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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Expert MLM Attorney, Jeff Babener, discusses how companies should handle discussions about compliance with their distributors. It is important for direct selling companies to be clear about what claims/statements distributors, consultants, members, representatives, etc. can and cannot claim about their earnings and products.

Interviewer: What I want to do now, Jeff, I want to turn our attention to compliance. Because this is an important key issue for any company, for any business owner, for any consultant or distributor, to know that their business is compliant. What would you say are, in your mind, the top issues regarding compliance that someone needs to be adhering to in order to make sure that they themselves are being compliant in the marketplace?

Jeff Babener: Okay. Well, maybe we ought to talk about this issue from the perspective of the company and from the perspective of the distributor. But in fact they’re one and the same. We have two goals: one is to help make them successful, and secondly, to help keep them in business. We’ve represented a lot of the leading direct selling companies. We’ve helped to start a lot of MLM companies.

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Interviewer: Jeff, let me ask you this question, what’s the difference between a legitimate direct sales opportunity and a pyramid scheme?

Jeff Babener: If you’re selling a product or service and it stands on its own in the marketplace and people would buy it because they want it, then you have a real, legitimate direct selling company. If on the other hand, the quality of the product is low, the price is high, then it merely becomes an excuse for people to buy the product because they want to qualify for the program in order to recruit others, make money, and earn commissions.

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The question below is taken from one of Mr. Babener’s client’s distributors’ Q&A pamphlets:

Q: My friends and relatives often ask me if direct selling/MLM/network marketing is a “real business”… I would like to give them something meaningful to consider … your take?

A: People have always asked that question… and it is a fair question. Keep in mind we have nearly 16 million people in the United States selling consumer products and services in the range of $30 billion and more than 90 million people around the world doing this with sales exceeding $150 billion. This activity penetrates the fabric of our society. Earlier statistics, presented by the Direct Selling Association, have indicated that, perhaps, one in ten households have somebody who is doing this part-time.

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