DSA Hints At Its Intentions of Publicizing Code of Ethics Violations

    Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

    Without question, self-regulation is better than government regulation. But when you remove the “regulation” out of “self-regulation,” it’s all sort of pointless. In other words, rules without penalties are meaningless.

    I was recently speaking at the Association of Network Marketing Professionals conference. It’s at these sorts of conferences where professionals get a sense of what’s really going on in the industry. We all get together, in casual environments, and compare notes about who’s crushing it, who’s cheating and everything in between. The common frustration throughout the years has been this yearning for improvement. People in the industry have a deep, deep desire to elevate the profession to a higher status. But in an environment where “anything goes,” this has been an insurmountable task. The words have fallen on deaf ears, yielding zero progress. After all, how can you elevate an entire industry without (1) a set of rules; and (2) consequences for when those rules are violated. Currently, we’ve got #1 covered. We’re working on the second.

    During my talk, I asked the audience of 500+ to raise their hands if they’ve heard of an industry-wide Code of Ethics. They all raised their hands. I then asked them to keep their hands up if they’ve heard of a single infraction of that Code.

    There was 1 person in the room with his hand up, and I’m convinced he thought he was going to win a prize.

    When people ask me how we can “elevate the profession,” the answer is crystal clear: we need to get more serious about self-regulation. It does ZERO good to have standards when it’s easy (and profitable) for people to infringe on those standards with no consequence. In an environment where there are no speeding tickets for driving 90 MPH in a 70 MPH zone, owners are forced to push the envelope, which leads to serious degradation in industry standards. We have good rules (that need to be improved). But once in, companies have never been…penalized. In an article written by DSA President, Joe Mariano, he makes it clear that better days are coming for ethics. In the article, he writes,

    Indeed, ours are some of the strictest membership standards of any industry association. Unlike many trade groups that throw out bad actors only after unethical or anti-consumer behavior has been identified, we vet our members on the front end.

    In other words, they place the priority on the front-end.

    Once a company is in the club, the DSA has been slow to penalize (candidly, I’ve never heard of a single penalty….ever). Based on statements from Mariano, this will soon change,

    . . . I nevertheless seized the moment during last month’s DSEF self-regulatory panel to commit DSA to greater transparency around Code enforcement actions, effective this year. We will undertake new yearly public reporting of complaints received by the independent Code Administrator, as well as the corrective actions taken to address the complaints.

    NFL and NASCAR

    Public enforcement. It’s a step in the right direction. The NFL is an example of an association that takes its rules seriously (at least lately). While they were not able to prove conclusively that Tom Brady had knowledge about deflated footballs, they suspended him for 4 games and fined the Patriots $1,000,000. The message was crystal clear: There’s no room for teams in the league that push the ethical boundaries. Zero tolerance. What about NASCAR? Same story. They repeatedly fine for questionable behavior.

    Spare the Rod, Spoil the Child

    And as we’ve seen with the NFL and other examples, when there’s a deep commitment to integrity, and that commitment is backed by enforcement, the end product is better. In the absence of penalties, trust erodes slowly over time as companies compromise on basic principles of decency to secure enrollments. Marketplace trust is crucial and it will never occur until we all get in sync on best practices.

    I firmly believe that our industry’s best days are ahead of it. Improvements when it comes to self-regulation are a crucial step in the right direction. If this new commitment to regulation lacks substance in the long term, we’ll be back to square one.

    Time to Revisit DSA’s Code of Ethics: Suggestions

      Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

      It’s old news now. Avon left the DSA. In their announcement, they stated the DSA’s Code of Ethics needed revision. Specifically, Cheryl Heinonen at Avon said, “We believe the association’s agenda in the U.S. is overly focused on the issues of a few specific brands rather than industry-wide challenges. . . We believe that the U.S. DSA Code of Ethics requires updating to better reflect the current state of the industry in the U.S.”

      In a separate article in the Washington Post, Heinonen gave a quote that shed a little light on what she meant. She said,

      I think it’s problematic when you sell inventory — bulk product — that the person who is acquiring it can’t use themselves and sometimes may not know how to sell,” Heinonen said. She added that the language in the trade association’s code of ethics on this point and other aspects of consumer protection need to be firmer.

      The problem: inventory loading. And I’ll drill down a little deeper because inventory loading, when it exists, is a symptom of a larger problem: lack of product value. In other words, when there’s a lack of legitimate demand for product, companies incentivize participants to “load up” on items they might not want or need in an effort to qualify for bonuses.

      The cure for this problem has historically been the 12-month refund policy. If you boil down the DSA’s Code of Ethics, the most valuable requirement is the 12-month refund policy. According to Avon, this is not enough. And I agree.

      The DSA has invited people to propose changes to the Code. Here’s a start. Call it “The KT Optimus-Prime Plan” (everything is better when you use Transformer names).

      (1) Proper Customer Coding

      I suggest that companies be required to offer an option for Customers to receive product discounts without joining. The technology exists. The most basic of startup companies in the industry can pull this off. The Preferred Customer concept has been around for at least 5 years, possibly longer. Today, it’s a great source of confusion when we, as an industry, say “We’re not able to deduce the amount of customer activity because many people join to save money on product.” While it’s a true statement, we’re in a position to clear this ambiguity and offer clean data. The alternative is nebulous and unprovable (short of paying for surveys, which has been done by Herbalife). Understand, it’s not illegal to operate without a preferred customer option. The absence of a customer option is not conclusive proof of fraud; thus, it’s not legally required. But, in my opinion, the DSA should not want to swim with average, they should strive to be above-average. Currently, the 12-month refund requirement is good, but by itself, it’s not good enough. There’s a cancer that has developed where companies, using the DSA’s Code, are “looking good” without actually being good.

      Requiring that companies clearly track their buyer motivations / offering a clear path for customers will help eliminate all doubt regarding the motivations driving volume consumption. There’s no need to mandate the AMOUNT that needs to come via customers, just to have the ability to clearly track the data.

      Also, along these same lines, when it comes to direct sales i.e. belly to belly sales, there needs to be a requirement that companies accumulate receipts from their sales leaders. The excuse that “we’re not able to track the retail activity in the field” needs to end. In the past, the excuse was reasonable. Going forward, it makes little sense.

