<aside> 📌 This page contains the syllabus, details and information related to the compliance course of the Direct Sales Industry. The course is particularly important for distributors working or planning to work in this sector. On the successful completion of the course, the distributors will be awarded a certificate and a badge.

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📜 Course Description and Details

Course Provider: BE Global Course Duration: 20 hours (videos and self-study material)

Prerequisite: None Exam Type: MCQ

Exam Duration: 1-hour Passing Grades: 80% or above

📚 Readings

Required Texts

💻 Course Content

1. What is Direct Sales Marketing, Affiliate Marketing, Network Marketing or Multi-Level Marketing (“MLM”)?

   1. Direct Sales Marketing, Affiliate Marketing, Network Marketing or Multi-Level Marketing etc., are different terminologies used for the same business method. However, there might be some small variations, but for the sake of simplicity, we will be only using the term Direct Sales throughout this course, as all other terms could be considered a subset of Direct Sales.
   2. The Direct Sale is a particular form of Direct Selling. In simple terms, Direct Sales is a distribution channel under which consumer products and services are sold through independent sales representatives or distributors.
   3. In a traditional retail and distribution channel, customers buy products and services from brick-and-mortar stores. These stores get their supply from wholesalers, these wholesalers get their supplies from bigger players like jobbers and these jobbers may be buying the products and services from manufacturers. So, before a product finally reaches customers, it changes hand many times, and each time, the intervening player adds their margin and cost, which ultimately increase the price of the product. This model also reduces the profit margin for manufacturers compared to what they can get if they can cut these middlemen.
   4. In the last few years, and mainly because of the internet/e-commerce boom and the situation presented during the COVID pandemic, the customer’s approach to how and where they buy products has changed.
   5. Direct Selling cuts these middlemen and provides a channel for products to reach from manufacturers to customers using independent Distributors. These Distributors either buy the products in bulk from manufacturers at a discounted rate and then sell to customers at a margin or introduce the customer to manufacturers and get a commission whenever that customer makes a direct purchase. The latter is the case in BE.
   6. This way, Direct Selling companies can save operations and advertising costs. And use the saved money to incentivize the distributors and handle the infrastructure, IT, logistics, marketing etc., for their distributors. This ultimately results in a win-win situation for all three, the manufacturer, the distributors and the ultimate customers.
   7. Distributors are not an employee of the Direct Sales company, they are independent, and they advertise and market the products and services of the Direct Sales company or the vendors/partners of the Direct Sales company.
   8. The distributor is not required to incur high costs to start their Direct Sales business. And in the case of some companies like BE, it is free to join!
   9. Furthermore, the initial registration fee, inventory holding, or other business expenses at legitimate Direct Sales companies are typically low. And in the case of BE, there is no registration fee or requirement for inventory holding!
   10. Direct selling provides revenue opportunities and imparts transferrable sales and management skills that can be applied outside of the direct selling business. Over the past several years, direct selling companies have successfully offered new items regularly to reach most of the consumer base.
   11. Organizations have also created new product versions to meet today's consumers' shifting wants.
   12. Direct selling companies have been able to appeal to a big audience with various product preferences by expanding their brand range. This has attracted new consumers and contributed to the direct selling market growth.

