Education. Economic Impact. Collaboration.
At a time when legislative gridlock in Congress means fewer regulations created by statute as well as increasing incidents of regulatory rule interpretation and expansion, direct selling companies are wise to step up or step into government affairs and advocacy at this time in order to proactively protect themselves. After all, once the Federal Trade Commission (FTC) comes knocking, it really is too late.
Trite, but true—all politics IS local, especially when it comes to advocacy. Lobbying elected officials at the state or federal level essentially begins by making friends in home territory. Advocacy works best as a long-range plan, aimed at building relationships incrementally while times are good, and sometimes winds up in Washington asking legislators for support when it’s needed most.
Along the way, a great deal of education needs to take place so lawmakers understand the issues their constituents face and the impact—sometimes unintentional—proposed legislation could have. That impact can be on real jobs and real people; the products they sell; the companies they represent; entire industries—even significant segments of a state’s economy. And in the case of direct selling, tens of thousands of independent contractors across the US.
So, now is the time to put faces to your corporate names and brands. Because people connect with people. People learn from people. People care about people. And to effectively educate Congress and state legislative bodies about direct selling’s empowering business model, it takes our people sharing their stories with their Congressmen and women, Senators, state representatives and staffers in offices scattered throughout state and federal capitol complexes.
People-to-people strategies—something the industry’s known for successfully executing and leveraging—create whole new levels of personalization and depth to relationship building. And when it comes to advocacy, our industry’s familiarity with this method of contact could provide a remedy for what is often most misunderstood, misconstrued and misrepresented about the industry’s way of doing business and how direct sellers earn a living.
Imperative Learning and Investments
“Government outreach, for the most part, is education first, advocacy second. Because no one is going to advocate for something until they understand. And if you’re waiting until you need advocacy to educate, it’s too late,” Deborah K. Heisz, Co-CEO, Neora, said.
“Too little too late” is how Heisz describes Neora’s government advocacy efforts before the FTC came knocking. And what they learned was that once in a fight with the FTC, no one legislatively will reach out on your behalf because it is an open case, and they can’t.
So, it’s important to put defunct theories about advocacy to rest; inform and strategize in the C-Suite; then make proactive investments because you are not painting a target on your back by participating. What you are asking of advocacy efforts is to bridge the gap between the realities of your business and the knowledge of government officials.
For Neora, throughout their landmark case against the FTC and going forward, Heisz said, “We’re asking them to pay attention to what this agency is doing—to determine whether that’s positive for American business and the American people or not. And we’re pointing out areas where they may have blind spots or haven’t been educated.”
It turns out that data—hard, cold data—was the solid ground on which Neora argued its case against the FTC and ultimately won in court. And it is data, that when combined with human relationships, can eliminate blind spots and convert elected officials into legislative advocates.
In Neora’s case, the data was company-specific, and it supported their argument that they were, indeed, following the law. However, Neora’s victory can’t be construed as a win for the entire industry because in the new guidance issued by the FTC in April 2024, it looks like the FTC is attempting to equate multi-level marketing with pyramid schemes, despite other industries participating in multi-level compensation for salespeople.
This means that direct selling companies need to educate themselves about their own businesses by collecting and analyzing their data to prove compliance with the law, while simultaneously teaching lawmakers about the industry and business model, as well as the very real prospects of government overreach by independent agencies.
“It is important for us, not just as a single industry, but banding together with other industries, to educate the government on the true impact these agencies are having on business. Because if we don’t, they are not going to be reined in, other than through judicial and legal action,” Heisz added.
Coalescing State Advocacy Impact
The direct selling industry is a mystery to many people, especially lawmakers who often only equate it with something far less impactful than its $65.2 billion in US sales last year. They simply don’t know what they don’t know. So, it’s our job as a channel to teach them about the industry’s economic impact; the opportunities direct selling provides families for supplemental income; how millions of people benefit from the opportunity and education afforded by direct selling companies; as well as the innovative, quality products exclusively sold by direct sellers. Of course, this educational process is perpetual since elected officials cycle in and out of office, and it’s at these inflection points where new, advantageous opportunities exist.
Troy Keller, partner with Dorsey & Whitney LLP, practices corporate law in Salt Lake City, where he coalesced a group of direct selling companies on a trade issue that put industry jobs at risk several years ago. Simultaneously, long-time industry advocates in the Utah Governor’s office and US Senate retired. Newly elected leadership lacked industry understanding and awareness, so this loosely based coalition went to work explaining the stakes, eventually galvanizing Utah’s Congressional delegation and avoiding tariffs that would have prejudicially hit key products.
“That made things click for several companies here in Utah,” Keller remembered. And the coalition grew organically from working together on common interests at a state level to seeking greater impact.
“The FTC was being aggressive, bringing actions against a couple of companies in the industry. It was a clear trend that folks were worried about, but we weren’t sure that our own representatives were educated on the issues for one, but also why it mattered for them and for their constituents,” Keller said.
Grant Baskerville, chair of the now formalized Utah Direct Selling Coalition, said, “I think there was a greater understanding that we’re operating in a pre-competitive space, where there are a lot of shared interests both state-wide, nationally and in some cases internationally, where it’s beneficial and advantageous for all of us to collaborate and work together.”
So, the coalition took a fairly normal route to helping people put facts on the page and connect the dots to the relevancy of an industry—they put together an economic impact study, in collaboration with World Trade Center Utah and the Utah Governor’s Office for Economic Development, working closely with the Gardner Policy Institute at the University of Utah.
