them available to other sellers. In fact, “tools” can be a very important part of the mentoring process.
Most people who become direct sellers have little to no business experience, yet those are exactly the skills customers expect from them. Trial and error is one way to get these skills (which can also cost one plenty of customers while you figure out what works and what doesn’t). Finding out what has worked for others is probably a much more efficient way to go about gaining necessary business skills.
For companies, it is critical that they have a strong training program. In fact, one of the most critical reasons for this is so distributors can avoid stepping outside ethical and legal boundaries. In order to convey company policies and procedures to hundreds of thousands of people or more, training tools are essential. (In fact, one component of this training should be what’s acceptable and what’s not in the area of selling tools!)
For members of the salesforce, one of the most important duties of an upline is to mentor downline distributors. Sometimes that’s through personal interaction, but other times, it may be through training materials – sometimes company produced, sometimes produced by a third party, and perhaps even produced by the distributor himself.
But then we get to the question of what crosses the line.
Just as inventory purchases for resale are standard and legitimate practices in direct selling businesses (and plenty of others), but can be abused, so can the sales and use of tools. Just as one can be “loaded up” with inventory, it’s possible that one could be “loaded up” with tools. Like other questions, this really boils down to a judgment call on each particular situation.
The DSA Code of Ethics does provide at least one hard and fast rule on these materials, however, so that no matter the reason, a salesperson can have the materials repurchased if he or she decides to leave the business.
Not to get too technical here, but here’s the language from the Code that provides protection against being “loaded up” with company-produced materials:
You’ll note that the Code provisions don’t address salesperson produced materials, and the buyback requirements for company produced materials apply only if those materials were required purchases or if salespeople earn some financial benefit on the sale of company produced materials.
DSA is constantly reviewing and updating its Code to address any consumer or salesforce protection issues that might arise in the marketplace, so keep an eye out for changes in this or other provisions of the Code that will help distinguish legitimate companies from fraudulent operations.
Having said that, though, remember that the following cautions always apply as you evaluate whether an opportunity is legitimate or fraudulent
1) Consider whether you risk financial loss by being involved in a situation. If you are being asked to spend an inordinate amount of money on anything, be that the startup fee, inventory or sales aids, regardless of who produces or promotes them, beware.
2) On what is your income based? If it’s sales of products, great. If it’s anything else, beware.
3) Be clear on what is subject to the company’s buyback policy and what’s not. The DSA Code of Ethics has very specific guidelines regarding the buyback, and the Code Administrator has broad authority to determine if a particular situation crosses the line – whether that has to do with product or tools.
4) Don’t be afraid to report what you consider to be abuses. As I’ve said before, there are scam artists out there – including some who are affiliated with perfectly legitimate companies. These people need to be stopped, but it’s only through a partnership between the companies and those who have been harmed (along with DSA and/or law enforcement officials) that the lines are defined and those who cross the line are put out of business.
April 29th, 2008 at 7:17 pm
Amy…
Your explanation of the DSA code is good. The tenants of the code are intended to protect people. Sadly, many of these people do not realize to what extent they are being taken advantage of, and therefore aren’t likely to complain very loudly.
The reasonable returns, though, many times aren’t all that reasonable. A distributor’s immediate upline is many times made responsible for the buy back even when they are not the kingpin distributor who did profit from the original sale to begin with. Buy back at “reasonable commercial terms” may be pennies on the dollar when this buy back amount is calculated by someone who is made the real looser on the deal.
I tend to think that the effectiveness of some company tools are better than others. It would seem that some distributor based tools are on the order of Lays potato chips. You just can’t eat one, you eat many and then bag after bag, all at the benefit of the successful upline kingpin distributors.
Where a company might seek to restrict the over abundance of mostly repetitive tapes, books and the like, the kingpin distributors are intent on selling more of their good money making thing.
Another problem I see with most of these tools, they don’t teach the most important principle of business: and that is to operate in a cost effective manner in hope to generate a profit. They tend to teach buy, buy, buy instead of buy little and sell, sell, sell.
Distributors are taught that functions, rallies and seminars must be attended although the company fine print says something else. Upline tools teach that “Point Values” purchases should be maintained month to month (also where company fine print says otherwise). All of these errant teachings benefit the direct sales company and the distributor tool kingpin sellers to the detriment of the distributor who may whole heartedly believe these tools are the absolute key to success.
You make a good argument for the existence of training tools, but my argument is that these propaganda laden teachings wouldn’t pass muster from the standpoint of a real world business intent upon showing a profit.
To teach that a business can operate at a loss from year to year for a decade or more is insane; yet people in some DSA companies encourage their people to follow this incorrect reasoning.
It is very much a “Buyer Better Beware” world for anyone considering a direct selling business or who is already involved.
Amy, we may actually agree on many more things than I first thought. Not all direct sales businesses are created equal. Many do make legit sales without undue pressure to sign on as a distributor. Others tend to be a “recruit and dupe” operation which only exist to enrich the company and the top kingpin distributors, all at the expense of everyone else.
If people would just stop and ask themselves, “Am I being sold on a dream or am I being sold on a legit sales opportunity that will profit me and bring a product or service that will also benefit others?”
I support the tenants of the DSA code, but when the DSA allows many of these “bad player” companies to be a members in good standing, there is something wrong. When a company operates an organization which systematically fleeces their own distributors, the DSA should step in a revoke their membership. Until then, I am left to believe that the DSA condones their actions.
