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May 01, 2015

DSA News

Responsible Self-Regulation

by Joseph N. Mariano

Click here to order the May 2015 issue in which this article appeared or click here to download it to your mobile device.

Protecting Our Most Important Assets

A few weeks after the Federal Trade Commission’s National Consumer Protection Week (NCPW), the Direct Selling Education Foundation (DSEF) hosted a panel discussion with top executives from three industries—advertising, distilled spirits and direct selling—to discuss the role of self-regulatory initiatives and their benefits to consumers. As one of the participants, it was fascinating to learn what other consumer-facing industries are doing on their own to protect consumers, while sharing highlights of Direct Selling Association’s (DSA’s) voluntary approach to policing our sales channel.

This event was a great reminder to me that our people—the salesforce and the consumers they serve—are direct selling’s most important assets. If customers saw no value in our personalized approach, then revenue wouldn’t continue to grow by 3 percent to 5 percent each year, as DSA’s most recent research indicates. However, continuing to gain customers and remain competitive with traditional retail will require DSA and every member company to place consumers squarely at the center of business operations. Indeed, there is a leadership role we must play, and DSA’s Code of Ethics should be at the center of an industry-wide solution.

The fact that DSA enacted and continues to refine a voluntary Code is not an achievement that should be taken for granted. It represents thousands of hours of legal and policy work, consensus-building among member companies in different retail segments, and evaluating criticisms brought against the industry. The Code promotes common-sense solutions that protect distributors and consumers without discouraging growth.

Every day, I am reminded exactly how our Code of Ethics works to protect consumers, as my colleagues on the DSA staff carefully evaluate new direct selling companies for membership and take note of how the actions of some companies outside of the association with less-than-stellar records on ethics can blatantly violate consumers’ trust.

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. Each direct selling company applicant goes through a year or more of well-intentioned scrutiny to ensure compliance with our Code before they are invited to join. This includes understanding the nature of complaints made against applicant companies and how they were handled and ultimately resolved. Once a direct selling company becomes a member, we subject it to periodic, random reviews to ensure continued compliance, and all complaints are adjudicated by an independent Code Administrator. Importantly, the Code also holds independent direct selling consultants affiliated with DSA members to the same high ethical business standards as our member companies. For these reasons, DSA membership can be a powerful differentiator for consumers in the marketplace.

As proud as we are of our heritage of responsible self-regulation, we also recognize we cannot rest on our laurels, because the marketplace inevitably demands more from us over time. Changes to the Code of Ethics have been contemplated nearly every year since the original document was ratified by DSA’s Board of Directors in [1970]. This year is no different.  Members of our Ethics & Self-Regulation Committee are taking a critical eye to just about every aspect of the Code—including consumer protective measures on income, lifestyle and health claims, and inventory return, as well as transparency. I fully expect this evaluation to deliver substantive policy changes later this year.

Although the Code imposes consumer protection measures that already go beyond the minimum standards set by the legal and regulatory communities, 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. In this meaningful way, we will ensure that DSA’s Code of Ethics remains relevant and vibrant, shedding new light on specific ways in which direct sellers are fighting on behalf of their customers.

From time to time, we reflect on our Code of Ethics because it’s the right thing to do, but that isn’t always easy. It means being willing to have an honest conversation with ourselves about where we fall short and how we might challenge, or even change, false perceptions over time with concrete actions we take that build upon our already strong heritage of ethics and consumer protection.

While every industry may have its share of bad actors that diminish it from time to time, DSA will continue to provide leadership in these important areas, setting the standard for a direct selling industry that’s worthy of consumers’ and policymakers’ trust for years to come.

Joseph N. MarianoJoseph N. Mariano is President of the U.S. Direct Selling Association.