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DSA Attempts to Legalize Product-Based Pyramid Schemes

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Direct Selling Association Says Few People Lose in MLM and, if They Do, They Don't Mind It !

February, 2007

The Direct Selling Association (DSA), the official voice of the MLM industry and many individual MLM companies, gave their versions of reality to the Federal Trade Commission recently. They wrote to object to FTC proposed rules that would require MLMs to provide more information about loss rates, failures and business costs when they solicit consumers to join MLM schemes. See http://www.ftc.gov/os/comments/businessopprule/522418-12055.htm

Pyramid Scheme Alert will soon be releasing a report on the fantastic claims and amazing logic used by the DSA to cover up the massive losses inflicted on consumers by multi-level marketing schemes and the lack of any “direct selling” in most MLMs

Among the claims of the DSA and other MLMs are
(1) MLM should not be classified as businesses that sell a “business opportunity”
(2) Most of the people who lose money in MLM do not really lose and are not harmed because they are actually not trying to make any money at all. They only want to buy MLM products at a discount.
(3) Many people show up in the annual average statistics as making only a tiny amount of money (e.g., $6 a week) in MLM because they only join for a “season.”
(4) Few people retail MLM products, not because the products are too high priced, unknown to the public, the retail margin too low, and the time and costs of selling too high, but rather because they only want the products for themselves.
(5) The large number of people who quit MLMs (e.g., 72% of all salespeople of Quixtar, the largest of all MLMs, quit within one year) is not a sign of pyramid collapse, consumer losses or MLM deception. Rather, it is a tribute to how easy it is to enter and leave the MLM business.
(6) No MLM should be evaluated on the basis of retail selling, but only on whether the salespeople themselves buy the products. Selling only to salespeople, and paying them when they recruit other salespeople in an endless chain, should be legally treated as “direct selling,” not a pyramid scheme.
Direct Selling Association (DSA) is the trade group of the MLM industry. Past DSA members have included a number of MLMs, including Equinox International and Trek Alliance, which were shut down due to regulatory action. The DSA has submitted a proposed piece of legislation which would effectively legalize any product-based pyramid scheme. Under its provisions, Omnitrition, Equinox International, Heritage International, and many other product-based schemes would have continued harming consumers, and it would all have been legal.

The DSA Bill's Effect on Consumers
Who is Behind this Bill?
What does this DSA Bill do to Past and Present Regulation of Pyramid Marketers?
What does this DSA Bill do to Consumers?
What does this DSA Bill do to the Marketplace?
Summary

This page last updated on 8/13/08