CAI
Consumer Awareness Institute
Non-profit Corporation
Legislators
and Regulators –
BEWARE the DSA!
For those who are informed on product-based pyramid schemes, it is difficult to find anything good to say about the DSA (Direct Selling Association). Once an association of legitimate direct selling companies, like World Book Encyclopedia and Tupperware, it has recently been taken over (some say hijacked) by pyramid or chain selling schemes; i.e., “recruiting MLM’s.” Careful study of the objectives and actual accomplishments of the DSA lead to the following conclusions:
1. The DSA
lobbies for legislation at the state and federal level that shields some of the
most deceptive and predatory schemes ever hatched.
Some of these
endless chain or product-based pyramid schemes are MLM (multi-level or network
marketing) programs that break a variety of laws every single day.
For details, read prior issues of this series at – http://www.mlm-thetruth.com/E-seriesIndex.htm
Justifiably fearing
prosecution by earnest regulators or private class actions by plaintiff
attorneys, DSA member firms are constantly seeking legislative protection from
prosecution by writing deceptive legislation. Cleverly hidden in bills that
seemingly provide some protection for consumers (buyback provisions, etc.), is
language that exempts MLM companies from prosecution as illegal pyramid schemes.
However, recent research (http://www.mlm-thetruth.com/mlm_research.htm
) demonstrates that the highest loss rates of all pyramid schemes are
product-based schemes, or recruiting MLM's. So the effect of the
legislation is to make the worst pyramid schemes legal.
Uninformed
legislators have passed such legislation in several states, which has tied the
hands of consumer protection agencies in those states. Congress has been lobbied
by the DSA to pass HR 1220. Utah nearly passed HB 269 last year (voted down by
the Senate after two brave senators spoke against it in the closing minutes of
the session), and it appears the DSA will attempt the same thing this year. The
DSA has deep pockets, and it will take much time and energy of a few dedicated
consumer activists to stop them.
2. DSA
members donate generously to the election campaigns of candidates for key state
and federal offices to facilitate the growth of endless chain or product-based
pyramid schemes worldwide.
As one would expect, the
DSA donates to influential candidates for offices that influence legislation and
regulation relating to pyramid schemes, including legislators and Attorneys
General in states where they introduce legislation, such as happened recently in
Utah. Nu Skin and Usana were lead contributors to the election campaign
of Utah Attorney General Mark Shurtleff – who favored HB 269 (DSA legislation)
in 2005.
Even more
shocking, an MLM outside the state which has been sued in class actions as a
pyramid scheme is Pre-Paid Legal - which contributed $50,000 to the Shurtleff
campaign prior to his testimony on the DSA
legislation that passed in 2006. The legislators at the hearing trusted his
legal advice, which was remarkably uninformed and misleading. Mr. Shurtleff did
not disclose the ethical conflict. He had been mailed information to warn and
inform him about this deceptive legislation. But it is very difficult to get
someone to understand something he is paid not to understand!
Note also that
Amway (or
Quixtar) has been the one of the largest contributors to the Republican Party
for many years. It has also been reported that Amway has entertained Republican
legislators on the Amway yacht as well as maintained close ties to the Bush
family.
Thanks in part to
pressure from White House trade representatives, the World Trade Organization (which
regulates trade and tariffs worldwide) has been requiring potential
benefactor nations to accept the MLM version of direct selling by the World
Federation of Direct Selling Associations (primarily the DSA) in order to
receive trade concessions from them. MLM, or product-based pyramid schemes, are
thus promoted by DSA members worldwide as “the American way” of free
enterprise. As a result, vulnerable consumers from 2nd and 3rd
world nations stand to lose tens of billions of dollars, which enrich mostly
American MLM companies and promoters. Long-term, this cannot help our soured
relations with much of the rest of the world.
