Posts Tagged ‘MLM’

I’ve received several questions about the process used to review and approve companies for membership and I think it’s an important topic to explore so consumers can get a better understanding of what DSA membership really means.

After submission of a membership application the pending process takes at least one year. There are three main things that happen during this period:

1) DSA reviews company materials, including a starter kit and other documents that represent what a potential recruit would receive, to ensure compliance with the DSA Code of Ethics. Does the company offer a 90% buyback policy? Are the startup costs reasonable? Are there any statements that indicate inventory loading or other prohibited practices?

2) DSA makes inquiries to law enforcement and consumer protection agencies such as the Attorney General in the state where the company is located, the Better Business Bureau, and on a case-by-case basis any other entity that may have relevant information to share. It is also important to note that the mere existence of a complaint with any of these bodies does not preclude membership, but instead what is considered is the way any issues were resolved.

3) It is clear that the two activities above could be completed in far less than a year. However, one of the most important parts of the pending process is what is essentially a waiting period during which potential issues have an opportunity to come to the surface. These are issues that may not necessarily be obvious with a review of the materials, but are exposed by the marketplace over time.

Should questions arise from any of the three activities above, companies must answer and/or address those questions before the company can move forward to full membership. In fact, each year there are dozens of companies that make application and either withdraw their application or are not put before the Board of Directors for approval because of outstanding issues. Additionally, once a member, companies go through the entire review process at least once every five years (possibly more often).

I’m tempted to reiterate here the difference between a law enforcement agency and DSA, but that’s mostly embodied in my last post. What’s key though is that DSA’s review is not a substitute for one’s own review of a company and it also doesn’t guarantee that a law enforcement agency won’t disagree with DSA’s interpretation.

DSA has come under fire by industry critics recently as a result of a complaint filed against YourTravelBiz.com, a subsidiary of YTB, International, Inc., a DSA member company.

It has been interesting for me to recognize disconnect between the perception some people hold about the role of a trade association and the parameters under which a self-regulatory Code of Ethics operates. The questions have been posed to me in various ways – some more civil than others – but the questions essentially boil down to one: How can a company be prosecuted as a pyramid scheme and still be a member?

Using YTB as an example, the basic answer is easy – so far the allegations are merely that – allegations. Nothing has been proven – the company has not even had a chance to respond to the court. The Code of Ethics says companies cannot operate as pyramid schemes – it does not say they can’t be accused of being pyramid schemes. But the tiny little point about due process aside, based on the information presented to DSA at the time of their application, in DSA’s interpretation, this company met the standards of both the Code of Ethics and laws applicable to direct selling. Information presented by the California Attorney General may change that view, or it may not – that’s what due process is all about.

However, until information is presented that runs contrary to the information we evaluated as part of the application process, there are no grounds to revoke their membership. You can be sure, though, that we are keenly following this case and are evaluating information as we receive it.

Here are a couple more questions that have been raised:

What value does DSA membership have if a company can be prosecuted as a pyramid scheme? First, the standards of the Code are designed as a guide for consumers when evaluating a company – member or not. In the case of a member, though, if the Code Administrator determines a company has not met the standards, the company must make it right. DSA cannot guarantee that a company will not violate the Code, just like a government cannot guarantee that people will not break the law. But as with the law, there is a process for recourse when the rules are broken.

Does the Code process guarantee satisfaction for consumers? Of course the Code can’t guarantee satisfaction, but it provides an option that in most cases is exactly what a consumer needs. Instead of a lengthy complaint process with the Attorney General or Better Business Bureau, most complaints can be taken care of through the independent Code Administrator. However, if the Code process doesn’t yield the desired results, more formal legal action can still be pursued. I don’t know about you, but I’d much rather try the easy (and free) route before filing a lawsuit.

Why not kick a company out when they violate the Code? The answer is two-fold. First, a company CAN lose their membership if they are determined to have violated the code – either once or repeatedly. However, in most cases this is not necessarily the best course of action because the company is then not subject to the additional standards provided by the Code at all. From DSA’s perspective it’s far better to keep the company’s feet to the fire by enforcing the Code than by kicking them out, thus releasing them from the Code requirements. I’d much rather see a company reform than go somewhere else and continue to act unethically.

