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DSA Offers Educational Seminars
Direct Sales and the Internet

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This month, the DSA holds its Direct Selling 101-Learning the Ropes Seminar at the University of Maryland Inn and Conference Center in Adelphi. On August 22-23, 2005, industry experts will guide attendees through the basics of direct selling, focusing on topics such as selecting the best direct selling marketing approach and compensation plan for a company's products; building a three-year business plan that forecasts sales, break even and profit; basic order processing and customer service infrastructure; creating the "business in a box" to promote distance recruiting; the "three principles and four questions" guide to management decision making; and creating a culture of partnership between the company and the sales force.

Upcoming Events
From September 26-27, the DSA will present the Business of Technology Seminar in Baltimore, Md. Operations and technology professionals in the direct selling industry will benefit from this seminar, which will address such topics as:

• Emergency preparedness
• Hosting and non-hosting technology solutions
• Paycard security
• Communication skills
• Project success and failure points
• Cost/benefit analyses when compared to risk management
• Distributor Web sites and other emergent distributor technologies
• Implementing successful back office systems
• Project Management 101

Online registration will be available shortly at http://www.dsa.org/education/technology.htm.

And December 7-8, the DSA will offer a Salesforce and Communications Seminar. This in depth look at best practices and new ideas for effectively conveying your company's messages to your sales force, the media and more will benefit both marketing and communications teams. The seminar will address such topics as how to choose and work with a PR agency; helping your sales force tell your story-the way you want it told; best practices in recruiting; a panel discussion with members of the working media and more. Online registration will be available soon at http://www.dsa.org/education/salescomm.html.

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Direct Sales and the Internet

When people hear the words "direct selling" they usually think of "person-to-person" selling. However, in recent years the use of the Internet by direct selling companies for product sales and other business transactions has presented opportunities for rapid expansion into new markets, more efficient product and service distribution, additional ways to communicate with and train distributors as well as the ability to reach a larger number of people. The combination of e-commerce and one-on-one marketing gives direct sales companies the benefit of promoting and selling through e-commerce with the added advantage of personal, faceto- face endorsements of products and services by distributors.

The opportunities created by the Internet also have brought with them certain challenges and issues, such as:

Today, numerous direct sales companies are enrolling individuals as distributors on their Web sites. The procedure typically involves the posting of the distributor agreement and/or the company's policies and procedures on its Web site for a potential distributor's review and consent. Since June 30, 2000, when the Electronic Signatures in Global and National Commerce (E-Sign) Act was enacted, the validity of electronic signatures has not been in question. However, it is important that proper procedures are followed in order to ensure the binding nature of the transaction.

A potential recruit must read and understand any agreement before consenting to be bound by it. A company should include language prior to the electronic signature which affirms that the recruit has reviewed the agreement and agrees to abide by its terms.

The use of the Internet for e-commerce allows a direct sales company to promote and sell its products and to market its opportunity 24 hours a day, seven days a week.

The recruit also should have the opportunity to click "I do not accept" if the individual does not wish to join. A company should not only document and archive that each new distributor has signed the agreement, but should also note the version of the agreement signed, as the terms may change over the years. While agreements signed by e-signatures are just as enforceable as those signed with a pen and ink, the process is still fairly new and the case law has not been well developed. A company should be aware that in the event of a dispute, a jury may find a hard copy of agreement with an original signature more compelling than a printout of the "I accept" provisions.

At times, direct sales companies have confronted the issue of a new distributor asserting that he or she never entered into the agreement or ordered product, but that the sponsoring distributor took such action without the new distributor's consent. An affirmative representation prior to the e-signature that the person pushing the "I accept" button is the individual who has filled out the application and has read and understands the agreement is helpful. In addition, the company should have a written policy that prohibits its distributors from clicking "I Accept" or ordering product on behalf of new recruits without their consent.

The use of the Internet and/or a Web site to promote a company's business is a great marketing vehicle. However, unless a company has concise, well-written policies which address these activities by its distributors in recruiting and selling products, problems such as improper earnings claims, unauthorized product testimonials and misuse of a company's trademarks and proprietary information can occur.

If a company permits its distributors to advertise, recruit and/or sell products through the Internet, it should have written policies which address, among other issues:

Similar rules should be provided for use of a company's Web site. In addition, a company should develop and post a detailed "privacy policy" which addresses the type of information collected on the site, the use of such information by the company, including the use of "cookies" and changes to the policy. The privacy policy should also address the terms of use of the Web site by the distributor, which would include rules regarding prohibited acts, intellectual property rights and use, indemnification of the company for misuse by the distributor, and disclaimers, warranties and limitations of liability of the company.

Issues may also arise when a company sells products online. If product is ordered online, a company needs to post its terms of sale, product warranties and return policies in the same location. Internet-only companies may not charge sales tax on the sales of products through e-commerce. However, if a direct sales company has an independent contractor in a state, unlike the strictly Internet-only company, it has nexus for sales and use tax purposes, and tax is owed on the sale of the product to the ultimate retail customer. The Internet Tax Freedom Act signed into law December 2004 simply places a moratorium on Internet access taxes into October 2003. It does not address collection of sales tax on Internet sales.

The use of the Internet for e-commerce allows a direct sales company to promote and sell its products and to market its opportunity 24 hours a day, seven days a week. Transactions can be faster and less expensive. However, companies need to be proactive in their approach to such use and have policies and procedures in place so as to avoid business and legal pitfalls.

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