      The downside (or upside, depending on how you view it): regulators, via a subpoena, will be able to clearly see the amount of customer activity.

      An argument against this concept: “When people join to save money on product, they might turn out to be productive distributors later.” In my opinion, the likelihood of these participants producing significant volume is slim; thus, the upside is not worth the alternative.

      (2) Zero Personal Volume Requirements

      This should be easier than the #1 idea above. It’s common for companies to require personal volume each month for participants to earn commissions i.e. move $100 worth of product to remain qualified for bonuses. While companies are smart enough to construct this in a way where it’s technically not required for people to buy the product (because they can qualify by SELLING too), in most cases, participants get on autoship and self-qualify. This is not illegal; however, the concept has been abused. It leads people to buy things they might not otherwise want or need in order to remain qualified for bonuses.

      This sort of rule would be consistent with the current state of the law. In BurnLounge, the court cited the fact that participants were required to purchase products in order to qualify for commissions. This fact was used to prove that the participants were buying products primarily to qualify for money instead of the value. While companies today can argue that participants are technically not required to buy, BurnLounge also teaches us that courts and regulators will look at how companies “operate in practice.” If the vast majority of participants qualify via an autoship, it matters not what’s on paper. It’ll be used as proof to show that the opportunity is driving consumption, not the products. Yes, it might be more difficult for companies to get participants to buy products. But if participants do not WANT to buy product, why force them? The DSA, in my opinion, should create space here.

      (3) Income Disclosure Statements

      The DSA should require its member companies to publish average earnings. We know that EVERYONE makes income claims in the industry. When recruiting, the question always comes up: “What’s in for me?” The pay plan has to be explained, which means that income will be referenced. It’s not illegal to make income claims. It is, however, misleading to make income claims WITHOUT ADEQUATE DISCLOSURE. With this in mind, why allow companies admittance without a solid income disclosure document?

      (4) Undisclosed Financial Arrangements

      It’s common in the industry for a company to offer additional compensation to leaders in exchange for them leaving another company. While the agreements never explicitly say “We’re paying you to leave Organization X and raid your old downline,” they might as well. This sort of behavior has spun out of control, causing companies to rip into each other and there needs to be a clear signal at the highest levels that this will not be tolerated.

      First, the FTC’s Testimonial and Endorsement Guidelines strongly suggests that these sorts of undisclosed deals are fraudulent. I wrote an article on the subject in June of 2010 here.

      Second, these sorts of deals are not illegal. It’s only a problem when there’s no disclosure. If the DSA were to require that these deals be disclosed, it might actually curb the activity.

      Third, these sorts of deals are bad for the industry because, candidly, they rarely make economic sense. The leader leaves, boasts about the greatness of the new company, takes very few people with him or her and subsequently crashes. This leaves hyperbolic activity in the industry where companies are trying to out-hype each other.

      Fourth, the DSA’s Code Administrator, when put onto the case, can easily deduce if a deal has been struck and whether the deal was publicly disclosed.

      (5) Compliance Training

      Rule 11 in the Code of Ethics states: “Member companies shall provide adequate training to enable independent salespeople to operate ethically.” But what does this mean? If companies are going to be allowed to sell starter packs ranging in price between $500 and $2,000, there needs to be solid training to ensure that the inventory moves properly. Compliance training can be delivered a number of ways: videos, email blasts, etc. If a new distributor was promised easy money, the time to cure this false expectation is at the beginning of their tenure. This is where the company can explain its refund policy, explain that success takes work and also reference its income disclosure statement. And, if the company were confident, it would be a great opportunity to suggest that if the distributor wants easy money, they should quit now and get a refund.

      (6) Sales Aides

      The Code needs to improve in this category by clearly prohibiting the practice of paying commissions on sales aides. First, it’s clearly pyramiding. Sales aides are not commissionable because there’s no market for the products beyond the network itself i.e. there’s no opportunity for customer sales, i.e x 2 the resulting rewards are “unrelated to product sales to ‘ultimate users,’ i.e. x 3 it’s pyramiding. The Code tries to create space from this practice by saying, “This Code provision is not intended to endorse marketing plans that provide financial benefits to independent salespeople for the sale of company-produced promotional materials, sales aids or kits (“tools”).” The Code needs to revisit this issue and address it head-on.

      If the company, or its leaders in the field, sell tools and pay commissions on those tools, they need to adjust or get out. Tool sales are highly profitable, leading sellers to focus primarily on recruiting new participants to expand the market for those tools (because there’s no market outside the network itself; thus, recruiting is the only way to maximize profitability). It leads to a twisted culture in the field, one that depends on hype and hyperbole. The DSA needs to create space here.


      It’s time to have an honest discussion about the future of the industry. Candidly, it’s BEEN time for several years. But, it sometimes takes a good crisis to mobilize support for change. Avon’s departure is a good catalyst for this sort of discussion. I’m not a fan of closed door meetings. Transparency is key. And transparency, at times, makes people uncomfortable. If you know me by now, you know that I’m not one to “kiss the hand” and play political games. In other words, I’m not trying to be liked by everyone.

      Leadership at the DSA needs to understand that building a consensus on any of these issues is going to be impossible. In order to “tighten the screws,” it’s going to frustrate some member companies. It needs to prepare itself for a little internal-controversy. Candidly, the DSA avoiding some of these issues has also frustrated members, leading to Avon’s departure. Avon was not a fluke. While this subject matter is unpopular, it’s very important for the health of the industry. I think the best ideas come by way of open discussion. And I’m not afraid to lead it.

      Do you agree with any of the “KT Optimus-Prime Plan” items referenced above? Disagree?

      Don’t be bashful. Share your thoughts and share this article.

      Avon Writes Open Letter to DSA Members Regarding Its Decision to Leave

        Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

        Avon has recently announced its exit from the Direct Selling Association.  The video includes my thoughts. This is a very significant development and represents extreme discomfort experienced by companies in the industry. The reasons for Avon’s exit. I’ll sum it up: (1) They’re not feeling the love. They feel as though other companies, the companies that do not quite match Avon’s values, are setting the DSA’s agenda; (2) They’re not happy with the current Code of Ethics. They feel it should be updated and that the current Code has too many holes; thus, minimizing the effectiveness of “self regulation.” Watch the video. Read Avon’s letter. This is an important subject to process.

