Search for Certainty in Direct Selling: A Legal and Business Rationale for H.R. 3409

Jeffrey A. Babener, principal attorney in the law firm of Babener & Associates and expert on direct selling: The legal environment and accepted business model of leading direct selling companies has been relatively stable for 50 years. That equilibrium was upset by the regulatory proposals of a former FTC commissioner to upend that environment with new arbitrary rules that lack a basis in case authority or legislation…creating confusion in today’s direct selling market. H.R. 3409, a mirror of many established state anti-pyramid statutes and the language of long-adopted case authority, is intended to return predictability and stability and certainty to that market. A close look at H.R. 3409 makes it difficult to believe that it is anything other than robust consumer protection legislation. H.R. 3409 comes down like a sledge hammer on scams and schemes:

(1)       It condemns inventory loading;

(2)       It calls out as evil pyramid headhunting recruitment schemes;

(3)       It forbids payment of commissions or rewards that are unrelated or not based on sale of products and services to the “ultimate consumer;”

(4)       It absolutely rejects programs in which distributor product purchases are made in unreasonable amounts, either for resale or actual personal and family use;

(5)       And it demands, as a condition of legitimacy that companies adopt a repurchase policy in which terminating distributors will be refunded for returned product inventory, in resalable condition, that has been purchased within 12 months of termination.

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Direct Selling Association

Direct Selling Association

Direct Selling Association (DSA) is the national trade association for companies that manufacture and distribute goods and services sold directly to consumers.