According to Jeffrey A. Babener, the principal attorney in the law firm of Babener & Associates.
For more than 30 years, he has advised leading U.S. and foreign companies in the direct selling industry, including many members of the U.S. Direct Selling Association. He has served as legal advisor to various major direct selling companies, including Avon, Amway, Herbalife, USANA, and Nu Skin.
Jeff Babener stated:
“On May 17, 2019, out of the blue, a 26-year-old Texas-based MLM/direct selling company, AdvoCare, respected in the industry for its business and products, announced, after “confidential talks with the FTC,” its only “viable choice” was closure of the MLM aspect of its business, with its attendant negative impact on the livelihood of all those distributors who worked hard to build downline sales organizations.
The Internet lit up.
MLM distributors decried betrayal, and they also may have wondered if this was merely step one to go directly into retail stores or online as Slick50 and Metabolife did after their MLM sales force created a market and brand.
Other leading direct selling companies were stunned. And distributors of those companies wondered, “Are we next?”
What happened? We may never know. Should the $30 billion MLM/direct selling industry be worried? With the power and leverage of the FTC over the fate of any one company it is important to understand as “best as possible” what happened here.
We only know one thing after the AdvoCare MLM abandonment: that uncertainty has surfaced again in the direct selling industry about the MLM model.
And because this issue is existential for MLM/direct selling, it should be a priority for leaders in the direct selling industry.
Babener advice USA companies to:
- Bulletproof yourself on earnings claims.
- Post a transparent earnings disclosure.
- Adopt, follow and enforce the Amway safeguards.
- Promote non-participant retail sales and a preferred customer program.
- Track. Track. Track… flow of product to and use by the ultimate user.