“It was a lot of sweat equity by the companies, by my team and by the state to gather and verify the accuracy of data. It was a good year and a half of work,” Keller said.
Education paired with inspiration were the study’s goals. The study would be a reference point to building relationships proactively where they needed them.
“Our goal wasn’t just for Utah’s representatives in Congress to be aligned with industry and DSA priorities. We wanted them to be champions for the direct selling industry,” Keller shared.
“One company quantifying its impact is one thing. A group of 12 companies coming together to quantify their collective impact in the state can be really powerful and send a great message. Not only that, but it shows that this group of companies are coalesced and share the same interests and concerns. That is incredibly helpful as well,” Baskerville explained.
So, what did they find?
The study verified Utah as a global hub for the direct selling business model with 91 direct selling companies headquartered in state and 66 key suppliers, as well. Ten of those companies sold more than $10.3 billion in goods and services to customers around the world—6.1 percent of industry sales from all states and countries.
“We knew that there were a tremendous amount of jobs created in the state by the industry, but hadn’t yet quantified it. We found that it was over 17,000 jobs directly supported, then almost 21,000 jobs indirectly supported by the industry. We’re over 38,000 jobs in Utah alone. That was a huge boon to learn that,” Baskerville said.
But something of a surprise was that these jobs paid significantly higher than average wages compared to other Utah industries. “We have a great economy, but a lot of that comes from companies that are headquartered outside the state that have manufacturing or sales offices or distributorships in the state. So, the direct selling industry is one of the few where virtually all the companies are headquartered here in Utah, and that means a lot of management jobs. I think that made a difference that we hadn’t really appreciated would come out so clearly,” Keller said.
But the most eye-popping of all was direct selling’s impact on Utah’s export numbers. As a landlocked state, Utah’s manufacturing segment makes a lot of parts for the aerospace industry and others, which travel out of state for final assembly and don’t qualify as exports. But essential oils and supplement products are manufactured from raw ingredients by Utah’s direct selling companies and are shipped around the globe. This brought big surprises to the coalition.
“It was remarkable, to be honest, to understand that over 70 percent of the state’s non-gold exports were from the direct selling industry—$6.3 billion in international exports. That’s incredibly powerful to be able to quantify and communicate that to representatives in the state and also across the nation,” Baskerville said.
It certainly caught the attention of Utah’s elected officials, who want to think of Utah as an international state, one that has influence around the world.
Beyond the economic impact study, the primary directive of the coalition, which is comprised of 12 corporate members and a broader subset of ecosystem industry support services companies, is to help defend the industry by cultivating legislative champions. But they’ve so far also worked at the state level to adopt laws to make cosmetics manufacturing and international sales easier and explored ways to strengthen the industry’s position and argument that direct selling distributors are independent contractors.
“I think that a really important strategy for the industry is to look at how they can pay attention to things at the state level, so they can combat them if they need to. But, frankly, more strategically is to ask what initiatives we can do at the state level that can create an environment that is more conducive to the good stuff we are trying to do for our consumers,” Keller said.
Coalition Benefits
The highly collaborative and communicative, pre-competitive operational style of the Utah Direct Selling Coalition creates plenty of advocacy opportunities. It’s an on-going forum of sorts, whereby a member company identifies an issue; emails the group; jumps on a call; and the group can then take quick action. And those actions, taken as a collective unit, lend all-important third-party credibility. Utah’s success shows that there may be opportunities for other states or regions to work together similarly and coalesce their advocacy efforts, too.
“We encourage companies who operate in other states across the US. If you have a good network, if there is a little group of companies in your state working in the industry, definitely talk to each other and see if there are opportunities to collaborate, work together, amplify the interests and your own collective interests, as well. You might be pleasantly surprised by the reaction and support you receive,” Baskerville said.
Building a coalition Heisz explained, “takes the pressure off of an individual company standing alone. It really does show that it’s a broader swath of people impacted. It spreads the cost burden around, and it also creates more visibility. It certainly would allow a mid-size or smaller company, as part of a coalition, to be heard and to be able to contribute to the conversation. Whereas independently, they may not have the resources or the knowledge to act—just as being part of the Direct Selling Association does, but you end up with a group of peers.”
Moving forward, Utah’s coalition continues to work very, very closely with national entities like the DSA, who Baskerville said does a phenomenal job at protecting and promoting the interests of the industry nationally.
“As a coalition based in Utah with such a large number of direct selling companies based there, we think we also have a supportive and supplementary role to play in the advocacy space nationally as well,” he added.
And during this time of political division and gridlock in Washington, a diverse group of companies coalescing different perspectives, resources and relationships, united for the greater good of the industry just amplifies and enhances the potential of advocacy on all levels.
With little legislative action happening on the federal level, states are taking up issues with increased frequency and urgency. We’ve already seen this with privacy laws and issues surrounding Artificial Intelligence. This trend will likely continue, so keeping watch and advocating on the state level is imperative.
But the industry can’t take their eyes off Washington either.
“I will tell you that despite all the divides that there are about business and about what government should and should not regulate, there are commonalities. There are Senators and Congressmen and women who want to support micro and small businesses on both sides of the aisle. We can’t work on just one side of the aisle, which is another reason to have a coalition rather than a single company. Your own company bent might be one side or the other, but we need to find a way to talk to both sides in order to truly make progress,” Heisz said.
From the July/August 2024 issue of Direct Selling News magazine.
