By: Peter Marinello, Guest Contributor
Peter Marinello is Vice President at BBB National Programs and Director of DSSRC.
Transparency is a hallmark and cornerstone of all industry self-regulatory endeavors, and the independent watchdog
program for the direct selling industry, BBB National Programs’ Direct Selling Self-Regulatory Council (DSSRC), is no exception.
DSSRC, an independent program developed in partnership with the Direct Selling Association (DSA), was designed to help support accountability and consumer protection in the direct selling industry.
The council’s role is to help ensure that direct selling companies are making truthful, accurate claims about the products they sell and about the opportunity to earn income with the business.
DSSRC accomplishes this through impartial and comprehensive monitoring of direct selling companies on an industry-wide basis, addressing issues with income representations (including lifestyle claims) and product claims by companies and salesforce members, including claims made on social media, as they arise.
For a self-regulatory program to gain the trust and confidence of both consumers and competitors in the space, it is paramount that the inquiries, case decisions, and guidance provided be open and available to the public so that industry members can learn both the fundamental principles and contextual nuances at issue.
Increasing Transparency in Reporting
Throughout the year, DSSRC provides access to all of its public actions on the BBB National Programs website, and each year, through annual activity reports, summarizes that work with a comprehensive overview of case work, new guidance, and educational efforts in the industry.
One area of reporting that historically has not been included is details surrounding administrative inquiry summaries—cases opened by DSSRC but closed administratively when the direct selling company, in its initial response, commits to discontinuing or significantly modifying the claims at issue.
As those who have been the subject of a DSSRC inquiry know, cases will be administratively resolved if they are relatively small in scale, such as those that involve one or two social media posts that a direct selling company takes immediate action to remove.
Since its inception in 2019, a majority of DSSRC cases have fallen into this bucket because direct selling companies have been cooperative in addressing concerns raised. Most often, when an inquiry is opened, a lack of education about advertising law is at the root of the infraction.
Unlike other case resolutions, the summaries of administratively resolved inquiry summaries, when posted on the website, do not include specific company names or the specific claims that were the subject of the DSSRC inquiry.
To increase transparency in reporting, DSSRC is committed to providing the names of those companies that were the subject of a DSSRC inquiry resulting in an administratively resolved summary in an Appendix to the annual Activity Report. Starting with the 2023 Activity Report, the Appendix will list those company names.
In addition to a list of names, the Appendix will also provide an opportunity for these companies to submit a Company Statement on their compliance oversight.
A Company Statement is a voluntary opportunity provided to companies that are the subject of a DSSRC inquiry to provide context around their experience with the inquiry and demonstrate their forward-looking commitment to ethical standards and compliance.
Often companies will indicate steps they have taken to ensure future compliance, such as the development of new training programs, revisions to existing processes, or the development of new oversight mechanisms.
DSSRC is sensitive to the potential misconceptions that could arise from identifying companies in summaries of administratively resolved inquiries and carefully considered the potential implications for the direct selling companies involved. As such, the council has taken proactive measures to mitigate any negative perceptions.
The Benefits of Transparency
Historically, there has been much public skepticism surrounding business practices in the direct selling industry. However, rather than shying away from criticism, it should be embraced as an opportunity for growth and improvement.
Increased transparency in the reporting of DSSRC inquiries will help build trust among members of the industry but also with those sharing in the skepticism.
When the inquiry and resolution processes are transparent, the credibility of the industry’s self-regulatory efforts is enhanced and the commitment of the direct selling industry to meaningful and effective self-regulation is demonstrated, including to regulatory stakeholders.
Aligning with regulatory expectations is crucial for the industry. The Federal Trade Commission (FTC), State Attorneys General, and other regulatory authorities have an expectation of transparency in advertising and in self-regulation endeavors as well as an expectation of compliance from participants.
In 2021, the FTC put direct sellers on notice: False promises about earnings potential and other aspects of a company’s business opportunity could subject the company to civil penalties of up to $43,792 per violation. Last year, the FTC revised its Endorsement Guides to combat deceptive reviews and endorsements in advertising.
DSSRC follows regulatory guidance when monitoring the direct selling marketplace and aligns its decisions with the expectations of regulators.
Additionally, if potential fines from regulators are not enough, transparent reporting serves as an additional deterrent to non-compliance by direct selling companies.
When companies know that the resolution of cases is being publicly reported, they are more likely to adhere to ethical standards and take corrective action to resolve any unsupported assertions. This new proactive reporting approach will hopefully only grow the culture of compliance that already exists within the industry.
The opposite behavior also occurs. When direct selling companies make a genuine, good faith effort to promptly address unauthorized claims in a positive context, they should be recognized for their efforts in improving training, compliance measures, and monitoring of their salesforce members.
A Time for Change
This new approach to reporting is just one example of DSSRC’s commitment to transparency and accountability. It demonstrates the council’s dedication to ethical standards, to meeting regulatory expectations, encouraging compliance, promoting industry best practices, and addressing stakeholder concerns.
DSSRC was established because leaders in the direct selling industry were committed to continuous improvement. With new avenues of clear and transparent reporting, we continue to educate stakeholders about the resolution process, helping them understand the criteria, considerations, and outcomes of inquiries, even those administratively resolved. This education assists direct selling companies in addressing similar issues related to the dissemination of claims by their salesforce members.
In the dynamic landscape of the direct selling industry, transparency and accountability are paramount, and the enhancements made to the DSSRC’s 2023 Activity Report reflect our ongoing commitment to these ethical standards in the industry.
By striking a balance between transparency and sensitivity, we aim to provide meaningful insights into our self-regulatory efforts while upholding the integrity of the industry.
As we move forward, DSSRC remains committed to continuous improvement and refinement of our processes. We welcome feedback from stakeholders and are open to further adjustments that enhance the transparency and effectiveness of our self-regulatory program.
By staying responsive to the evolving needs of the industry, we can ensure that our reporting mechanisms remain robust and credible.
