Watching Out For a 47- Million-Member Community
A Conversation with
Neil Offen, President of the
Direct Selling Association (DSA)
By John David Mann
The Direct Selling Association (www.dsa.org) was formed in 1910 in Binghamton, New York by ten companies. The group later relocated to Minnesota, and then in 1968, to Washington DC, where, as our profession's trade association, they have grown into a formidable lobbying and educational force. Three years after the move to the nation's capital, DSA decided it was time to hire their first full-time, in-house lawyer. Seven years later, Neil Offen had graduated from staff attorney to Association President--and a great deal had changed.
The closely-watched federal litigation known as FTC v. Amway had just drawn to a close, giving the business a broad legitimacy and sparking the vigorous growth of the '80s and '90s. The DSA's scope of activities grew furiously as well: they formed the non-profit Direct Selling Education Foundation (DSEF), dedicated to educating the public about the profession, and oversaw the formation of the World Federation of Direct Selling Associations, which was formed by nine participating countries in 1978 and today boasts 59 member countries. (DSA member companies do business today in 175 countries worldwide.)
The Association's mission is, "To protect, serve and promote the effectiveness of member companies and the independent business people they represent. To ensure that the marketing by member companies of products and/or the direct sales opportunity is conducted with the highest level of business ethics and service to consumers." In 2010, the Association will celebrate its 100th anniversary--and, says Neil, their work has just begun.
Neil, can you give us a quick profile of the profession as it exists today?
There are about 13 million people in the US involved in direct selling; the majority are in some type of multilevel compensation program. About 10 to 15 percent of this sales force work 30 hours or more a week--that's about one and a half million people!
We're now getting a few million hits per month on our Web site, representing 50,000 to 70,000 individual people--and that's increasing rapidly.
How is the world of our business different today from ten years ago?
For one thing, it's much more multilevel. In 1985, only about 20 percent of our people were involved in a multilevel compensation structure; 80 percent were in a traditional, single-level sales structure. Now those numbers are reversed.
It's also much more multinational: 60 percent of our companies are multinational, and nine out of ten new companies today go international within their first few years.
It's also a much bigger world: We're up to $85 billion in annual sales worldwide--not counting China, which is going to be a fabulous market. And it's a much more sophisticated world, with many more resources. The Internet has also vastly improved our communications.
What does the DSA do, broadly speaking?
The DSA has about 25 full-time staff here in Washington; DSEF has another half dozen. Our member companies do over 90 percent of all US sales in our industry, and represent over 90 percent of the salespeople. We're also the headquarters of the World Federation of Direct Selling Associations.
Our number one priority is governmental relations. We lobby government and regulatory agencies on every level, from federal to local, both domestic and foreign, to protect the industry from unnecessary government regulation and help create effective consumer protection laws.
Our second priority is professional education. We present a range of seminars each year--an international seminar, a tax seminar, a technology seminar, a government relations seminar, a multilevel marketing seminar, and so forth. Our annual convention and our fall management conference are our major educational programs.
What impact does the DSA have on me, the individual distributor out here in the field?
Everything we do is geared to protect and promote distributors. We believe that what's in the interests of the field is going to be in the best interest of the companies.
Our Code of Ethics protects consumers who buy and use our companies' products and also protects distributors from being abused by the companies. I call it "the three P's": Our job is to protect the industry, to promote the industry, and to police the industry.
If my company wants to become a member of DSA, what kind of standards does it have to meet?
We have a one-year screening process; it takes at least that long for us to conduct our investigation--and I think we may extend it to two years.
About half the companies who apply are accepted after that one year and become members. Of the other half, most drop out from the pressure, rather than being actually rejected.
Each of our companies has to recommit to be bound by our Code of Ethics each year when they renew their membership. Our Code applies in every one of the 175 countries where a member company operates.
We also conduct a random lottery that selects 20 percent of our existing members for audit each year, to make sure that once you're in, you don't misbehave. To monitor our member companies, we send our lawyers to sit in unannounced on opportunity meetings and conventions, to make sure that what our companies are telling us in writing is actually what's going on in the field. We also check with the various state Attorneys General and the FTC to check the company's reputation and make sure there's no litigation against them.
For years, we've been saying, "If we don't do a better job policing ourselves, the regulators are going to step in and do it for us." How are we doing?