2. Why BE developed this course?

   1. Hardly any Direct Sales company offers such a detailed and well-researched awareness and compliance course. Some don't have time and others are probably busy expanding their market and distribution network. While we at BE also face these two challenges; however we decided to lead by example. We wanted to educate not only our distributors but also customer and the general public about various aspects of Direct Sales.
   2. Direct Sales is one of the world’s oldest industries, but because of a lack of meaningful discussion and education, this industry has been heavily criticized. The one-sided criticism without appreciating the apparent benefits of this business has adversely impacted the reputation of the industry and the global companies that are operating in this industry.
   3. All legitimate Direct Sales companies are engaged in legitimate business! Period.
   4. Some critics have tried to label all companies operating in the Direct Sales industry as fraud, mainly because of the risk associated with it. One such risk highlighted by the critics is that people joining as distributors may not make any money or are similar to top distributors.
   5. Well, that is true and in line with the way the world operates in a free economy and market.
   6. As reported by Fortune; “The top 0.01% richest individuals—the 520,000 people who have at least $19 million— now hold 11% of the world’s wealth, up a full percentage point from 2020. Meanwhile, the share of global wealth owned by billionaires has grown from 1% in 1995 to 3% in 2021.” We are not celebrating the inequality in wealth distribution; but merely pointing out that such inequalities exist and that cannot be a ground to classify a legitimate, registered and licensed business as a fraud or pyramid scheme.
   7. The other criticism is that people might lose money as distributors rather than make money. Well, isn’t that a risk all businesses take? Which industry or sector can guarantee you 100% return? Will investing in stocks, state-run lottery, regulated gambling, real estate etc., will guarantee you a secured return? Obviously not, but does that make these businesses illegal? Obviously not! Changes in regulations, market conditions, customer perceptions and preferences, advancements in technology, changes in the political environment etc., can impact a company’s business and in some cases might force a company to be shut down, but that mere closure of a company or someone losing their money doesn’t make that company an illegal business. These are inherent risks associated with any type of business.
   8. There is a misinformed drive to draw a distinction between a traditional business and a Direct Sales business. But what such critics are trying to achieve is a distinction without a difference (A distinction without a difference is a type of logical fallacy where an author or speaker attempts to describe a distinction between two things where no discernible difference exists. It is particularly used when a word or phrase has connotations associated with it that one party to an argument prefers to avoid).
   9. Rather than focusing on education, highlighting how a Direct Sales company operates, its business model, operations etc., a few critics have attempted to declare their verdict – which is – all Direct Sales companies are scams, frauds, ponzi or pyramid schemes. Neither the Direct Sales business model nor the complicated compensation plan is discussed or taught in business schools. It is the lack of education and awareness among the public, and media that makes perfectly legitimate business an illegitimate business.
   10. Critics also claim that Direct Sales companies are unsustainable and that is another reason for them to call such companies illegal. But making such a bold claim is like shooting oneself in the foot. By that logic isn’t the entire natural resource industry unsustainable because the resources like oil and gas are limited? Does that make the natural resource industry to illegitimate industry? Some Direct Sales companies have been in business for decades while many regulated banks, governments and other so-called legitimate businesses have collapsed. How does this logic work then?
   11. Anyways, we at BE realized that it is about time to educate our distributors, customers, public and our well-wishing critics about Direct Sales. It would a bit unfair to call Direct Sales companies that have registered companies, offices, websites, customers, distributors, executives, registered trademarks, profits, DSA Registration, contracts with vendors and business partners, employees, bank accounts, payment gateways, licenses, which declare their financials, submit audited reports and operate globally as illegal or scam business.
   12. Another reason for developing this course was to provide specific compliance-related education and awareness to our distributors.
   13. Keeping the above goals in mind, we have worked for months and spent our resources to bring this course to you. We hope that this course adds value and assists you in better understanding of Direct Sales industry.

3. Why would a Distributor join a Direct Sales Company?

   There might be various reasons why a Distributor would like to join an Direct Sales company. Some join to earn an additional sum of money temporarily, while others join with a long-term career goal to work exclusively with the said Direct Sales company.

4. What is the difference between legal Direct Sales companies and Illegal Pyramid Schemes?

   1. The table below will provide some differences between a legitimate Direct Sales company and an illegal/scam Direct Sales company (also known as a “Pyramid Schemes”).
   2. Just because a company has some of the characteristics below doesn’t make it legal or illegal. All factors must be considered, and a determination must be made accordingly.
   3. Below characteristics are just indicative and for information purposes only;

Legit Direct Sales Company v. Pyramid Scheme

1. How big is the Direct Sales Industry?

   1. As per the Grand View Research report, the global direct selling market size was valued at USD 189.71 billion in 2021 and is expected to expand at a compound annual growth (CAGR) of 6.1% from 2022 to 2028.
   2. Direct selling offers a significant number of people additional income options and encourages micro-entrepreneurship.
   3. According to the World Federation of Direct Selling Associations (WFDSA), over 125.4 million direct sellers are anticipated to be involved in the industry in 2020; and this number is expected to rise as the industry grows.

2. What are different Laws and Regulations Applicable to a Direct Sales Company?

   1. A wide variety of laws and regulations might apply to a Direct Sales company and its distributors depending on the product or services marketed or sold, whether those products or services are sold online or in retail stores, and in which jurisdiction the company is registered and offering its products and services.
   2. Some jurisdictions like Italy, California, Malaysia, Indonesia, France etc. have specific laws banning pyramid schemes and regulating legitimate Direct Sales.
   3. However, some jurisdictions might not have legislation which is specifically meant for regulating the Direct Sales industry. But that does not mean that the companies in this sector operate in a void and no law applies to them.
   4. Laws and regulations related to cyber security, data protection, fair trade practices, consumer protection, advertising and marketing, labour laws, etc. might still apply to all companies operating as a Direct Sales company.
   5. Countries also have specific regulations, license and approval requirements for Direct Sales companies that wish to offer regulated health or fitness supplements or any other regulated products or services like securities, insurance etc.

