Last week, Washington state Attorney General Robert Ferguson filed an injunction against LuLaRoe, Inc., which the Attorney General described as an unlawful pyramid scheme.
The complaint alleged that the LuLaRoe plan violated the Washington state Anti-Pyramid Promotional Scheme statute, made false and misleading earnings claims to potential and existing participants, and otherwise violated the state’s consumer protection laws. LuLaRoe is not a member of the Direct Selling Association (“DSA”), the national trade organization for direct selling companies that are required to adhere to a stringent Code of Ethics.
DSA’s Code of Ethics applies to DSA member companies and prohibits pyramid schemes, as well as false, misleading or unsubstantiated income claims. The DSA Code also requires that member companies adopt and rigorously enforce a bona fide repurchase policy for inventory that cannot be sold, prohibits encouragement of unreasonable purchases of inventory or payment of large upfront fees, and provides other protections to salespeople and customers.
DSA President Joseph N. Mariano said,
“DSA members, through their membership, are committed to the highest level of consumer and salesperson protection.
In addition to our DSA Code of Ethics, DSA and its members have vocally supported the enactment of strong anti-pyramid laws consistent with the provisions of DSA’s Code, including Washington state’s anti-pyramid law now cited by Attorney General Ferguson.
“Sadly, not all companies in the direct selling channel are DSA members,” Mr. Mariano continued, “and non-members like LuLaRoe do not accept, as members are obliged to, the requirements of DSA membership and our Code. That’s why we have just announced the establishment of our new Direct Selling Self-Regulatory Council (DSSRC) in partnership with the Council of Better Business Bureaus.”
“The DSSRC will monitor the marketplace, accept competitor challenges, and otherwise consider patterns of consumer salesperson complaints for DSA members and non-members alike,” said Mariano.
“The DSSRC, working in tandem with the DSA Code, is intended to help ensure the marketplace is free of the types of consumer harms, particularly deceptive income and earnings claims, that Attorney General Ferguson’s complaint alleges in this case. We wholeheartedly support prosecution of operations that flout the law and disregard the legal and marketplace standards reflected in the DSA Code,” continued Mariano.
DSA will be monitoring the developments of this case closely and will continue to work to ensure all consumers are shielded from operations which pretend to be legitimate direct selling companies.
About the Direct Selling Association
The Direct Selling Association (DSA) is the national trade association for companies that offer entrepreneurial opportunities to independent sellers to market and sell products and services, typically outside of a fixed retail establishment. In 2017, 18.6 million Americans were involved in some capacity in direct selling in every state, congressional district and community across the United States.
In 2017, direct selling generated $34.9 billion in retail sales. For more information please visit www.dsa.org
Get more information, fact and figures about LuLaRoe, click here for the LuLaRoe overview.