I guess in some respects I’m flattered to learn that DSA’s Code is recognized as such an important example of self-regulation. At the same time I’m disappointed to learn that there is so much misunderstanding about the limits of the Code. However, I view this as a great opportunity to evaluate public opinion and explore ways to both strengthen the Code and help close the gap between public understanding of the role of the Code.

There are a lot of questions circulating on the Internet and blogosphere with regard to the recent complaint filed by the California Attorney General against YTB, a DSA member. You can read DSA’s official statement on the matter, but I thought it would be helpful to weigh in with some thoughts that address some of the questions people have asked about what membership in the Direct Selling Association (DSA) really means.

To be sure, we are proud of our members and their collective efforts over decades to create standards for themselves regarding sales and recruiting practices. Those standards are embodied in the DSA Code of Ethics. The Code is not a perfect document – that’s why our Ethics Committee and Board are constantly evaluating the Code to reflect what we see going on in the marketplace. But the Code is an enforceable standard of behavior for our members and a mechanism that does aid salespeople and customers alike with getting answers to many of their complaints. Thankfully, despite millions of consumer transactions each year, we get relatively few complaints. That’s a testament to the standards themselves and the pledge that our member companies make to abide by them.

And that’s what DSA membership really means – that DSA member companies pledge to abide by the rigorous standards of the Code – that they will buyback inventory from departing distributors – that they will not allow inventory loading – that they will not require unreasonable upfront fees – that they will not make misrepresentations about their products or opportunities – that they will not be pyramid schemes – that they will not hide behind the independent contractor status of their salespeople to avoid application of the Code. And when a company doesn’t abide by these standards, it will be subject to the judgment of an independent Code Administrator who makes determinations that are in the best interests of the consumer and the industry – not necessarily the company.

Even the best of us make mistakes, and DSA’s purpose is to minimize those mistakes by creating the standards I’ve described and providing a mechanism to address them when they happen. But what about companies that are accused of breaking the law? Fortunately, DSA member companies are rarely accused of this in any credible way. But it sometimes happens that one of the hundreds of DSA members, or some of their millions of salespeople, are charged with serious, systemic wrongdoing. How can this happen and what does DSA do about it?

DSA’s process for reviewing companies prior to becoming association members is a rigorous one. It takes at least one year for applicants to become members. During that year, we look at company marketing materials, contracts, manuals, video and other items to ensure compliance with the DSA Code. We contact law enforcement agencies and others to determine what kind of consumer complaints and legal and regulatory actions have been lodged that might raise questions about the applicant. We will periodically attend company meetings to help ensure that the materials we’ve seen and real world practices of the applicants are consistent. If there are any questions about the company or its marketing plan, or any complaints that we’ve been made aware of, we ask the company to explain them. If they can’t explain, or won’t, we’ll defer their application or recommend to our Board that the company not be admitted to membership.

After approval, if a member company is accused of a fundamental wrongdoing, we take the allegation seriously. If there is an allegation, we forward it to our Code Administrator for possible further action based on his review and the evidence and conclusions that come from any government claim.

But DSA’s reviews and standards are no substitute for one’s own wisdom, caution and education about direct selling. Whether a company is a member of DSA or not, anyone considering direct selling should always ask the same questions – Is the cost to get started reasonable? Is the product a viable one that you think you can sell? Is the compensation of the plan based on sales to real users of the product and not merely based on recruiting other people? Are you being told that this will take hard work to succeed? Does the company have an inventory buy-back policy?

We’re confident that when you ask these questions about DSA members, they’ll be answered to your satisfaction. If not, the DSA Code comes into play. If a member company is not complying with the requirements of the Code or the law, the Code Administrator will take action to force the company to comply, help any individual complainant, or if necessary, ask the Company to leave DSA, make the matter known publicly, or refer it to law enforcement for action.

We’re proud of our Association, our Code, and our member companies and we know that the standards we adopt, fight for, and enforce are an important part of making sure direct selling is a business model that represents the best for consumers, sellers and companies.

I admit it – I frequently attend direct selling parties and demonstrations. Sometimes I call it “market research,” but I really do enjoy the opportunity to browse for new and interesting products, as well as catch up with old friends and perhaps make a few new acquaintances in the process. I was a direct selling customer long before I started working at DSA, so this is one aspect of my work that isn’t like work at all!