        Beginning of letter (h/t to Matt Stewart for transcribing the letter)

        To our U.S. direct selling colleagues,

        At Avon, we strongly believe in the power of direct selling to enhance people’s lives. Our entire business model is based on our commitment to helping women build better lives for themselves and their families. And we know that multi-level marketing, in some markets and with the appropriate guardrails, is a robust and effective channel for distributing products to consumers.

        As you may be aware, this week Avon made the decision to exit the U.S. DSA. This decision came after careful consideration and more than a year of thoughtful discussion. This decision was driven by two key issues:

        • We believe the association’s agenda in the U.S. is overly focused on the issues of a few specific brands rather than industry-wide challenges.

        • We believe that the U.S. DSA Code of Ethics requires updating to better reflect the current state of the industry in the U.S.

        As the U.S. DSA is currently operating, we do not believe that either of these issues will be addressed.

        Like any industry, direct selling and multi-level marketing evolve and the associations that support the direct selling industry need to evolve as well. As one of the largest direct selling companies in the world, we at Avon feel that it is our duty and responsibility to protect those just starting out in the industry, as well as those who have made careers as independent direct sellers.

        In the U.S., we believe there is a need to enhance the DSA Code of Ethics to better ensure that individuals entering direct selling have the benefit of adequate safeguards. If and when these issues are better addressed by the U.S. DSA in a way that is supportive of the industry as a whole, we would re-consider our membership.

        Avon is not exiting the World Federation of Direct Selling Associations (WFDSA}, local market DSAs, or other direct selling trade organizations outside of the United States. We continue to believe that industry associations play an important role for Avon and you, our direct selling peers.

        As it relates to Direct Selling Associations (DSAs} around the world, Avon has a long history of involvement. In fact, we were a founding member of many of these organizations. The Direct Selling Code of Ethics, as administered by the DSAs, is a key component of the industry’s self-regulation.

        Accordingly, Avon abides by the World Federation of Direct Sellers “Code of Ethics.” There are three major aspects of our business model that we believe further safeguard our Representatives and consumers.

        1. The Avon business model does not rely on nor does it encourage sales of inventory, training or business support materials between Representatives. The     core of our business model is Representatives selling our products to an end consumer.

        2. Avon has reasonable return policies.  Representatives are not left holding excess inventory.

        3. Avon limits earnings to three generations. We do not promise commissions on infinite sales. Rather, we primarily promote and incentivize            Representatives based on their sales to Customers.

        By adhering to these principles in every market where we operate, we protect our Representatives and help ensure new recruits have a positive experience with direct selling.

        It is also important to consider how consumers view direct selling. Avon’s message to consumers is:

        At its best, direct selling is “I tried the product. I liked the product. I recommended it to a friend.” If you are considering entering direct sales (or ‘social selling’) here are three tips to remember:

        1. Like the product! Make sure it’s a product you use and enjoy yourself. You will be selling to your friends, family, neighbors and co-workers.

        2. Understand the product. All good direct selling/social selling companies will provide training and mentoring support. But you should not need to invest heavily in start-up training and marketing materials.

        3. Know who you are buying from and who is paying you. When ordering product for your customers, make sure you will be purchasing from the Company, not the individual who recruited you into selling, and that your earnings will be paid by the Company.

        With over $32 billion in sales in 2013, direct sales continues to be a vibrant and growing industry in the United States. Every day, people across the country looking to earn extra money are signing up to become direct sellers. These women and men are hoping to build a business, unlock additional earnings, start a college fund for their children, buy a new car or simply supplement their current income

        For well over a century, Avon has been committed to assuring that direct selling remains a viable option for individuals looking for financial empowerment. Our commitment to our Representatives today and in the future will not waiver.

        Cheryl Heinonen

        Senior Vice President, Corporate Relations & Chief Communications Officer  Avon Products.

        Avon Exits the DSA

        We Got it Done. DSA Model Legislation Passes in Tennessee

          Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

          We got it done. I’ll be honest with you. Four years ago, when I originally tried to pass MY version of the anti-pyramid bill, I would never have guessed that I would’ve successfully collaborated with the DSA to get a bill passed. The DSA and I were on opposite sides of the aisle at that time. But…people grow. We grow wiser, experience things, we learn and we develop. The DSA Model Legislation was passed in my home state (Tennessee) with an overwhelming majority in the state house and senate. The DSA announced the good news today (and I got a little ink…as a Supplier Member, that’s a big deal;)

          Click here for the full text of the Tennessee Anti-Pyramid Bill.

          I’m going to share with you what led me to pick up the phone and reach out to Joe Mariano about this effort. I was watching the movie “Lincoln” starring my favorite actor, Daniel Day Lewis. There was a scene where Lincoln was chatting with staunch abolitionist Thaddeus Stevens. Stevens wanted Lincoln to draw a firmer line with respect to slavery. Lincoln’s words made sense to me:

          “A compass, I learned when I was surveying, it’ll… it’ll point you True North from where you’re standing, but it’s got no advice about the swamps and deserts and chasms that you’ll encounter along the way. If in pursuit of your destination, you plunge ahead, heedless of obstacles, and achieve nothing more than to sink in a swamp… What’s the use of knowing True North?”

          In life, it’s unwise to take extreme “I’m right, and you’re wrong!” positions. This is especially true with politics when it comes to language in a bill. Is the bill PERFECT? No. But legislation is not about perfection. Legislation / politics is about compromise. It’s about identifying shared goals with parties with unique interests and working towards those mutual goals, regardless if your personal preferences are fully met. 80% of something is better than 100% of nothing. At this juncture in the industry, it’s more important now than ever that PEOPLE WORK TOGETHER. This bill legitimizes the practice of paying commissions on internal consumption. It also has requirements for solid consumer protections i.e. 12 month buyback policies.

          In this industry, battle lines are drawn between companies, vendors, distributors and Wall Street investors. With so many contrarian views, it’s impossible to pull out anything actionable that we agree on. At a time such as now, we all need to support a consistent vision that network marketing, when done appropriately, is a legitimate and viable means of distributing goods and services. The “when done appropriately” part is the part that trips us up. What’s appropriate? What distinguishes good from bad? There’s no consensus and, in my opinion, there’s never going to be a consensus without federal guidelines. In the meantime, groups in the industry need to LEAN IN and take some positions. At a minimum, people need to get behind the idea that paying commissions on internal consumption is legitimate provided that consumer safeguards are in place. Companies MUST refrain from encouraging/incentivizing distributors to load up on inventory they don’t really want in quantities they can’t really justify.

