A candid discussion between audience members and key stakeholders of the DSSRC ensued at this year’s Direct Selling Legal and Compliance Summit.
Editor’s Note: The Direct Selling Association (DSA) and the Council of Better Business Bureaus (CBBB) joined forces to create a third-party entity: the Direct Selling Self-Regulatory Counsel (DSSRC), which launched in January. DSSRC is a shift in the direct selling industry towards proactively monitoring the entire industry—including Direct Selling Association members and non-members alike.
By Kim Cruzcosa
New case could help safeguard due process in future company shutdown pursuit.
On Aug. 24, 2015, 15 federal agents stormed the headquarters of Arizona-based direct seller Vemma Nutrition, halting its operations, freezing bank accounts and firing employees. Led by regulators at the Federal Trade Commission (FTC), the raid put the company into receivership and essentially out of business.
In December of the next year, Vemma settled the lawsuit with the FTC, which alleged that Vemma “was a pyramid scheme that compensated participants mainly for recruiting others rather than for retail sales based on legitimate consumer demand for the products,” according to an FTC press release.
By Jennifer Anderson
Health claims now being identified and enforced in new, non-traditional ways.
Along with increased scrutiny from regulatory agencies, additional pressures are emerging among private stakeholders concerning dietary supplement manufacturing. This article explores three of the most significant enforcement measures in operation today: NSF International, the Food & Drug Adminstration (FDA) and Google, which has tremendous power and control over a company’s access to consumers via the internet.
Of the three forces that are most greatly impacting dietary supplement companies today, NSF International may be the most complex and potentially hazardous because it has not been publicized much. At its core, NSF is a not-for-profit, independent organization that develops and tests standards as well as audits, inspects and certifies products and systems in order to protect the world’s food, water, environment and consumer products.
Seldia reveals the results of their distributor survey and Canada grapples with employment classification.
By Jennifer Anderson
In Europe, direct selling continues to remain consistently popular. Last year, in fact, direct sales contributed 34 billion to the European economy—a 150 percent increase from 2007. It is no wonder then that the European direct sales association, SELDIA, is in the mood to celebrate. In addition to the sustained popularity of the sales channel, the organization is currently enjoying its 50th year in existence.
The centerpiece of SELDIA’s 50th anniversary celebration was its European Direct Selling Conference, which was held in October. At the conference, the organization revealed the results of a survey it commissioned from the international market research group, Ipsos, concerning the day-to-day lives of direct sellers throughout the continent. The survey took two months to complete and involved over 30,000 participants in 11 European markets.
An industry attorney and a data analyst weigh in on whether these programs are good for your business.
By Jennifer Anderson
3 & Free programs are disappearing from the marketplace almost as quickly as they arrived. While the legal risks are low, they are simply too difficult for companies to enact and enforce.
"The biggest downfall is that companies aren’t thinking of their comp plans holistically."
-- Kenny Rawlins, Vice President IT Systems and Application Development, InfoTrax Systems
Unsurprisingly, direct sales companies have long sought legally viable ways to incentivize distributors to generate sales and attract new recruits. Under the watchful eye of the Federal Trade Commission (FTC), however, many incentive programs have been considered, implemented, and ultimately rejected. Notwithstanding the watchdog efforts of the federal government, two bonus structures have withstood the test of time—so-called "3 & Free" programs and "Fast Start" bonuses.
In this month's Risk Roundup, we examine each bonus type from two unique perspectives: (1.) the legal viability of each bonus structure; and (2.) the data-driven practicality of each method. To get to the core of these issues, we spoke to two industry insiders.
“It doesn’t take a lot of work for a plaintiff’s lawyer to find a disgruntled former distributor with an axe to grind, and then piggyback onto published case law and FTC guidelines that are critical of the direct selling industry.”
—Larry Steinberg, multi-level marketing practice group chair, Buchalter
In recent years, well-publicized class action lawsuits have been filed against multiple companies including Herbalife, Stream, Jeunesse, Rodan + Fields, MONAT Global and Advocare. The majority of these cases settle out of court.
In one example, the Jeunesse settlement required the company to pay $2.5 million into a fund and buy back products for a refund of up to $2,500 per affiliate. Stream Energy also recently settled after nine years of litigation, which included two trips to the U. S. Court of Appeals.
Xerox has often used advertising to shore up support for its brand against genericization. The above ad appeared in The Hollywood Reporter in 2010, and was discussed in the ABA Journal that year as well.
By Joseph Honescko
"Companies that do not stay ahead of potential problems can end up weakening their trademark and their brand."
—Tom Kulik, Scheef and Stone
Since there is no government agency, including the United States Patent and Trademark Office (USPTO) that keeps track of unauthorized uses of a company’s trademark, it’s up to the company to do their own policing to protect them. Failure to do so can have severe consequences, including losing all rights to the trademark. The risk is real, regardless of company size.
By Joseph Honescko
In April, Pennsylvania Judge Michael Baylson ruled in favor of the ridesharing company Uber declaring the drivers as independent contractors, not employees. Uber has been sued dozens of times over the past few years over this issue, but all prior cases have been settled in arbitration. The plaintiffs in the Pennsylvania case had opted not to sign arbitration agreements.
The U.S. Federal Trade Commission’s (FTC’s) positioning over the last several years has made one point clear: the agency does not view compensation plan participants as “real” customers, and takes issue with products being sold to independent distributors who resell the product to end consumers.