April 29th, 2008 at 9:44 pm
I’m glad we’ve found some common ground and hope we’ll find more as we move forward. I can assure you DSA does not condone unethical behavior and that’s one of the reasons it’s important for the Code of Ethics to be a living document that can adapt to a changing marketplace. But, we all know that change takes time, so we’ll continue to promote the protections the Code offers and have an ongoing dialogue about what’s working and what’s not.
By the way, thanks for taking the conversation to your blog as well.
April 30th, 2008 at 9:21 am
Amy…
I am glad we have found some middle ground. For the readers of this blog, I invite you to do as Amy suggests, file a complaint with the DSA if you believe that you have been victimized by a MLM or direct sales company or any of their motivational organizations.
Give the DSA a chance to honor its own code. I believe there are bad players in the company of the other more legit companies holding membership in the DSA.
Have you ever been told unrealistic success stories that lead you to believe that you would succeed in 2 to 4 years working 2 to 3 hours a week? Did you try with all your heart, buy all the tapes, books, and rally tickets, but still find yourself not any closer to the success upline distributors all but guaranteed? They would have you blame yourself, when it is really not you, but those who fostered these errant exaggerations.
Have you ever had problems receiving a return on products or tools?
Have you ever been prospected for a real estate or investment opportunity by your upline distributor?
Have you cases and boxes of unsold goods in your basement?
Have you succeeded in your business to some pin level and find out that the expected income is nothing like you were told it would be?
Do your upline instruct that you don’t really have to sell anything, just purchase all your goods from the company and teach others to do the same?
Do upline mentors inspect your cabinets for negative products?
Did your company allow you to receive a commission check for products you purchased without making the required minimum sales to outside customers?
Are you told you must attend meetings, seminars, and rallies—otherwise your upline will not believe your are serious and will no longer help you?
Have you had legitimate complaints with a company only to have them bottled up in binding arbitration?
If you have any of these complaints or any other complaints about any of the DSA member companies, do as Amy urges, file a complaint. Give the DSA a chance to weed these bad players out. Make your voice heard.
I will be interested in learning how these complaints are resolved and would be even more shocked to learn that a bad player company is booted from the DSA.
Amy, if people would follow through, file complaints, then the ball will be in the DSA’s court. What they do with it is “proof of the pudding”.
My heart goes out to people who’s money, and time are being extracted in pursuit of mostly worthless dreams sold by other dream duped distributors. Do you have you family members that fall into this category? Have you been roped into supporting a family member or watching their children gratis so they can pursue this dream? Well, you are a victim also. If you just don’t know what to do, make your complaints heard.
April 30th, 2008 at 3:06 pm
Welcome to the blogosphere Amy! Great responses to QIAC’s concerns. I agree with everything you’ve said and I also encourage people to use the opportunities provided to them to ensure this industry and its member companies are the best they can be.
That also includes, by the way, use of company-provided measures that are intended to provide a good experience for their representatives and customers (and anyone else who has come into contact with representatives). There are many ways to report abuses provided by the companies themselves (i.e., abuse@quixtar.com is an avenue we provide here at Quixtar) or to be “made whole” (i.e., we have a satisfaction guarantee on our products and demand that IBOs provide them for the tools they sell to those within their systems).
If people don’t take advantage of the consumer protection mechanisms provided, the companies involved cannot accurately pinpoint where abuses are happening and respond quickly.
Great job Amy!
July 9th, 2008 at 7:44 am
1. Assuming what you said is true, how much of the volume was from the non-participants? Where is your study to back up the 50% figure? What are their reasons for not getting more involved? Did they find the prices too high to promote to others?
2. Although the FTC doesn’t require external sales, many companies do in their rules. The primary purpose of these rules is to show the products are fairly priced, and goes a long way to prevent the business from being classified as a money pyramid scheme.
3. As I’ve mentioned in another thread, your efforts with me have fallen flat.
July 9th, 2008 at 9:28 am
Tex,
We haven’t really had a chance to get acquainted as your previous posts that I can recall dealt only with a specific company and thus were not posted, but you do pose some appropriate questions here.
First, the 50% number should have been attributed (I believe it is on the main site) - but it comes from the 2004 Public Attitudes Tracking Survey conducted by Burke Research on behalf of DSA. A random sample of the public is asked about their shopping habits and attitudes toward direct selling - one of the questions asks if they have purchased direct selling products in the last 12 months; 50% said yes. When you consider that about 5% of Americans are direct sellers (whether actively selling or discount buyers) that leaves a significant number of individuals who have purchased products without being part of the salesforce.
You also mention volume. This is an interesting area because I know many MLM critics don’t understand or accept the concept that many people sign up only to buy the products at a discount. For this reason, in some companies the volume sold to participants may be very high, in other companies it is the opposite. I know your particular perspective and won’t debate the details about a specific company, but in the wider direct selling industry, the concepts above are the reality.
In response to your final point, I assume you are referring to a Code complaint and this is not a forum to discuss individual complaints. However, I would hope you would share your dissatisfaction with the DSA Code Administrator so an appropriate resolution can be reached.
Finally, in response to a statement you made in a post I cannot make live because it violates the blog rules on discussing specific company policies, you question the title of this post. And yes, I stick to my original assertion that DSA and those who have “issues” with the industry do have the same goal - and that’s consumer protection. Critics often don’t approve of the time that true change takes and assume since things don’t change overnight that nothing is happening, but reality couldn’t be further from the truth. I will make the comparison to losing weight - you can take off 10 pounds in a week with a fad diet and then gain it all back almost immediately when you are off the diet, or you can do it the good old-fashioned way and keep it off for life. So instead of making overnight changes that may or may not be effective nor address the true root of an issue, true change takes time. Be patient and don’t assume nothing is happening just because you don’t see it splashed across the headlines.