Center for the Study of Ethics in the Professions at IIT

Direct Selling Association
1776 K Street, N.W.
Washington, DC 20006
202/293-5760
 
1986 Direct Selling Association
068605/5M/PP

Foreword

Because direct salespeople are guests in the homes of their customers, it is appropriate that our industry adhere to the highest standards of marketplace ethics and courtesy.  These high standards are embodied in the DSA Code of Ethics.  As a condition of membership in the association,  every member company pledges to abide by the Code’s standards and procedures. 

Since the Code was first adopted in 1970, there has been a dramatic reduction in consumer complaints against direct sellers as reported by better business bureaus and consumer agencies.  As a result, the industry as a whole enjoys a much better reputation, and customer confidence in in-home buying has increased as well. 

The purpose of this pamphlet is to help assure that every DSA member understands what the Code requires both in terms of company policies and procedures and in terms of company response to the DSA Code Administrator in case of a Code complaint or inquiry.  I urge you to have this pamphlet read by all those in your company policies affecting consumers. 

The fine reputation which the Direct Selling Association and its member companies now enjoy is due in large part to the effectiveness of the DSA Code of Ethics and member dedication to it.  I want to take this opportunity to express my appreciation for your support of the DSA Code and high marketplace standards.  All of us can take pride in the excellent consumer protection record of the industry over the past decade since the Code was adopted 

Neil H. Offen
President

Introduction

This is your guide to the DSA Code of Ethics.  It contains two sections.  The first section explains what the Code requires of company procedures, sales and documents, etc.  While virtually all of these requirements will already be and established part of your company's policies, this guide can prove a useful and important checklist.  The fine consumer policies of member companies are strength of the DSA Code and its reputation. 

The second section describes the simple steps which companies are required to follow in the event of a Code Administrator contact prompted by a Code complaint.  Although the Code procedures are rarely necessary, it is extremely important that member companies respond quickly and cooperatively when given the opportunity to resolve a potential problem through the Code mechanism. 

Code Requirements for Company Policies

The requirements of the DSA Code of Ethics are found in the five provisions of the Code of Conduct (reproduced inside the back cover for your reference).  These requirements fall into four areas of company responsibility:  checking company sales documents; training company representatives; reviewing the company marketing plan, and investigating and resolving consumer complaints promptly.  Let's look at what is required in each of these four areas:

1. Check Company Sales Documents

All contracts and promotional literature must be accurate in their description of company products and services, terms of sale and guarantees.  They should also contain all provisions and notices required by state and federal laws.  DSA legal staff is available to answer questions concerning laws applicable to direct selling, but company counsel should be consulted when these documents are prepared.

Customer contracts should contain all information necessary to give the customer a complete record of the sale:  description of the goods purchased, total price (including interest, fees and other charges), any conditions of sale, and the name and address of someone to contact if there is a problem (the salesperson, a branch office, company headquarters, etc.).

2. Train Company Representatives

Many of your company's responsibilities to customers must, of course, be fulfilled by your independent sales representatives.  In this area your company's obligations are to provide accurate, up-to-date information to your sales force and training so that in every sales presentation your representatives will:

           a. give a complete and accurate description of company products and services, the terms of sale and the extent of any guarantees;
           b. describe the benefits and characteristics of the products and services without exaggeration or misrepresentation;
           c.  fill in all blanks on the sales contract before asking the customer to sign, and 
           d. leave a copy of the sales agreement (along with a copy of any guarantee) with the customer.

3. Review Company Marketing Plan

It is a violation of the DSA Code of Ethics for any member company to engage in pyramid practices as defined by state and federal laws.  A pyramid scheme is based on endless chain recruiting rather than the sale of products.  Member companies have the responsibility to become familiar with the law in this area and to make sure that their marketing plans do not permit or encourage pyramiding.  They also have a responsibility to use reasonable diligence to discover and prevent pyramid practices by their distributors.  DSA legal staff is available to answer questions concerning pyramid laws and, in cases of potential problems, private counsel should consulted.