          With other leaders in the industry, I want you to take a position. Don’t just talk about “elevating the profession.” I challenge you to propose some concrete ideas about how you intend on making it happen. As a unified front, there’s no stopping from advancing. But as a dispersed band of competitors, we’re weak.


          I was pleased to get this effort going in Tennessee. And without the DSA communicating support, the effort would’ve died. Jeremy Durham, one of the bill’s sponsors said, “I was happy to work with Kevin Thompson and the DSA on this bill. Kevin’s credibility and expertise on the subject made it easier for us to get the support we needed for the bill. I’m always happy to serve my constituents and I’m very pleased with this result.”

          Special thanks also goes out to Senator Jack Johnson who co-sponsored the bill from the State Senate. One of the reasons Tennessee is tearing it up economically compared to the other states: we’ve got great, pro-business leaders.

          Direct Selling: The Great Equalizer and Opportunity

            Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

            This article was written by the former President of the DSA, Neil Offen. It was published in Direct Selling News magazine. The article was so well-written that I requested permission to republish on my site. In the article, Neil dispels of several myths about network marketing and he casts a strong vision on ways to improve its reputation. I’ll gladly share my site with anyone willing to LEAD the industry in a better direction. At a time when the industry is being attacked by people with a financial incentive to bring it all down, this content is important and it’s very worthy of your attention. +Kevin Thompson

            By Neil H. Offen

            Neil Offen New Perspectives Direct Selling

            It has been slightly over two years since I retired after 40 years with the Direct Selling Association (DSA), first as a staff attorney and lobbyist and eventually as President and CEO. In addition, I was there at the creation of the Direct Selling Education Foundation (DSEF) and the World Federation of Direct Selling Associations (WFDSA), serving as Vice Chairman and Secretary General, respectively, of those two organizations.

            I have spent some 42 years in our industry—the reality is that it’s a method of distribution more than an industry per se—representing it, protecting it, promoting it and policing it. To say the least, I have seen much change, much adaptation, and much growth and innovation during that period. At the same time, I have seen the industry’s core values remain focused on empowering people one individual at a time, seen it being led by women and men of integrity and high moral character, and seen a continuing commitment to and passion for our distributors by corporate management.

            I have also witnessed a spirit of service by our industry and its companies, their personnel and their representatives in the field in the various communities in which they operate. Given all of the good that our industry represents, it is disappointing to see the negative attacks on it. At this juncture in the road, the direct selling industry faces the question: Do we let our critics define us or do we take steps to make sure we better control our own reputation?

            To explain what I mean, I will be focusing on four areas. One disclaimer that I need to make at the outset is that I am speaking for myself and only myself. I am not representing the DSA, the WFDSA or any other entity.

            The four areas I will discuss are the industry’s attributes, the negative myths and canards leveled against it, the actions that can harm the reputation of the industry, and finally, what I see as possible solutions and courses of action that will continue to protect, promote and enhance the reputation of the direct selling industry. I use the terms sales personsconsultantsdistributors and representatives interchangeably throughout the article.

            Do we let our critics define us or do we take steps to make sure we better control our own reputation?

            Direct Selling Attributes: What Are They?

            All of us working in direct selling believe in its positive attributes. I’ve listed here those truths about the direct selling opportunity that I believe are most powerful:

            1. It empowers people. Its diversity is without bounds. It offers opportunities for people to set their own objectives, great or small, through full- or part-time efforts, for career opportunities or merely for supplemental income. It is an industry that directly ties reward to effort. It does not discriminate based on race, gender, national origin, religion, age, physical condition, educational background, political beliefs or financial resources;
            2. It provides unlimited flexibility for the individual to achieve her or his own   goals and control the time spent in the business as well as how that time is spent;
            3. It drives micro-enterprise development wherever it operates—in a world seeking and needing such enterprises—and is a robust, grassroots source of business skills education, guidance and training;
            4. It motivates people through providing recognition, quality products and services, technical resources and an overall nurturing environment with ongoing symbiotic support;
            5. It provides opportunities with minimal capital investment or risk of loss;
            6. It provides consumers with outstanding product warranties and guarantees in each marketplace in which it operates;
            7. Its rules and standards, through company policies and through the independently administered direct selling associations’ codes of ethics, protect both salespeople and their consumers from abuse;
            8. It is a simple business, though not necessarily an easy one, and due to the independent contractor status of each salesperson, it allows great ease of entry and egress;
            9. It is global in nature and borderless in promotion of common core values and ethical standards;
            10. It is innovative, adaptive and technologically friendly;
            11. It has a strong public service and corporate social responsibility orientation at both the corporate management and the individual distributor levels;
            12. It offers social contacts in a world where more and more people are becoming isolated from one another;
            13. It is cause-oriented where its distributors believe in the product or service or opportunity and that they are helping to fill a valuable need of friends, family, neighbors and the public at large; and
            14. It is a source of social and economic stability and opportunity within all its markets

            “Direct selling motivates people through providing recognition, quality products and services, technical resources and an overall nurturing environment with ongoing symbiotic support.”

            Myths and Canards

            Several untrue assertions regarding our industry permeate the Internet and mainstream news media. The following are some of the misstatements or outright lies often attributed to our business model.

            Myth No. 1: All—or almost all—people who participate in direct selling lose money.

            In my experience, the reality is that an overwhelming majority of people who join a direct selling company to sell products and build a business do profit from it. DSA research shows that over 80 percent of business-oriented recruits have very modest goals when joining a company and the vast majority, whether still with the firm or no longer in the industry, have their expectations met or exceeded. The distributors earning the highest level of income are the business builders who typically spend significant time on the business selling, recruiting, motivating and training distributors and consumers in their organizations. They generally constitute between 10 percent and 20 percent of the salesforce. There is nothing wrong or unethical about this model, and this is similar to most non-direct selling retail sales organizations.

            In addition, the industry has implemented safeguards against financial loss. The biggest protection against financial loss for all participating in our business is the unconditional product money-back guarantees for consumers and, for sales people, our minimum 90 percent inventory buy-back. All DSAs require their member companies to offer buy-back protection to all their distributors. Membership in a DSA is an added protection from abuse for sales people, potential sales people and consumers.