3. What are the compliance requirements for a distributor working with a Direct Sales Company (& how to promote BE)?

   1. Company IP and Brand Protection:
      1. Distributors should understand that the company they are working with might own trademarks, copyright and other forms of intellectual property.
      2. Most companies will provide a guideline on how to display their brand and to what extent their IP can be used in advertising and marketing the products and services.
      3. Distributors must abide by such guidelines and instructions, or else they will be at risk of legal action.
      4. It is always recommended and is also a good practice to approach the company when you are creating a new website, social media page, post or groups, etc. to be reviewed by the legal or compliance team of the company.
   2. Product Claim:
      1. A Direct Sales company might market and promote a wide variety of products and services that fulfil customers' various requirements. Such products or services can be related to education, health, fitness, wearable technologies etc.
      2. Each distributor marketing and promoting such products or services need to make sure that they provide necessary disclosures while making any claims related to products or services, or else they will be at risk of legal actions from their respective Direct Sales company and the regulators.
      3. The distributor must provide adequate disclosure when making a Product Claim. Such disclosure must be clear and conspicuous, it must be;
         • within close proximity to the relevant claim in question,
         • not hidden in a bunch of senseless words,
         • is prominent and easy to spot, i.e. clearly visible,
         • is in plain language that your target audience will understand, and
         • is not accompanied by other distractions in the advertisement.
      4. The distributor must also ensure that the claims are substantiated regardless of if they originate from the company or the field. Substantiation refers to evidence that backs up your claim. The claim must have the appropriate support for all express and implied objective claims that the ad conveys to reasonable consumers.
   3. Income/Earning and Lifestyle Claim:
      1. Whenever a discussion on money or earning opportunities occurs in any capacity, those in the field must provide proper disclaimers.
      2. What does a disclaimer entail? Plainly speaking, a short explanation of how much money a participant can expect to earn/lose. Legally speaking, for an income claim to be truthful, a company and the distributor must show that earning any specific amount of money is the generally expected or achievable result (i.e., a reasonable basis for the claim).
      3. Even a truthful income claim from a million-dollar earner could nonetheless be misleading in the eyes of the regulator if there isn’t a clear disclaimer of how much money is made/lost by MOST participants.
      4. The often notoriously used “quit your job,” “earn enough to stay home,” “wouldn’t it be nice to live stress-free” or “career level income” phrases are false or misleading if the AVERAGE participant doesn’t achieve such results. The same goes for lifestyle claims featuring luxury cars, yachts and vacations.

4. What are Unethical Practices in Direct Sales Industry?

   1. Unethical Practices:
      1. Every business needs to be in compliance with the laws of the land.
      2. But mere compliance with the laws is insufficient, as there are situations that are either not covered under specific laws or the law on such situations is vague.
      3. In these situations, Direct Sales companies and distributors are expected to act ethically and with high moral standards to ensure that customers' interests are protected and no harm is caused to the general public.
      4. Unethical behaviour or business practice can land a distributor and his business in legal trouble exposing them to criminal penalties, loss of business and in some circumstances, even imprisonment.
      5. Some of the unethical practices that need to be avoided are;
         • providing wrong information or forged documents;
         • making exaggerated and unsubstantiated lifestyle, earning and product claims;
         • crossline signup or cross sponsoring;
         • harassment, threat, defaming, or disparaging customer, distributors, company’s directors, employees, freelancers, agents, or any other representatives;
         • leaking or disclosing any confidential information or trade secrets, etc.;
         • tax fraud, corruption or bribing any company or government officials;
         • breaching non-solicitation and non-compete provisions;
         • directly or indirectly supporting any discourteous, deceptive, misleading, unethical or immoral conduct or practices;
         • any discrimination regardless of race, gender, social class or religion;
         • breaching intellectual property rights of the company;
         • use of fake names to register with the company;
         • creating more than one distributor account with the company without its explicit written consent;
         • promoting the company’s products without necessary disclosures and disclaimers;
         • promoting the company’s products and services as ROI, Securities, quick way to make assured income, or investment opportunities;
         • not carrying a valid ID card (if any) issued by the company;
         • involved in the practice of Bonus Buying;
         • promoting, advertising, or selling (even for free) the company’s products and services in violation of its policies;
         • creating social media account using the company’s name, trade name, or logo;
         • creating any email id, blog or website with the company’s name, brand name, product name, etc., which could lead to confusion for customers or other distributors;
         • sending a mass email, spam or an-authorized solicitation;
         • providing false or misleading information to customers, distributors or regulatory authorities;
         • any manipulation of the compensation plan which is not explicitly intended by the company;
         • selling, assigning or delegating their distribution account to any person or legal entity without obtaining prior written authorization from the company, etc.
   2. How to Report?

5. Conclusion: We appreciate you investing your time to learn more about direct sales business and the necessary compliance requirements. You have already made significant progress by taking this first step, i.e., educating yourself on compliance issues. We hope you have taken notes, and we encourage you to share this knowledge with your friends and network so that they can use it to keep their business safe.