In Canada’s Financial Post, contributor Armina Ligaya recently provided an in-depth look at legitimate direct selling practices in contrast to how illegal schemes conduct business. The distinction is a welcome one in an industry that has sold products or services to 42 percent of Canadians, according to the country’s Direct Selling Association.
As Ligaya notes, “Multi-level marketing is a humming multi-billion-dollar engine of the Canadian economy that’s often overlooked, as business takes place in everyday conversations with friends and family, behind closed doors.”
That has changed in recent months as a series of high-profile investors have taken large stakes in global nutrition company Herbalife, following Bill Ackman’s very public attack on the company’s business model and concurrent $1-billion short position on Herbalife. Ackman’s claims have put a spotlight on the direct selling industry and sparked further dialogue about what distinguishes legal multi-level marketing companies from fraudulent ones.
Canada’s direct selling industry is regulated by the Competition Act, which, like similar legislation in countries around the world, serves to safeguard consumers. These regulations enforce measures such as buyback guarantees, product returns and transparent compensation structures.
Ligaya outlines proper business practices and explains the role that direct selling associations play in enforcing a strict code of ethics. As a supplement to her piece, be sure to read this month’s feature on “Herbalife: What the Short Sellers Missed on the Way to the Press Conference”, a point of view by MLM Legal’s Jeffrey A. Babener.