            “DSA research shows that over 80 percent of business-oriented recruits have very modest goals when joining a company and the vast majority … have their expectations met or exceeded.”

            Myth No. 2: Self-consumption by sales persons is a problematic practice.

            In fact, there is no binding precedent that establishes that a set amount of sales must be sold to persons outside the sales organization. The seminal FTC/Amway case in 1979 created a “70% rule,” but that rule only applied to the requirement that the distributors certify that they had sold at least 70 percent of their inventory in the prior month before they could be permitted to buy additional inventory. (Note: This case was long before the industry adopted the 90 percent inventory buy-back standard as part of the DSA Code of Ethics, which occurred in the mid-1990s.)

            Our industry’s standard of the buy-back removes the possibility of inventory loading if the firm is bound by the buy-back and it is properly administered. A distributor who purchases a product to personally consume it is a “consumer,” and there is nothing inherently wrong with paying compensation on these product sales.

            Myth No. 3: Multilevel direct sales firms will fail due to geometric progression and turnover rates.

            This simply may seem logical mathematically, but only if you start with the assumption that everyone is purchasing products solely to qualify to earn large amounts of compensation by creating a network and earning compensation on similar downline purchases. It does not occur in the real world because the assumption is faulty. Most persons signing up as salespeople in our industry are either seeking to buy product at a discount or for supplemental income, putting in less than 11 hours per week, and not that much in every week.

            The FTC tried to make the geometric progression argument to the Second Circuit Court of Appeals in the Ger-Ro-Mar Inc.  vs. FTCcase back in 1975. Ger-Ro-Mar sold bras and lingerie. In the words of the Second Circuit Court of Appeals:

            “We find no flaw in the mathematics or the extrapolation [presented by the FTC] and agree that the prospect of a quarter of a billion brassiere and girdle hawkers is not only impossible but frightening to contemplate, particularly since it is in excess of the present population of the Nation, only about half of whom hopefully are prospective lingerie consumers. However, we live in a real world and not fantasyland (emphasis added).”

            As stated above, the reality is that a majority join a direct sales firm either after having been a customer or wishing to buy its products at a discounted price. Most sales people and most direct sales firms market low-ticket, consumable products, and my educated guess is that over 50 percent of such sales people are sales people in name only. They buy the firms’ products at a discounted price for personal consumption and do not sell products or recruit other distributors. This percentage of “discount buyers” may approach over 90 percent of the salesforce of some firms and account for over 90 percent of product sales.

            As with any sales organization, the industry experiences a high rate of turnover in its salesforce, but people join and leave a salesforce for a variety of reasons. For example, if a woman was working only one month before Christmas to earn Christmas present money, she would contribute to the high turnover rate even though she might return year after year for decades during the Christmas season. In addition, based on data that I have seen over the years, many sales people sell for more than one direct sales firm during the year, either simultaneously or at different times. I believe that between 10 percent and 20 percent of the sales organization falls into this category, thereby overstating turnover rates.

            One final point on the geometric progression canard: I believe that the turnover rate of retail store personnel and franchise employees is very high. Strange that we don’t hear more about that and the fact that some work in retail stores because they are given employee discounts as part of their compensation plan. According to recent data, retail store employee discounts are often extended to the employee’s family and even sometimes to friends.

            “The percentage of “discount buyers” may approach over 90 percent of the salesforce of some firms and account for over 90 percent of product sales.”

            Actions That Can Harm the Reputation of the Industry

            The reputation of our industry can be negatively impacted by a number of factors including the following:

            1. Misconduct by a Member of a Salesforce

            As sales people in any industry, most participants in direct selling conduct business in an ethical and consumer- and recruit-friendly manner. It is unfortunate but true that the reputation of the industry is negatively impacted if a participant inappropriately markets products or the income opportunity in a misleading way. Given the millions of participants in the direct selling industry, even the acts of a small percentage of participants can create significant reputational harm. Examples of acts that can damage the industry’s reputation include:

            • Exaggerated earnings claims made to prospective recruits;
            • Exaggerated or false product claims;
            • High-pressure recruiting and sales tactics; and
            • Excessive non-corporate training/motivational expenses.

            2. Business Practices

            It is also important that companies properly evaluate business initiatives and compensation incentives before they are implemented to make sure they do not motivate or incentivize problematic behavior.  For example, I believe that compensating the salesforce for sign-up fees—which is one strong indicator of a possible pyramid scheme—as well as sales kits and aids, samples, and training fees and materials can create an incentive that increases the cost of the investment to join the business and the associated potential risk of loss to a new participant.

            “It is important that companies properly evaluate business initiatives and compensation incentives before they are implemented to make sure they do not motivate or incentivize problematic behavior.”

            3. Enforcement of Distributor Policies and Codes of Ethics

            If a company fails to diligently monitor the activities of its salesforce and enforce its ethical standards, regulations and policies, it will ultimately contribute to inappropriate actions that damage not only the reputation of the company but also the industry. A large number of participants join our industry each month, which makes it an imperative that companies adequately train the salesforce on marketing claims, legal requirements and the industry’s code of ethics. Companies cannot be passive in this effort.

            My Vision

            Having touched upon some of the attributes, myths and problematic practices, let me now turn to a view of the future that maximizes our positive attributes and potentially helps quash some of the negative stereotypes and myths that presently afflict us. Here are my high-level recommendations for the industry that I believe will further strengthen the industry and its reputation.

            1. Continue to Enhance Consumer Protective Measures

            I believe our industry has done a remarkable job developing consumer and distributor protective policies and codes of ethics. The industry standard of a 12-month return policy plays a critical role in protecting distributors from inventory loading risks. Unconditional 100 percent consumer product money-back guarantees should continue to be encouraged.

            The DSA Code of Ethics establishes a baseline of important ethical practices for companies to follow. It is important that we continue to evaluate whether there are additional measures that can be adopted to further enhance the protection of consumers and distributors. The following are areas where I think additional protections may be beneficial to consumers, distributors and the industry:

            Compensation Summary: I believe the industry should adopt and implement an industry-wide standard of transparency and disclosure regarding various relevant aspects of compensation earned by its salesforce members. Many of our companies already make such disclosures, which provide prospective recruits with protection from misleading claims that could be made by a participant in the salesforce. No one can criticize us if we provide full disclosure of earnings. Presenting prospective recruits with detailed distributor earnings data during the recruiting process as well as on our websites and in our literature will eliminate most of the risk of the salesforce exaggerating the opportunities we are offering.

