Op-Ed in the Hill by DSA President Joe Mariano: Direct Selling Is No Pyramid Scheme

July 25, 2017

We live in an age when consumers can purchase almost any product they want from online retailers and can hail a ride with a touch of their smartphone.

Fewer and fewer people are going to their local mall for goods and services they can order online and have delivered to their door within 24 hours. Retail businesses of all kinds are reimagining how they engage their customers.

Concurrently, more and more people are looking for income opportunities that afford them the same kind of freedom and flexibility they enjoy as consumers. There is a business model that’s been around over a hundred years that for many people seems a natural response to the changing dynamics in the workforce and marketplace.

Direct selling is the vibrant retail channel that offers consumers the ability to buy goods and services in the comfort of their own homes from friends, family members, and neighbors. And it offers budding entrepreneurs an opportunity to build a business on their own terms.

People get involved in direct selling for a variety of motivations. They might be looking for a part-time opportunity to supplement their family’s income or they might be full-time entrepreneurs building larger businesses and earning more substantial income by recruiting a network of independent sellers to serve a growing market of customers.

Or they might be people who affiliate with a company because they enjoy its products and wish to purchase them at a discount. All are legitimate activities that give satisfaction to millions of direct sellers and their customers.

Everyone who engages in or is considering engaging in direct selling, be they consumer or business builder, needs better protection from the reputational and financial harm caused by pyramid schemes that masquerade as legitimate businesses.

An amendment proposed by Rep. John Moolenaar (R-MI) to the FY 2018 Financial Services and General Government Appropriations bill, July 13, would define a pyramid scheme under federal statute for the first time and make clear that direct sellers buying products for their own personal use is a legitimate business practice.

The amendment also encourages all direct selling companies to provide a 90 percent refund for unused inventory, a commitment that is mandatory for member companies of the Direct Selling Association (DSA), the industry trade association I’m privileged to serve as President.

The Moolenaar amendment would do nothing to interfere with the Federal Trade Commission’s authority to prosecute pyramid schemes under Section 5 of the FTC Act, and is consistent with dozens of state laws and federal case law.

Everyone wants pyramid schemes prosecuted to the fullest extent of the law, but nowhere in federal statute is it clear to consumers or anyone else what constitutes a scheme.

These goals can be achieved by Congress without doing an injustice to past, current, or future agreements that the FTC has with companies to regulate their business practices.

Small businesses and consumers need clarity from their government about how they can operate their businesses and how they can purchase products they love.

This language is a commonsense way to provide them that certainty.

Joseph N. Mariano is president of the U.S. Direct Selling Association, a national trade association for companies that offer entrepreneurial opportunities to independent sellers to market and sell products and services, typically outside of a fixed retail establishment.





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