Last Friday, September 12, 2014, Avon quit the Direct Selling Association and wrote an open letter to the industry. Here is the press release with link to the letter.
Avon’s letter said (paraphrasing): the Direct Selling Association (DSA) has been hijacked by pyramid schemes and protecting a select few members.
If you are reading this, you are well aware of the issues surrounding Herbalife. Under the pressure of a 50 million candlepower flashlight, that criminal racketeering enterprise has recently made several changes to its business methods. Interestingly, Avon’s letter highlighted three differentiating characteristics, all of which fall right into the lap of Herbalife and its affiliated Mega-Recruiters.
Avon went on to differentiate by saying:
(1) Avon doesn’t encourage sales of inventory, training or business support material between Representatives- recruiters to new recruits. (Herbalife recently prohibited all “Business Builder Tool scams”)
(2) Avon has a reasonable return policy. (Herbalife recently changed to a “Gold Standard” return policy; which really doesn’t matter because they’re force feeding the product to Nutrition Club members anyway.)
(3) Avon limits earnings to 3 generations. (Herbalife pays Infinity Bonuses – a telltale of pyramid schemes. Sales and profit will fall apart if Hebalife eliminates the Infinity Bonus from its pay plan.)
The DSA got their members (including illegal Multi Level Marketing pyramid schemes) excluded from the FTC Business Opportunity Rule. That is like saying the Dentists are excluded from the Dental Opportunity Rule. It is outrageous. The main objection that pyramid schemes had with the BOR was the 7 Day Wait Period. No pyramid scheme can function successfully if they have to wait 7 days to fleece their targets. Of course, that’s the whole point. And the DSA succeeded in protecting the criminal racketeers. I’ve previously said, either the world is upside down or people need to go to jail as a deterrent for that not to happen again.
Let’s stop dancing around the issue. Tupperware CEO said it plainly: The
DSA and industry has been run over by pyramid schemes in the 35 years
since ’79 Amway. At the time, Administrative Law Judge James Timony, along with Commissioner Robert Pitofsky (former FTC Chairman and former Dean of Georgetown Law), Commissioner Elizabeth Dole and the other Commissioners made a HUGE error. The harm has been unprecedented.
Someone with a pulpit, influence, and/or industry credibility – Avon, Tupperware, Cutco, Berkshire Hathaway (Pampered Chef, Kirby, WorldBook) and others – should stand up and LEAD the formation of a new trade association. You can temporarily call it the NPSA (Not a Pyramid Scheme Association) because that would more accurately describe why they are separating from the DSA.
Federal regulators should pay particular attention when well known, old line industry leading companies turn their back on a trade association and the companies that indirectly control them and the agenda.
In 1989 Amway tried a hostile bid for Avon, but Avon responded by reminding the investment community that Amway had a long and colorful history of criminal activity or accusations, lawsuits, tax evasion and on and on (quite unlike most companies). Amway dropped its bid. (The Belle of the Ball, Avon, received an offer she couldn’t refuse from the Mafia Don. Illegal new money seeks legitimacy by marrying the old money. It’s an old storyline.)
Pyramid schemes covet the brands consumers know and trust because they use that trust to deceive. That’s why they joined the DSA, to associate their fraud with trusted names. I wrote about that in the middle of this blog post. They join the “Club”, the DSA, to associate with legitimate companies in the hope of being viewed as legitimate. Ultimately, they hijacked the DSA and the entire agenda. Herbalife hired Michael Johnson for his expertise in Global Brand Imaging (I wrote about that in this blog post) in order to cast off the pathetic image of Mark Hughes flogging shake mix, selling a fraud business opportunity and overdosing on alcohol and pills. It’s tough to recruit and profitably grow a company with that stigma and legacy.
I forget what they call the marketing jargon for Q-Tip, when the brand defines the market or the product. Amway is a Q-Tip in the eyes of consumers. When people figure out the cryptic sales pitch is actually for a pyramid scheme, they say, “Is this one of those Amway things?” And that has tainted the entire direct selling industry. It is time to run the crooks out of town.
The leadership of Tupperware, Avon, Pampered Chef, etc used to be members of a decent Club. And somehow the leadership of that Club started letting criminals in. And pretty soon the entire Club was full of criminals and they took over the leadership. At first the Old Guard thought they could change it back to what it once was. Then slowly they realized they would have to quit the Club. Now they need to form a new Club, based upon their original core values and make certain they never let the criminals back in.
It is not enough to do that quietly or passively. They need to tell the regulators and the media why you are doing it. Stand up and lead. Have some pride. Take their industry back. They may be surprised how many people agree with them. It will appear so obvious in hindsight, but for inertia no one wanted to say it or do anything about it.