            It is important that such disclosure be complete and provide sufficient information to furnish a fair overview of the earnings potential. Creating an industry standard will assist other companies and provide a norm they can follow. Once in place, all companies taking this transparency approach would be free from any charges of financially misleading members and prospective members of the salesforce.

            Minimizing Risk of Loss: A critical component of the industry’s code of ethics is its 12-month inventory return policy, which was adopted to reduce the risk of loss for new participants. Salespeople utilizing the return policies should be able to do so easily and expeditiously. The industry also needs to remain diligent in monitoring and evaluating trends and developments in business practices and activities of direct sellers to identify additional measures that should be adopted to ensure the industry always has comprehensive measures to protect consumers and distributors.

            For example, I recommend that it should be made more clear that the current buy-back policy includes other purchases by new participants in the business such as sales aids, training costs and starter kits. I believe that DSAs should promulgate code provisions to codify some of the best practices in the industry, including restricting payments on certain types of compensation.

            “I believe the industry should adopt and implement an industry-wide standard of transparency and disclosure regarding various relevant aspects of compensation earned by its salesforce members.”


            2. Educate Our Constituencies

            • Members in the DSAs should take the opportunity to participate in industry research and surveys done by outside third-party firms retained by DSAs so that the industry will have accurate and credible data for use with the press, governmental entities, academia and other constituencies.
            • Member companies can further increase their focus on educating their salesforce and customers regarding compliance policies and codes of ethics. Having a salesforce that is knowledgeable about the code of ethics—and their responsibilities under such code—is important to the long-term success of our industry. Member companies should have the necessary compliance staff and provide the training to accomplish this. I believe the head of this function should report to the CEO or general counsel. Companies should also have a whistle-blower system in place.
            • Member companies should work to further improve their customer relations departments with a philosophy of total consumer and distributor satisfaction and excellent service. This is not just good business, it’s also smart business.
            • There should be ongoing and significant public education efforts portraying the industry as it truly is, through public relations efforts based on solid data and useful information, public service activities, promotion of quality research, excellent use of social media channels and targeted projects to educate key influencers in society (e.g., legislators, regulators, the financial press, the “style” and general news media, academia, think tanks and consumer protection organizations). We have an opportunity to tell “our story,” much more effectively. This will require substantially increased financial commitments by the companies to those efforts.
            • Annually, the WFDSA global “best practices” exchanges will ensure our industry is operating in all our markets on a consistent basis, at the highest ethical levels, and with the most effective ways to protect our corporate interests through taking the high road in building and sustaining our reputation, image and brand. Strengthening DSAs across the globe strengthens our industry. All industry firms should belong to the national DSA in the countries in which they operate.


            Now is not the time to relax in our efforts to be a consumer-friendly, consumer-protective industry. This is critical to our long-term success and the success of the people who rely on this industry for income opportunities and life-enhancing products. We must constantly evaluate our business trends and practices and be willing to take additional steps to protect our industry and its participants.

            Having worked in 50 countries throughout my career, I have seen that the DSAs that are most successful are those with the support of the majority of companies in the country. I believe strong DSAs are critical to success, and I can’t emphasize enough that all industry companies should be members of the association in the countries in which they do business to most effectively do the job necessary on behalf of the industry.

            “Now is not the time to relax in our efforts to be a consumer-friendly, consumer-protective industry”

            Our business model not only works, but it is also a good thing for free enterprise, society and individual freedom. Its success is built on maintaining existing and establishing new personal relationships based on truth and trust. We and our sales people want happy customers and satisfied recruits. We and our sales people want to be good corporate citizens and contribute to society. In other words, we and our sales people want to do well while doing good.

            The original article is published on the Direct Selling News website. Direct Selling News is the trade magazine serving direct selling and network marketing executives since 2004. Subscriptions are available in the App Store and Google Play Store via this link: http://directsellingnews.com/index.php/dsn/app

            MLM Detractor Blatantly Mischaracterizes the Law: Ignores Facts and Precedence

              Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

              Bruce CraigRetired Wisconsin litigator, Bruce Craig, wrote an article featured on Seeking Alpha titled, “An Investor’s Guide to Identifying Pyramid Schemes.” While the title certainly implies a hint of objectivity, it’s simply false advertising . In a nutshell, the author holds on to his long-standing, 30+ year view that all MLMs are pyramids. Unfortunately, Craig willfully omits several well-known facts that obliterate his entire argument. It’s this kind of willful omission that makes him guilty of the very behavior he claims to be against.

              Bruce’s thesis is simple: When analyzing a MLM for legality, retail sales do not matter…at all. In fact, he essentially concludes that all MLMs are illegal. If there’s any sort of recruitment element to a program, it’s “inherently deceptive” due to their “exponential characteristics.” In other words, with no limits on recruitment, epic doom is inevitable. This “all MLMs are pyramids” rationale is made crystal clear in Bruce Craig’s 2009 letter to the FTC when he says, “[The Amway case] has effectively legitimized pyramids, now called MLM’s.”

              True North

              I always respect people’s right to voice their opinions. While I might disagree with the points, I think good, open dialogue is the only path to progress. But…in the Seeking Alpha article, Bruce crosses a line. He is not providing objective, well-researched information to investors, as implied in the title. He’s making a carefully crafted argument. The article is “Outcome Determinative,” meaning he begins with the end in mind (all MLMs are pyramids) and stitches quotes together in support his argument. While making his argument, he leaves out several material bits of information.

