Skip to content

History of the DSA Code of Ethics

iStock_000020817628Small

Our topic on MLM.com this week is ethics. The DSA Code of Ethics was established in 1971. Over forty years later, some of the same issues that faced the industry then are still a concern now. Remembering how and why codes of ethics were written in the first place is important. In the interest of research, I reviewed Moral Suasion, by Wotruba (1995), an article on the development of the code of ethics for the direct selling industry.

Banking scandals, insurance fraud, price fixing, deceptive sales practices, etc., the list goes on. Can consumers ever trust that businesses will be truthful and fair in their practices? One way various industries have attempted to self-regulate is by developing a Code of Ethics. Most industries, from medicine to sales, develop ethical standards to help those who work in the industry avoid questionable practices. Just as the American Medical Association tries to rid the industry of bad doctors, so does the direct selling Code of Ethics work to minimize the “bad apples.”

Direct selling as an industry has roots in the early days of the United States. Avon traces their beginning to 1886. Selling door-to-door provided a method for sharing goods and connecting rural areas of the country. Few of today’s businesses can celebrate 120 years in business. However, not all of the businesses and their sales forces at the turn of the century were as useful and helpful as Avon and its Avon Lady.

Despite the successes of some early direct selling companies, other companies used deceptive practices to secure profits like fraudulent warranties or bait and switch tactics. In the early days of the industry, many were able to take the word of buyers or sellers that all would be well. Soon enough though, “buyer beware” became the mantra. Our government tried to establish consumer protections with the establishment of regulations as early as the late 1800s. Another surge of consumer protection acts occurred in the 1930s. However, the consumer movement of the 1950s brought many of the unethical and deceptive practices to light and led to the code of ethics written and ratified by the companies of the Direct Selling Association in 1971 (Wotruba, 1995).

Businesses and door-to-door salespeople were not the only consumer problems in the 1950s. Some industry associations conspired to fix prices and control the market with this and other unfair practices. As a result of the consumer movements, such as those lead by Ralph Nader, the federal government allotted the FTC more power to help regulate industry practices. The FTC proposed “cooling off” laws as well as other legal actions.

A new leader of the DSA felt that self-regulation by association members was a better way to deal with the problems consumers had with some door-to-door sales persons’ practices. The association worked to get its members to support a standardized Code of Ethics. Although DSA companies wanted to rid themselves of fraudulent companies and practices among its ranks, companies also worried about how and who would serve as the enforcers of such a code. Their concerns were not unfounded. Some trade associations made themselves lawmakers, policemen, the judge, and the jury. Such practices were also under attack by the FTC.

Despite reservations by some association members, the first Code of Ethics passed in 1971. The initial code covered fair practices with consumer rights. The code also set into place practices to assure companies could not become victims of unethical practices themselves.

Unethical business practices continue to this day, of course. It seems we cannot go a single week without a major scandal of one kind or another. Certainly direct selling is not the only industry facing such negative actions by members of their industry. The question remains, what is the best way to reward ethical behavior and minimize ethical violations? In the early 2000s, I attended a DSA event with a session of industry members whose job it was to enforce the Code of Ethics. The strength of an ethical code comes as the code is enforced. One of the pushes at that time was for all member companies to post the code of ethics on their material. DSA’s Code of Ethics can now be found on all Association member company websites.

Finding ways to minimizing unethical behavior continues to be a challenge. Distributors and their companies should provide a reasonable return policy and product guarantee. They should also fully abide by both their own code of ethics and the DSA Code of Ethics. Additionally, if consumers continue to purchase from unethical companies, those companies have no incentive to stop such behavior. The best way to encourage ethical behavior is still for consumers to research product purchases and support ethical businesses.

Wotruba, T. R. (1995). Moral Suasion: Development of the US Direct Selling Association Industry Code of Ethics. Direct Selling Education Foundation.

you may also like

compensation consulting for mlm companies

We offer data-driven compensation plan design & analysis

LEARN MORE

MLM.com Newsletter

Get our e-mail newsletter, with MLM.com articles & online exclusives, delivered to your inbox each week.

Please enter a valid email address.
Something went wrong. Please check your entries and try again.