Also, from 2001 to
2004, the Federal Trade Commission was led by Timothy Muris, a Bush appointee
who led the defense of Equinox, one of the worst product-based pyramid schemes
and a member of DSA. It has been some time since the FTC has seriously pursued
any major recruiting MLM’s as pyramid schemes. And the FTC has not enforced
some of its most important actions in this arena, including “the Amway
rules” and the Order for Nu Skin to stop its misrepresentations. (Read REPORT
OF VIOLATIONS linked from “Nu Skin’s Naughty Numbers” at –http://www.mlm-thetruth.com/nu_skin's_naughty_numbers.htm
The DSA’s
political contributions are a prime example of how money and politics can
corrupt the legal system – leaving consumers without adequate protection.
3. The
DSA promotes misleading consumer education and information.
In reading their flyer entitled “Pyramid schemes: Not what they
seem!” readers are told that multi-level marketing programs are “legitimate
income opportunities.” As cited above, recent research reveals that this is
not the case for nearly all MLM’s. For evaluations
of over 200 MLM’s, based on this research, go to – http://www.mlm-thetruth.com/mlm_evaluations.htm
Unfortunately for
consumers, the Better Business Bureau and several states have used the
information supplied by the DSA’s Direct Selling Education Foundation in their
own literature and in information on their web sites on the topic of pyramid
schemes and MLM. Many consumers who follow such advice will lose a lot of money
in highly leveraged product-base pyramid schemes. For an example, read my
critique of Utah’s web site information.
4. The DSA
misrepresents who they are.
In much of their
communication, the DSA claims to represent a membership made up of legitimate
direct selling companies. While many legitimate direct selling companies are
included in their membership, some of the most notorious product-based pyramid
schemes (recruiting MLM’s) have also been members – and even prosecuted as
illegal pyramid schemes (Equinox, Trek Alliance, etc.)
The DSA define
s
direct selling as “the sale of a
consumer product or service, person-to-person, away from a fixed retail
location.” This is
acceptable, but what the DSA omits is what legitimate direct selling is
NOT – recruitment of
participants who buy products to qualify for commissions and who then recruit
more participants to do the same – ad infinitum – in an endless chain of
recruitment. These participants may be called “distributors,”
representatives,” etc., but in fact such chain buyers are the MLM’s primary
customers. For more on what direct sales is NOT (and what the DSA is), go to –
http://www.mlm-thetruth.com/dsa.htm
Anyone who has read
the above reports with an open mind will agree that the typical MLM is no more a
legitimate direct seller than a pig is a horse. A pig is still a pig, no matter
how much money is spent positioning it as a horse.
5. The DSA
engages in unethical business practices, including the web version of identity
theft.
Although the DSA
requires its members to comply with its “Code of Ethics,” it has little
compunction against unethical practices to promote its ends. In addition to the
foregoing, note the following:
In June of 2000 a
non-profit group called Pyramid Scheme Alert was created to expose and prevent
pyramid scheme fraud. Volunteers created a web site – pyramidschemealert.org.
The “org” domain suffix was the acceptable at the time for non-profit
organizations. Profit-making companies would have to use the “.com” – or
“.net” for computer-related businesses.
Soon after the
requirements for these suffixes were lifted, what do you suppose the DSA did? In
April of 2003, Amy Robinson of the DSA registered the domain names
“pyramidschemealert.com” and “pyramidschemealert.net.” Check it out. If
a person accidentally typed in either of these common suffixes, they are taken
to – you guessed it – a DSA web page that gives their convoluted definition
of what is a pyramid scheme. On the web page, multi-level marketing is presented
as a “legitimate income opportunity” – which would include MLM’s with
horrendous loss rates (Read the statistics linked from – http://www.mlm-thetruth.com/NUMBERS.htm)
The DSA has also
sponsored links from several related sites to their site for “Pyramid Scheme
Alert.” This identity diversion, or web identity theft, is an excellent
illustration of the deceptive marketing practices routinely used by the MLM
industry.
6. A contest:
What does DSA really stand for?
Since
DSA, as the
acronym for Direct Selling Association, has become something very different from
what it purports to be, perhaps we could suggest a more accurate de facto title.
Let’s see. How about “Deceptive Selling Alliance?” No, recruiting MLM’s
that belong to the DSA are about recruiting, not legitimate direct selling. OK,
let’s try – “Deceptive Scheme Alliance?” Pretty accurate, wouldn’t you
say? Other nominations will be considered.