              Bruce Craig’s “True North” is ultimately protection of consumers. When he says he cares about consumers, I believe him. But as Abe Lincoln said in the recent movie (“Lincoln”), “What good is True North if you end up stuck in a swamp?” At some point, critics like Bruce need to be practical. Taking the position that all MLMs are illegal immediately removes you from the conversation. Completely. And without influence, there’s no change. The industry is not going away. Instead of drawing hard lines and praying for a nuclear bomb to decimate the entire industry, wiping out even the cleanest of companies, he and critics like him should try to offer suggestions to make the industry better. I have a personal experience of being hammered with the political process. I tried to pass an anti-pyramid bill in Tennessee in 2010. The bill was killed by the DSA. Instead of whining about the political process (as done in nearly every article posted by critics), I joined the DSA. I’m a firm believer that the right ideas win over time. Bruce’s article lacks objectivity, which is why it will only serve to excite the critics and be largely ignored by everyone else, including regulators.

              I’m going to address Bruce’s points in no particular order.

              Market Uncertainty With Respect to MLMs

              When writing about his motivation for the article, Bruce writes, “The recent incident involving David Einhorn and Herbalife (HLF) drew my attention to the stock market and the subject of pyramid schemes. It seemed that the significant drop in Herbalife’s stock price reflected a market uncertainty about the inherent stability and legality of this company.”

              This is false. As a quick recap, Einhorn asked a few questions during an earnings call with Herbalife. During the call with Einhorn and shortly thereafter, Herbalife’s stock dropped 20% ($1.7 Billion loss in value). The market was not reacting to uncertainties about Herbalife’s model, the market was reacting to Einhorn. Einhorn is a legend on Wall Street, having successfully shorted multiple companies, including Lehman Brothers and Green Mountain Coffee. The market perceived that Einhorn smelled blood with Herbalife. Herbalife’s stock dropped 10% during Einhorn’s 5 minute conversation on the earnings call. 5 minutes is hardly enough time for analysts to research MLM law and thoughtfully conclude that the Herbalife stock was junk. They were reacting to Einhorn. Despite this “market uncertainty,” the other publicly traded companies in the MLM industry are doing just fine. The average rate of return on the publicly traded MLMs is well over 30%, soundly beating the DOW, NASDAQ and the S&P 500. It’s not even close.

              Misleading Analysis on BurnLounge

              In his article, Craig referenced a definition in the judge’s final order against BurnLounge. This case represents the most recent case against a pyramid scheme. In the final order, the court defined “Prohibited Marketing Scheme” as:

              An illegal pyramid sales scheme . . . in which participants pay money or valuable consideration in return for which they obtain the right to receive rewards for recruiting other participants into the program, and those rewards are unrelated to the sale of products or services to ultimate users. For purposes of this definition, ‘sale of products or services to ultimate users does not include sales to other participants or recruits or to the participants’ own accounts.

              If you were to read this definition out of context, it would certainly seem that it’s illegal to pay commissions on product consumption generated by distributors (known as internal consumption). In fact, if interpreted literally, this sort of definition would spell the end of the network marketing industry, period. Bruce takes advantage of this quote and contrasts it with a seemingly contradictory statement the FTC made in 2004. In the FTC’s Advisory Memo to the DSA, it said, “In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme.

              There are 3 key facts that Bruce fails to mention:

              1) The definition in the BurnLounge order is IDENTICAL to the definition found in another case against a pyramid scheme twelve years ago (FTC vs. Equinox). The FTC’s advisory memo quoted by Bruce came well after the Equinox case. The FTC made its position clear: Paying commissions on internal consumption is fine.

              2) The definition that Bruce quoted was specifically limited to the BurnLounge case. First, it’s clear when it reads, “For purposes of this Final Judgment….the following definitions shall apply.” Second, Bruce failed to reference the other part of the FTC’s memo…the one that clearly says that the definitions found in the Orders do not represent the “general state of the law.” It’s pretty important…and he left it out. The memo says,

              [T]he FTC often enters into consent orders with individuals and companies that the Commission has determined have violated the FTC act. To protect the public from those who demonstrated unwillingness follow the law, these orders often contain provisions that place extra constraints upon a wrongdoer that do not apply to the general public. These ‘fencing-in’ provisions only apply to the defendant signing the order. . .”.

              It’s crystal clear. Despite what Bruce was suggesting in his article, the FTC was not contradicting itself in the BurnLounge order. It’s doing exactly what it’s been doing over the past twenty years. Bruce Craig is not a disinterested reporter looking to provide help for investors. He’s an opportunist taking advantage of media generated by David Einhorn to lob a grenade at an industry he clearly hates.

              3) Bruce fails to reference the BurnLounge Statement of Decision. Prior to the Final Order, the judge wrote a 31 page opinion where he stated his conclusion about BurnLounge. I summarized this BurnLounge Statement of Decision on my site. While Bruce argues that retail sales have no place in pyramid scheme analysis, the judge in BurnLounge dedicated almost 10 pages to the value of the BurnLounge product (or lack thereof). He ultimately concluded that the products had SOME marginal value; thus, he discounted the amount of consumer harm. If everything hinged on the “exponential characteristics” of the marketing plan, as submitted by Bruce, there would be zero need to discuss the product. Bottom line: retail sales DO matter. If the products have legitimate value as demonstrated by retail sales, it’s indicative of a legitimate program. Speaking of retail sales, even the FTC’s own economist, Peter VanderNat, wrote about the importance of retail sales when distinguishing legitimate MLMs from pyramids. There’s just no way around it: retail sales matter.

              The rationale that led Bruce Craig to reference a single sentence out of context while ignoring the 31 page Statement of Decision is beyond me.

              Tolman Case

              While Bruce was eager to reference two pyramid cases from over 35 years ago, he ignores a case that was published in 2004. In Tolman, the court held that paying commissions on downline purchases “does not, by itself, render a multi-level marketing scheme an illegal pyramid.” Paying commissions on internal consumption is perfectly legal.

              Bottom Line

              Critics are desperate. It’s not just Bruce Craig. There have been a number of negative reports lately, all having commonality on a certain line of thought: “MLMs say that everyone can win….and since people fail, it’s fraud.” They’ll use words like “destined to collapse” without referencing a single case of market saturation. And they’ll never reference the technology tools available today that eliminate all geographic barriers for distributors; thus, negating their saturation arguments. They simply hate the space and they want it gone. And now they’re growing angry because they’ve been largely ignored by the FTC over the past several years. It’s not a surprise: their position is logically, politically and economically untenable.

              The space needs to improve. I agree on that point. I’ve written exhaustively about my ideas to improve the MLM space. The industry is not perfect, but it’s still a great space. And whether the critics like it or not, the business model is accelerating. Peer to peer advertising is a much more cost effective and efficient means of distributing unique products and services. While I agree that the space needs to improve, I take exception when another lawyer makes an argument while leaving out material information. It’s just poor form.