While I’d certainly be a direct selling customer no matter what, my role with DSA has given me a different perspective on the many reasons why people are involved in direct selling. When we talk about the benefits of direct selling, we tend to focus on the fact that direct selling provides customers with a unique experience that includes the personal touch of a knowledgeable sales representative, or the opportunity for supplemental income that many find attractive. But whenever I attend a party or a personal demonstration I’m always reminded that for many people, the best thing about direct selling is that it builds a community. Admittedly, women will look for any excuse to do a little shopping – it’s a relaxing pastime that for many is a much-needed release from otherwise stressful lives. The chance to shop and socialize is, well, the best of both worlds.

Most of the women at a recent gathering I attended are long-time friends – and those who didn’t know each other quickly found conversation centered on the products for sale, which led to discovering other common interests. It was clear that they welcomed the opportunity to peruse the items offered for sale; and most went home with a new-found gem or two. However, what was most clear was that they came for the opportunity to sip wine, catch up with old friends and take a brief break from their responsibilities back home. The direct selling experience facilitated their community gathering, but by no means drove it – and while they still talked about their kids, their husbands and their jobs, it was a welcome respite from the outside world.

I also spent some time talking to the sales consultant, a single mother of two who started with the company to earn some extra money to make ends meet. She’s part of a community too, one that provides her with access to training from the company she represents and support from her fellow consultants across the country. It’s not uncommon for consultants to form life-long friendships and even business partnerships through their participation direct selling.

My experience at this event and others like it always reminds me that direct selling is more than a business. It’s a community that often extends far beyond any financial motivations. Today, many people make personal connections online through social networks, but direct selling companies used this concept far before the Internet even existed. Direct selling not only reflects current social trends – it even helps shape social trends. So, whether you’re chatting with your friends online, or sitting in your best friend’s living room browsing through product samples, think about the community you’re a part of and the important connections you are making.

I’ve mentioned several times that my goals on DirectSelling411.com include correcting misinformation about direct selling while also providing a forum for discussing topics relevant to direct selling.

One thing I didn’t fully anticipate was that people would have questions about DSA’s mission. Several people have asked, “How can DSA represent the direct selling industry and work to protect the sales consultants and consumers involved?”

It’s a legitimate question, one that DSA President Neil Offen addressed during his Annual Meeting Speech last week in Phoenix. He explained that these twin goals are really two sides of the same coin, but I’ll let Neil speak for himself:

“Of course we have a duty to our dues-paying members to protect and promote their interests, but one of the most important ways we fulfill that part of our mission is through a commitment to consumer protection. By holding ourselves to a higher standard, by policing our own actions through a system of self-regulation that goes above and beyond the requirements of the law, we do more to promote and protect ourselves than is possible through any other method.”

In other words, we achieve one goal by achieving the other. Happy, satisfied customers who understand and exercise their rights as consumers represent the best kind of success for DSA and every member company. We never rest on our laurels, and Neil shared his thoughts on where we plan to focus our efforts in the coming year and beyond:

“We must continue to do more to enforce our own rules and always act in the best interests of our sellers and their customers. Throughout the course of this meeting, we have heard about Corporate Social Responsibility. But it means more than “doing well by doing good.” It means operating using only the highest standards in business ethics by every measure of the term. The tenets of the (DSA) Code (of Ethics) outline this behavior, but consumers and distributors will ultimately define acceptable marketplace standards. Today’s consumers and distributors are empowered and they speak loud and clear – we must listen and act accordingly. Companies and industries that do not meet consumer expectations will be left by the roadside.”

Neil, who reinforced the Association’s ongoing review and enhancement of the Code of Ethics, closed his remarks by reminding attendees that when it comes to DSA’s mission they must think about the long term:

“We have made great strides this past year, but the road before us is long and winding. We are in it for the long-haul and we shall not retreat from [our members’] mandate to always do what is right, to choose the high road when faced with a fork and to always have DSA act in the public interest…for that is in the interest of our companies and its millions of salespersons who rely on us.”

