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.