Stories in this section:
Direct Selling 101 Provides Overview of Industry
Legal Matters-Database Confidentiality

Jump to other sections:
Making Headlines
Financial Report
Global Landscape
Roundtable
Perspectives and Innovations

Direct Selling 101 Provides Overview of Industry

Almost 100 direct selling industry professionals gathered last month in Maryland for the Direct Selling Association’s 4th annual Learning the Ropes: Direct Selling 101 Seminar. The two-day event, designed to provide attendees with thorough information about direct selling, attracted industry newcomers, veterans and suppliers. “It was great to meet so many new and potential members during the 101 seminar,” said DSA Membership Director Nancy Burke. “This particular seminar is the best opportunity for individuals looking to learn more about the industry to find the answers they need, whether they have recently launched a company or are new to direct selling.”

DSA Executive Vice President, Secretary & Legal Counsel Joseph Mariano kicked off the event with a definition of direct selling and the history of the industry. John Fleming, Vice President, US Sales Strategies & Training, Avon Products, Inc., and Alan Luce, President, Luce & Associates, followed with an explanation of the industry’s two basic selling approaches: party plan and one-on-one.

After the industry overview, the next sessions focused on the nuts-and-bolts components required to launch and run a successful direct selling business, including promotional programs designed to motivate distributors, compensation plan design essentials, business plans and budgets and legal issues. Each presenter allowed plenty of time for questions and answers, and networking breaks allowed attendees to interact and talk to others in the industry.

“This was our second Direct Selling 101 seminar and we learned as much this year as we did the first time,” said Julie Gordon, Co-Founder of Baby Splendor.“Start-up companies face some very unique challenges and there is no better way to overcome challenges than to learn from others who are experiencing or have experienced the same thing. The DS 101 seminar provides a great opportunity to do that.” Gordon attended the seminar with Baby Splendor Co-Founder Kelly Majewski.

Day One came to a close with the stories of two established companies— Lillian Vernon and Crayola—that recently launched direct selling arms. David Steinberg, Senior Manager of Big Yellow Box by Crayola, described the external and internal challenges and opportunities of creating a party plan company. Linette Reindel, Vice President, Celebrations by Lillian Vernon, shared some of the stumbling blocks and successes of launching a direct selling company with a recognized brand, a topic of great interest to Heather Ligget, Director of Marketing, High Desert Foods.

“I attended the DS 101 seminar because our organic gourmet food company was evaluating the possibility of utilizing the direct sales channel of distribution,” Ligget said. “As a result of what I learned and some insightful input from attendees and speakers, we have decided to make the leap into the wonderful world of direct selling and I am looking forward to launching our company in October of this year!”

After the day’s session, attendees relaxed at a networking reception followed by dinner, providing an opportunity to interact with industry veterans and supplier companies. Scott Orlinski, President of Smart Office Solutions, Inc., said that for him, the event was more than a chance to network with potential clients, “As a supplier, it’s an opportunity to keep current with industry trends and to develop a stronger understanding of the challenges faced by our clients,” Orlinski said.

Technology was the focus of Day Two of the seminar, with Creative Memories’ Chief Information Officer Glenn Scuteri, and XanGo’s Director of Information Technology shedding light on this complex and often confusing subject.

For many, a highlight of Direct Selling 101 was the final Question and Answer Roundtables, which allowed attendees to get feedback from presenters on topics that were covered during the seminar.

Though the seminar attracted many direct selling newcomers, industry veterans also gained valuable knowledge.

“Even though I have been employed at Regal Ware for over 26 years, I was only recently appointed to a sales manager position in our private label group. I attended the DSA seminar to gain a better understanding of the
direct sales business so I can effectively work with and assist my customers,” said Jacky Herriges, Sales Manager, Multi-level Accounts for Regal Ware.

> back to top

Legal Matters-
Database Confidentiality
by Gerald Nehra

To what degree can a name, address or phone number be kept confidential? While a company has a direct contractual relationship with each of its distributors, the distributors within the organization are connected to one another only in their company’s database. Serious confidentiality issues may arise when personal contact information is made
available to everyone within an organization.

Uplines and downlines often share a personal connection but that’s where the connection usually stops. A person is recruited into an income opportunity personally by a sponsor who introduces her to the opportunity and, in return for bonuses paid by the company, helps the recruit get her business going. Most often a relationship existed prior to the recruit joining the income opportunity, just as some form of relationship continues if that person chooses not to join and remains then in the prospective sponsor’s “little black book.”

As we go beyond the personal relationship—and as a direct result of being a representative—names and addresses, other than of one’s immediate upline and downlines, become known to representatives through company documents and company provided Internet access. One can say that, “But for being a representative, this information would not be known to me.” This information belongs to the company, and the company may require that this information be given confidential treatment.

Names, addresses and phones numbers of distributors are confidential and proprietary to the company and the use by a representative should be limited to business purposes to further the company’s income opportunities and sales objectives. Distribution of genealogies and mailing lists containing names and addresses of distributors should be restricted to authorized recipients. Personal contact information should only pass from one representative to another as necessary for the specific business purpose of furthering the interests of the company.

Names, addresses and phones numbers of
distributors are confidential and proprietary to
the company.

A company’s legal counsel usually recommends that terms and conditions be spelled out for the use of confidential information. In addition, companies should consider placing a confidentiality notice on their genealogies or lists, alerting representative of the company’s proprietary rights to the information.

Courts need an education regarding the confidentiality and misuse of contact information within MLM organizations.

When the issue is as complex as “cross group sponsoring,” it is often a steep learning curve. Judges do not know what cross group sponsoring is and, even when carefully explained, may still view it as a restraint of trade not sufficiently “reasonable,” in their view, to pass muster. A much easier case can be made for theft, conversion or misuse of confidential information, because these principles often come up in general business litigation and are known to the courts.

A company’s customer list is generally deemed by the courts as an important asset that can be legally protected. In almost all MLM structures, the distributors are the company’s primary customers. By taking steps to treat their names and addresses as proprietary and confidential, a company is laying the groundwork for a strong legal argument. Note that the argument by a dismissed distributor that “I have a right to make a living” may be countered by, “Yes, you do, but not with the company’s confidential and proprietary information, in your possession solely for the furtherance of this company’s business purposes.”

The recommendations are simple to implement. The company’s general counsel or MLM specialist counsel can advise on effective language and technique that are not so controversial as to be resisted by the field.

Gerald P. Nehra is an MLM specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 34 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441, 231-755-3800. His e-mail address is GNehra@mlmatty.com. You are invited to visit his Web site at www.mlmatty.com.

> back to top