Neil’s remarks accurately reflect the importance of representing member companies, independent sellers and consumers – the concepts really are inseparable and I look forward to continuing to comment on this site about our efforts.

A bit of delay on posting this as I was on my way to Phoenix (and early warning that comments submitted over the next week could be delayed as well), but the following comment was submitted Wednesday in response to my post debunking the 99.9% myth. While I could have easily discarded it based on the personal attacks the author makes toward me, I ultimately decided that the bulk of the post does address the very issues we have been discussing here. While the author and I obviously disagree on many points, being exposed to various viewpoints is an important part of being informed. My stance remains that given the facts, consumers are intelligent beings who can come to their own rational conclusions. As a result, I am more than happy to post dissenting opinions.

I chose to post this as a new entry because there are certainly many opportunities for discussion here, and I don’t think being buried in the comments of an old post would give site viewers enough opportunity to review and react to it. As such, it is posted in its entirety below. I will look forward to the reactions of others.

Just one final note before we get to the post itself. Thus far the visitors to this site have conducted themselves with respect to the opinions of others. The intent of this blog is to discuss the issues, and personal attacks have no place here. However, I am posting this message in its entirety because I hesitate to do ANY editing to posts – one would then always need to wonder if something had been left out. Since the bulk of the post does address relevant issues, I did not want to lose that input – no matter how far afield it may be from my viewpoint or that of DSA. That being said, in the future I will not post any comments from this author or any other that make personal attacks on people or their opinions, or simply restate the same information regardless of the topic at hand.

Message from Jon Taylor posted 10:28 pm ET 6/4/2008:

Amy – Is this the same Amy Robinson that used the web version of identity theft to register pyramidschemealert.com to divert honest people seeking the truth from finding the pyramidschemealert.org web site they were seeking? And the same DSA that blatantly lied in our Utah legislative committee hearings to get MLM exempted from prosecution as pyramid schemes? The same DSA that used blatant influence peddling to get MLM exempted from a Business Opportunity Rule that would have given consumers some protection from the worst business opportunity scams?

I don’t expect that you would dare post my response (below) to some of the above comments on your blog. It would only be honest and ethical to do so, since the statistics you challenge are my statistics. But I would be surprised if you were that open to honest feedback. Here are a few points for readers to consider:

1. The 89%, 84%, and 91% satisfaction rates for direct selling you cited above on “Happy Mothers Day” (and which have been cited in legislative hearings, etc.) are themselves extremely misleading, since they combine legitimate direct selling with pyramid or chain selling. MLM is not considered as a separate category, but is treated as core direct selling activity.

2. I worked my way through college selling World Book Encyclopedia while you were still in diapers. World Book, Fuller Brush, Tupperware, etc. were not endless chain selling operations, but legitimate direct sellers at that time. I have watched MLMs gradually take over the agenda of the DSA, which initially represented legitimate direct sellers. Now the DSA spends its resources twisting the truth to match the deceptions used to recruit hapless victims into the revolving door of recruits needed to fuel the insatiable appetites of TOPPs (top of the pyramid promoters), officers, and founders of MLMs that are its most profitable members.

3. Back to your statistics, only “active” participants in MLM are included in statistical population, not the 90% that are gone within 5 years in many of the programs we’ve studied. If you included only MLM and ALL who were enrolled in a 5-year period, you would get strikingly different statistical results. This is only fair, since some of the “successes” included in the studies have been with the company for ten or more years.

4. As far as the “99% myth,” you should read Bob Fitzpatrick’s “The Myth of ‘Income Opportunity’ in Multi-level Marketing.” (See www.falseprofits.com) He comes up with a loss rate of closer to 99% using the numbers published by the MLM companies themselves – assuming you subtract minimal expenses. My 99.9% figure comes from a more strict accounting and statistical standard – subtracting “pay to play” expenses (purchases required to qualify for commissions and advancement) and minimal operating expenses – which I established be carefully tracking expenses in a one-year test. It also includes ALL recruits within a reasonable time period – not just “active distributors,” etc. And since the vast majority of MLM recruits soon become EX-participants, they deserve to be represented.

