New Provisions Strengthen DSA Code of Ethics

Hello 411 readers! It was a busy summer and early fall as I continue to get many inquiries about direct selling in this poor economy from both media outlets and the general public. It’s also been very busy at the Direct Selling Association as we prepare for our 100th anniversary in 2010.

However, some of the most exciting work has been done by the Ethics and Self-Regulation Committee which has spent more than a year carefully reviewing every clause of DSA’s Code of Ethics. For those who aren’t aware, the Code outlines the ethical guidelines DSA member companies must  follow, and guides DSA’s independent Code Administrator in handling any violations of the Code.

The Code is a living document that maintains its strength because it can adapt to a changing marketplace. After review, the Ethics and Self-Regulation Committee recommended substantial changes and additions to the Code. These changes were adopted by the DSA Board of Directors in September and I am pleased to be able to share these with readers of this blog!

Here’s a brief summary of what’s new:

  • Statements Regarding Other Companies: Member companies are specifically prohibited from making misleading comparisons of another company’s direct selling opportunity, products or services. All comparisons must be based on objectively substantiated facts. 
  • Promotional Materials: Promotional literature, advertisements and mailings may not contain product descriptions or other information that is false, deceptive or misleading. All literature must also contain the address and telephone number of the direct selling company and may include contact information for the independent salesperson. 
  • Training and Materials: Independent salespeople may not market supplemental materials that are inconsistent with the member company’s policies and procedures. Further, the materials must be reasonably priced and cannot be a required purchase. The materials must also have a return policy consistent with that of the company itself. 
  • Sales Receipts and Cooling Off: In the case of sales made in a non-face-to-face manner, such as via mail, phone or the Internet, a written order or receipt must be provided either in a printable or downloadable form via the Internet or with the initial order. Consumers must also be offered a clearly written description of the cooling-off period permitting cancellation of an order within three days for a full refund of the purchase price. 
  • Inventory Loading: Companies must reasonably ensure that sellers who receive compensation for downline sales are consuming, using or reselling the products they purchase. In other words, salespeople should not be purchasing product for the sole purpose of qualifying for their downline commissions. 
  • Fees: Any fees charged by a company to become a salesperson must be directly related to the value of materials, products or services provided in return. This provision does not prohibit a company from making a profit on their sales kit or other fees, but it would prohibit, for example, a $300 sales kit that includes nothing more than a set of pamphlets worth $20. 
  • Extraterritorial Effect: U.S. DSA member companies operating in a country where they are not a member of the local DSA, or where a DSA does not exist, must comply with the World Code to the extent it is not inconsistent with U.S. law.

These changes address some very important and hotly debated direct selling issues and I’m confident the new provisions will add clarity and strength in these areas. Of course, the Code is only effective when consumers are aware of its existence and take advantage of it if they encounter a problem. The Code doesn’t have the power of law, but DSA member companies are responsible for making sure their corporate policies and the actions of each individual seller are in compliance – otherwise they risk losing their DSA membership or other remedial action. DSA’s job is to set standards and be the first line of protection if there’s a problem.

I encourage everyone to liberally share these changes, and the Code itself, with any one involved in direct selling – whether as a customer of the product or as a seller. You can also find an updated ”plain language” version of the Code online for both consumers and sellers.

As always, anyone is welcome to file a Code complaint if they’ve encountered a problem. 

And don’t think DSA is done yet! There will likely be additional tweaks and changes coming over the next 6-12 months so stay tuned.

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