4. Investigate and Resolve Customer complaints Promptly

It is the responsibility of each member company to have established procedures for customer complaint handiling--procedures which insure that each complaint will receive prompt and thorough attention so that he company can quickly correct any problems.

Procedures to be followed in the event of a Code Complaint

Although your company may never be contacted by the DSA Code Administrator on a Code complaint, your company responsibilities in this area begin at the point you apply for membership in this area begin at the point you apply for membership in the association. 

Every member company must designate a "code responsibility officer" whom the DSA Code Administrator will contact in the event of a Code complaint.  This person must be thoroughly familiar with the DSA Code of Ethics and have the training authority to resolve complaints.

Your company must also voluntarily agree to take full responsibility for the actions and statements of your salespeople in consumer transactions.  This is for the purpose of fostering consumer protecttion and does not in ny way affect the independent contractor status of your representatives.

DSA Code Administrator

The DSA Code Administrator is appointed by the Board of Directors to recieve compliants against member compainies from consumers, conduct investigations and determine in each case whether a violation has occurred and what remedy, if any, is appropriate.  The administrator is chosen on the basis of his knowledge of the industry, stature in the consumer affairs and business communities and reputation for competence and integrity.  All investigations by the Code Administratro are completely confidential.

The procedures followed by the Code Administrator are clearly set out in the Code of Ethics:

1. Consumer complaint received by Code Administrator*;
2. Member company notified by Code Administrator;
3. Opportunity for informal resolution;
4. Formal procedures and hearing;
5. Decision by Code Administrator--possible remedies and sanctions;
6. Appeal to arbitration. *Note: The Code Administrator may initiate an investigation of possible 
Code violations without a consumer complaint if he has reason to believe 
a violation has occurred.

Most code complaints are resolved informally at step three once the problem is brought to the attention of the company's code responsibility officer.  If a hearing is called by the Administrator or requested by the company, it will be arragned at a mutually convenient time and place.  The company has a right to be represented by counsel, to present evidence, and to call and cross examine witnesses.  The party that calls a witness must bear the costs of bringing that witness to hearing.  Within ten days of the hearing Administrator will issue a written decision and notify the parties.

As a remedy the Administrator may order a refund to the customer or repair or replacement of the item purchased.  The Administrator may additionally request payment by the company of avoluntary contribution of up to $500 (to a special assessment fund for publicizing the Code) and submission of a written assurance of specific steps to be taken by the company to prevent similar Code violations in the future.  These additional measures are only authorized in the event of serious of repeated Code violations.

In cases of noncooperation with the Administrator or noncompliance with any remedy, the Administrator may, after consultation with independent legal counsel and notice to the company, report any probable law violations to the appropriate government agency.

An accused company may appeal the decision of the Administrator to an independent arbitrator dchosen by the company form a list provided by the American Association of Arbitrators or similar organization.  The decision of the arbirtator is final and binding on the Administrator and the member company.

Code of Conduct

1. Deceptive or Unlawful Consumer Practices
No member company of the Association shall engage in any deceptive or unlawful consumer practice.

2. Products or Services 
The offer of products or services for sale by member companies of the Associaton shall be accurate and truthful as to price, grade, quality, make, value, performance, quantity, currency of medel and availability.

3. Terms of Sale
A written order or reciept shall be delivered to the customer at the time of sale, which sets forth in language that is clear and free of ambiguity:

a. alll the terms and conditions of sale, ithe specification of the total amount the customer will be required to pay, including all interest, service charges and fees, and other costs and expenses as required by federal and state law;
b. the name and address of the of the salesperson or the member firm represented.
 

4. Warranties and Guarantees
The terms of any warranty or guarantee offered by the seller in connection with the sale shall be furnished to the buyer in a manner that fully conforms to federal and state warranty and guarantee laws and regulations.  The manufacturer, distributor and/or seller shall fully and promptly perform in accordance with the terms of all warranties and guarantees offered ot consumers.

5. Pyramid Schemes
For the purpose of this Code, pyramid or endless chain schemes shall be considered consumer transactions actionable under this Code.  The Cede Administrator shall determine whether such pyramid or endless chain schemes constitute a violation of this Code in accordance with applicable Federal, state and/or local law or regulation.