5. Now to the tax studies. If you read my tax survey carefully, you would know that I acknowledged the problems of doing the survey from the outset. If anyone were to do a simple survey of tax professionals on the profitability of MLM participants using a standard survey questionniare, they would be unable to get the desired data – period. You should know that. This is confidential information. What happened to me was that accountants aware of my research were asking me why no one doing MLM was reporting any profits. So they gave me the opening for talking with others. I would simply ask “…  Shoot, I’m not going to write out pages to repeat the process that is reported on my site. Go to www.mlm-thetruth.com and click on the research link, and you will find it. My approach was the best I could do under the circumstances. And I stand by my 99.9% loss rate for the companies I have studied – not based on the tax survey, but on careful analysis of actual company data.

6. You should know that Bruce Craig, while working in the AG office in Wisconsin in the 70’s and 80’s, was able in a state action to obtain the tax returns of the top 1% of Amway distributors. Their average income was minus $900. So there was a precedent.

This feedback is surely too honest and straightforward for you to post, so I don’t expect anyone but you to see it. But I feel better having written it.

Amy Robinson, how can you sleep nights, knowing (as you must) the great harm the DSA and its member firms are doing world wide?

Jon M. Taylor, MBA, Ph.D., President, Consumer Awareness Institute and Advisor, Pyramid Scheme Alert

Amy’s response:

The author says he has the same goal as DSA – and that’s to make sure pyramid schemes are not able to operate in the marketplace. The problem is we don’t agree on the definition of a pyramid scheme. However, I find value in the exercise of finding common ground from which to start a discussion. Undoubtedly there is somewhere in the middle where we have some agreement, and both sides could probably benefit from an open and honest discussion of each other’s opinions. Certainly there are areas where we would have to agree to disagree, but I’m not sure the author would ever be able to accept that his views might be wrong.

Now, since I chose to proceed with posting the personal attacks, I will respond to them briefly. The online identity theft assertion has been used frequently by the author – and is absurd. Why the author has made this an issue personal to me, I’m not sure – it is only my name on the registration because one has to be there. But that detail aside, DSA does in fact own a domain similar to one used by the author and at one point we did have information posted there relevant to anti-pyramid scheme legislation being considered by Congress. However, at no point did we conceal our identity or masquerade as anyone else.

Assertions about DSA’s testimony with regard to anti-pyramid scheme legislation in Utah are equally as absurd – and in reality represent no more than a difference of opinion. Just because our view is different than the author’s doesn’t take away from the truth of what we are saying – we simply view the facts differently. This is further evidence that the author is unwilling or unable to entertain different points of view.

With regard to the Business Opportunity Rule, the FTC reviewed our feedback on the issue just as they reviewed the feedback from the author and others and decided the merits were on our side. If we had the influence the author suggests, wouldn’t we have used it to prevent the Rule from being proposed in the first place? We are confident in our position because we know we have the facts on our side and verifiable data to back it up.

Now to the specific, and more substantive, assertions made by the author:

Regarding the author’s specific comments on my previous posts, the numbers I quoted with regard to satisfaction are from our 2002 National Salesforce Survey, during which more than 1,800 direct sellers involved in both MLM and non-MLM compensation systems were polled by an independent research firm. While the interviewees were current direct sellers when selected at random from the salesforce, that group ultimately represents people who were just starting, well-established or in the process of quitting – for a variety of reasons. I don’t understand the suggestion to limit the pool of respondents to only companies using a multilevel marketing compensation plan – while most direct selling companies use MLM, some don’t and they should be represented proportionately. And why would we want to limit the time period to exclude those who have been active for a long period of time? Are the experiences of those people less relevant than newcomers, people who had only a short-term goal or decided direct selling was not for them? You can’t pick and choose your respondents to get the results you want, nor is it credible to conduct your own research and analysis, as the author did, when you have a clear and stated bias.

Interestingly enough, the author goes on to state in another part of his post that when looking at income stats, then we should consider ALL distributors – not just those who are active. So which way is it? Do we pick and choose or do we include ALL participants?

The credibility of DSA’s numbers is backed up by the outside research firms that conduct the studies. A respectable research firm won’t risk their reputation by cooking the numbers – regardless of who pays for the study.