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              DSA Convention 2012 – Inspiring Entrepreneurs

                Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

                This year’s DSA annual meeting was held in Dallas, Texas. It was a really cool event! We had phenomenal speakers, the best being none other than George W. Bush. I was skeptical before joining the DSA two years ago. I’m just not a “trade association” kind of guy. I’m so happy I joined! It’s a great organization charged with a complicated and important task of representing the interests of a very diverse industry. While I give the DSA a hard time about not doing enough with respect to the DSA’s pyramid legislation, I understand that it’s hard for a trade association to pivot when it’s trying to appease hundreds of companies, each with a unique set of needs and concerns.

                Below are some of my favorite pictures from the DSA convention.

                IMG 4896

                I have a lot of respect for Richard Bliss Brooke. He’s been very supportive of my participation in the DSA.  He encouraged me to get involved in both the Ethics Committee and the Government Relations Committee.  As someone that wanted to positively impact the direct sales community, getting involved with those committees was a crucial first step. He also gave me a kick in the ass to get started on my book. I made a commitment to get the content done by September 3. I’ve got a lot of work to do!

                IMG 4897

                Joe Mariano is someone else I hold in high esteem.  As the president of the DSA, he’s got a very challenging job. As a trade association, the DSA is comprised of over 100 member companies and a few hundred supplier members.  He’s got the difficult job of aggregating the collective will of that community while leading a team that follows legislation all across the country.  It’s really incredible when you think about the complexity of the entire operation. Joe has been very generous in allowing me to be part of the important conversations about the industry.  

                Gerald Nehra is one of the kindest men I’ve ever met.  He’s also a great competitor.  He was one of the original MLM attorneys.  Without him, I’m not sure if I’d be having as much fun right now.  And he’s got a very kind, loving and generous wife.  For two years straight, I’ve attended the convention stag.  I’ve never been able to bring my wife, which makes it weird showing up at a party solo.  Both years, Gerry found me and invited me to sit at his table. I always enjoy chatting with him and his partner, Richard.  In reality, there’s only a handful of competitors that are serious players in the industry. Nehra and Waak are two of them.

                By far, The most moving moment was when Rich DeVos welcomed his two boys, Rich and Doug, into the DSA Hall of Fame. I’ll be honest….I shed a tear or two. As a father of three children, I was simply amazed at the unique moment Rich DeVos got to share with his two sons. It made me assess my path and wonder if I was on track to leave a lasting legacy for my children as Rich has done for his. With Rich on stage, telling stories about the start of Amway, and seeing the pride in his eyes when his boys took the stage…it was just awesome. I recorded his speech, without permission. I’m not sure if that’s ok. But until someone says otherwise, check it out below.

                This is my full library of pictures from the DSA event.  Unfortunately, I didn’t take very many.

                Minnesota MLM Survey – Ignore It

                  Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

                  By way of the Lawyer’s Council and Government Relations Committee, I learned of a “survey” that’s being sent to all network marketers in the state of Minnesota.  See below.  As explained to me, their Department of Revenue is trying hard to  build a case that MLM companies have a nexus to Minnesota for the purposes of income tax.  Apparently (I’m not an expert with taxes), the questions are clearly slanted towards establishing a nexus.  The Department of Revenue in Minnesota smells money in the MLM space and they’re looking to score.  

                  Call of (No) Action

                  Ignore the survey.  We’ve been advised to discourage salespeople from responding.  The survey is optional.  If you have members of your team in Minnesota and you hear about this survey, tell them in your best Italian accent “Forget about it!”

                  Minnesota Dept of Revenue – MLM survey(function() { var scribd = document.createElement(“script”); scribd.type = “text/javascript”; scribd.async = true; scribd.src = “http://www.scribd.com/javascripts/embed_code/inject.js”; var s = document.getElementsByTagName(“script”)[0]; s.parentNode.insertBefore(scribd, s); })();

                  ACES Radio Live With Troy Dooly and Jim Gillhouse

                    Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

                    When both Troy Dooly and Jim Gillhouse call me to be a guest on their program, I jump every single time. They ask great questions and lead fantastic conversations on their program.

                    During this episode, we talk about the troubling language in the final BurnLounge order. Feel free to listen and share your thoughts below.  Already after this interview, I’ve been a part of some great conversations about the future of the space.  It’s a very healthy discussion.  

                    Listen to internet radio with ACES Radio Live on Blog Talk Radio

                    California MLM Independent Contractor Bill Amended

                      Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

                      California Senate Bill, the specific bill written about on this site earlier regarding independent contractor reporting requirements in California, has been amended! Through the efforts of the DSA, the teeth behind the bill have been removed. In its original form, the bill would have required distributors to provide and maintain burdensome records about each downline participant enrolled for a two year period. Violators could have been prosecuted for a misdemeanor. Clearly, this was a ridiculous requirement.

                      The bill has been recently amended, eliminating the problematic terms for direct sales companies. Read the DSA’s release about the victory over the California independent contractor battle. Excerpts are included below:

                      Thanks to the dedication of DSA member companies and the industry’s government relations Road Warriors, the California Senate, on a 22-13 vote, passed an amended version of Senate Bill 459 last Friday eliminating a burdensome notice requirement for companies relying on independent contractors—including direct sellers—proposed in the original bill.

                      The original version of California Senate Bill 459, championed by California Senate Majority Leader Ellen Corbett (D), would have required companies that rely on independent contractors to issue a statement detailing the impact of the individual’s status as an independent contractor on his or her tax obligations and eligibility for labor employment protections. While such notification is already part of the written contract a seller must sign before becoming affiliated with a direct selling company, the additional requirements would have posed a threat to the industry’s ability to recruit and retain salesforce members. Additionally, under the original bill, any independent contractor who failed to file or keep the proposed paperwork could have faced misdemeanor charges.

                      While all members of the California Assembly received a letter from 28 DSA member companies with a physical presence in the state, more than 1,200 independent California direct sellers wrote to their state representatives expressing their concerns about the legislation. Additionally, DSA member companies and staff met one-on-one with legislators who also received more than 2,400 emails from California distributors about the bill.