This is a big part of what DSA is all about. One goal we're working toward is for the DSA logo to become widely recognized as a seal of good practice, something akin to the Good Housekeeping Seal.
All our member companies are required to communicate to all their employees and distributors the provisions of our Code of Ethics and their adherence to that Code. They are required, on their own Web sites, to hyperlink to our Web site and our Code of Ethics complaint filing system, so that their distributors and consumers will know we exist to protect them and they can go right into our system if they need to.
In the past, we have not enforced this requirement; we are beginning to do so. The companies have to communicate our existence. If they're not, our Code of Ethics Administrator steps in and takes action.
Can you give us an example of effective lobbying?
Back in the '70s, the IRS tried to make all our salespeople employees. It took a ten-year fight--five years in court and five years in Congress. Finally, in 1982, we got Section 3508 of the Internal Revenue Code, which says that if you're a direct seller and you meet the criteria that we drafted, you are not an employee for federal tax purposes--so the company can't withhold on you or make you pay FICA.
Economic consultants told us that if we'd had to make our people all employees, it would have cost a billion dollars (in 1978 dollars)--and we would have had to terminate two-thirds of our people!
And some examples of self-policing?
We used to have high-pressure sales; in the early '70s, I personally lobbied 35 state legislatures to help enact cooling-off laws to protect consumers and get rid of high-pressure sales. Today we have a federally-mandated three-day return guarantee; in some countries, it's a lot more than three days.
The next big abuse was inventory loading; that's why we now have buy-back laws: If you decide to get out, the company must repurchase your unsold inventory (usually at 90 percent of your cost). We've now extended that to include Web sites--and we had a company quit the Association over that issue.
We're currently dealing with the problem of exaggerated earnings claims. The FTC people want to deal with that by not allowing compensation on personal consumption by the salesperson and his family. This is crazy--misses the point completely. So I've gone to the FTC and some AGs and said, "Look, if the problem is exaggerated earnings claims, maybe the answer is transparency. What if we mandate that companies have to publish the mean and median income for each title, highest and lowest incomes for each title, and average length of time it takes to get to reach each position?"
Some companies have done something like that voluntarily, and it only enhances their credibility.
That's exactly right. We have about a dozen companies who already supply that kind of information on their Web sites. If we give that data on our Web sites, then how can people be misled? So we have a bill in Congress aimed at stopping the FTC from banning compensation on personal consumption.
Have you seen changes in public awareness of direct selling and network marketing during your tenure?
We place a lot of importance on researching this worldwide. We're doing a major update of a 2000 study on public attitudes and last year we did a major study of the salesforce.
In 1976, Lou Harris conducted a public attitudinal study about the industry and found a fascinating dichotomy between reality and perception: The experience of the people polled was almost universally positive--yet those same people had an overwhelmingly negative image of the industry. They had a good experience themselves--but for some reason, thought that other people were getting ripped off!
Harris said these stereotypes were so deeply ingrained, it would take millions of dollars a year for 20 years before you could make a dent in it. We didn't have those kinds of resources, so we decided to focus internally, within the industry.
Today, a quarter-century later, the world is changing. This month's issue of Fortune [Aug. 11, 2003 edition] featured tangible evidence of the new image-enhancing, reputation-building program we're launching globally: a 19-page insert, with an article written by Fortune reporters, along with ads for many of the major companies. There's never been anything like this before; this is indicative of what we're able to accomplish now.
What's our biggest challenge in the years ahead?
We have to get our positive story out over and over, realizing that we're always going to have thousands of bad actors, no matter what. This is in part because of the ease of access. One of the great things about our industry is that we take anybody in, no matter what age, sex, educational background, financial condition, race, religion or physical condition--it's wonderful, and it also means that anyone can slip in.
There are 47 million sales people in direct selling right now, world-wide--that's like having an entire country! In any country of 47 million people, you're going to have both saints and crooks. If one hundredth of one percent of our people misbehave, that's almost 5000 people--that's a lot of negative publicity.
We have a wonderful career opportunity and a wonderful group of people--but we need to counter the negative image. Perhaps we shouldn't have listened to Harris back in '76. In any case, we have no choice now: We have to do it. If it takes another 20 years to educate the world about network marketing and create in the public's mind the positive image we deserve, then so be it. That's the job we have to do--and we're doing it.