No one can control all of the challenges that face the direct selling industry, but education and transparency is the best approach to discuss issues.

No one can control all of the challenges that face the direct selling industry, but education and transparency is the best approach to discuss issues.

We have a long-term perspective as a law office that has had three decades of experience in the MLM industry. In the last three years or so, developing trends have posed both opportunities and challenges for network marketing companies. Mr. Babener discusses a few of these opportunities and challenges (paraphrased from the DSWA interview with Nikki Keohohou) in this post.

As far as industry-wide opportunities are concerned, there has been an explosion in party plan companies. The party plan companies that we know and represent are doing quite well. There has been growth in the public recognition of these companies. This is due to large-scale events such as the 2009 Super Bowl where Avon was a primary sponsor. At the 2009 Super Bowl, Avon advertised their opportunity, not just their products, which was really a message to the country that our industry has something special to offer to everyone.

The internet has also helped push the industry in a positive direction in recent years. Social media and growing internet technology has enabled many companies to expand internationally.

However, this also means that the industry has a new challenge: coping with internet technology. Companies have to recognize the creative power of Facebook, Twitter and all of the other social media platforms. Companies have to find a balance between enabling their consultants the ability to be creative and protecting the brand. Protecting the brand presence in search engines, protecting against inappropriate medial/earnings claims and allowing consultants to work with social media, providing basic tools for distributors, are industry-wide challenges that require delicate balance.

In addition, we’ve seen some tension between new companies and distributors in recent years. There are some consultants who are too willing to jump ship and bounce from one company to another. Distributor raiding is undermining to the company and the opportunity, as well as to all of the consultants left behind.

On the other hand, we’ve seen some overreaching companies who’ve been bullying distributors, telling them what they can and cannot do. There will have to be a dialogue to figure out the common ground for what are reasonable expectations for distributors and what control companies can have over distributor actions.

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News headlines for August 2013

On August 19th, 2013 the Dhaka Tribune reported that Bangladesh recently approved a draft of the newly-created Multi-Level Marketing (Control) Act. The article reports, “The provisions of the new act keep include a five to 10 years jail time or a hefty fine of Tk5m for conducting multilevel businesses without a licence.”

Other news headlines for August 2013 include:

Avon Says U.S. Rejects $12 Million Offer to Settle Probes (8/1/13)

Colliers International Lists Longaberger Golf Club for Sale (8/6/13)

WorldVentures opens for business in Poland (8/8/13)

Market America brings magic to its hometown (8/9/13)

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The the March issue of The World of Direct Selling‘s newletter, the editors asked, “‘Do you think the direct selling industry has an image problem that needs to be worked on? What makes you think that way?’ was the question we asked some of the experts.” MLM industry expert, Jeff Babener, provided his two cents, as shown below:

Jeffrey Babener, Legal Counsel at Babener and Associates

“Short term answer: Absolutely. However, as noted by famed Univ. of Chicago economist, Milton Friedman, the future is longer than the present. In the current financial markets furor of hedge fund titans bashing direct selling, with the financial press piling on, a slightly dejected industry should take note that in the ‘big picture,’ it actually isn’t doing so bad at winning the ‘hearts and minds’ of consumers and potential recruits. With some blips, long term image trends are good. In the past two decades, just witness direct selling’s extraordinary international expansion, its emergence on the NYSE and as acquisition target by NYSE companies.”

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When we’re engaged by direct selling companies one of the first questions we hear is “Should we go international immediately?” This is an understandable question to ask because the internet has changed the way we do business. Clients who are selling services can offer those services globally in a seamless fashion.

Obviously, more challenges occur if they are selling tangible products because of the required approval process. There are customs issues, tax issues, etc. Our answer to companies, as a general matter, is that they need to consider the cost and expense of international expansion. Some companies will say, “We can’t hold off the sponsoring of distributors around the world.” And, some companies decide they really can’t afford the cost, saying “We’re just going to invite distributors from other countries to come to our website and sign up here in the U.S. We’re not going to deal with the tax issues, compliance issues, etc. We’re going to just try to stay below on the radar.” But is that practical? Practically, if you were to ask us for the right answer, this isn’t the right way to address international expansion since every country – just like the United States – has its own compliance regulations.

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