That said, I’ve made no claims on this blog that there are not issues to address. On the contrary, one of the reasons we’ve started this Web site and this blog is to have an open exchange of ideas about the industry regardless of one’s position. Our goal is to improve the direct selling experience for everyone – if that means changing policies or educating companies about what today’s consumer’s want, then everyone would win.

Further, this site encourages people to do their homework regarding direct selling in general and the companies they are considering in particular before signing up – and to begin with realistic expectations regarding the time involved and the income potential. In case I have not been clear, direct selling is not an easy way to get rich quick.

In addition, the site promotes the DSA Code of Ethics – which acts to both prevent issues and solve them. Compliance with the provisions of the Code sets a framework for ethical behavior, but if a seller or consumer encounters a problem, it also provides a structure for relief.

Regarding the studies the author cites, it’s not surprising that one would choose to cite the research of others they agree with – particularly when they already work closely with those individuals, closely enough in fact that they are all advisors for each others’ organizations. The studies the author cites contain limited data. For example, his own study group was admittedly a sample of just 33 tax preparers from three counties in Utah who were asked what they recalled about returns they had completed. Further, they were asked to divulge confidential information and then coaxed further by being told what others had already said. That is simply not an objective way to collect data. The data may have been difficult to collect, but that doesn’t mean you can introduce a bias to extract information or randomly fill in missing information. At best, the data is anecdotal, at worst it’s just outright wrong.

Lastly, Mr. Taylor asked how I can sleep nights. Well, with a full-time job, a husband, and two small children, I don’t sleep as much as I’d like to. However, I do sleep well because I know that direct selling can be a rewarding opportunity for men and women, whether they’re looking to begin a new career or just earn some extra money to pay bills or take a trip. And I also know that those of us at the DSA are working to make the industry even better.

Mr. Taylor is certainly welcome to be part of the conversation and I do hope that we’ll be able to have a useful back and forth free from personal attacks that focuses on the issues at hand. It’s fine if we reasonably disagree on the basis of facts and data. It is not acceptable to degrade the other party.

The other day I read a blog post where someone had once again asserted that 99.9% of direct sellers lose money. It’s an eye-catching line and it’s memorable. It’s a line that’s often repeated by opponents of direct selling as means of discouraging potential sellers. It’s also false.

In fact, more than half of direct sellers report that their net income from direct selling, after taxes and expenses, is positive. In addition, positive net income is reported by nearly half of new direct sellers – those representing their current company for less than a year. The research from our sales force survey also shows the following:

• 89% of direct sellers rate their personal experience in direct selling as excellent, very good, or good;
• 84% of direct sellers say that direct selling meets or exceeds their expectations as a good way to supplement their income or make a little extra money, and;
• 91% of direct sellers say that direct selling meets or exceeds their expectations as a business where the harder they work the more money they can make.

Does this mean that all of these people are making six-figure incomes? Of course not! In fact, most are probably earning very modest amounts – exactly meeting their goals. One of the advantages of direct selling is that you can set your own goals and develop your own schedule to meet those goals. Many people begin direct selling as a way to earn a little extra money in their spare time – they’re not looking for a fulltime job.

I’ve always found this 99.9% myth fascinating because it essentially asserts that nearly 15.2 million people in the U.S. and 60 million people around the world continue as direct sellers despite losing money. Are we to believe that five percent of the U.S. population would continue in a business where they are losing money? Simply put, most people do not lose money in direct selling.

Further, anyone who gets involved with a legitimate direct selling company should not risk financial loss by doing so. The DSA’s Code of Ethics, for example, is designed to protect direct sellers and customers. Inventory buybacks (which include sales aids) and other provisions of the code allow sellers recourse if there’s an issue with the company.

It is my hope that everyone who tries direct selling will begin with reasonable expectations and a clear understanding of the path to their goal – hopefully information found on this site will help with that.
Certainly, direct selling is not a fit for everyone – but no one should risk financial loss by giving it a try. Managing expectations for new independent sellers is critical for success, and is an issue I’m sure we’ll address more than once on this site.

The bottom line is, just as it’s wrong to tell someone considering the direct selling opportunity that they’re guaranteed to succeed, it’s just as wrong to tell them that 99.9% of direct sellers lose money and that they’re guaranteed to fail.

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.

1. “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…
2. “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.
3.  “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.