As we have reported in the past couple of months, there have been numerous actions taken against companies which proudly feature(d) the DSA logo and go through rigorous due diligence to become a member of the DSA - Direct Selling Association (Weekenders, NHT Global, Mannatech, Herbalife) .
In some cases the suits can be considered frivolous or just class action based on stock performance (lack thereof) but we also have examples like Weekenders who decided to close its doors with no warning to its distributors at all and the latest $25m lawsuit against YTB brought by the California Attorney General alleging fraud.
While we have made several attempts to get answers from the DSA about the Weekenders demise, we have been met with a lack of any information on their part. In fact, the DSA never posted a single announcement on their website about Weekenders closing nor did it provide any information online to Weekenders distributors as to what they can do or offer any assistance to them that we have seen. What was equally as puzzling was the fact that even weeks after Weekenders had closed its doors, it was still featured as a member of the organization on its website.
What is most interesting about the chain of events that has taken place recently and how it relates to the DSA is to better understand how the DSA makes its money - off of the efforts of these companies distributors hard work. Once you have been approved by the DSA - a process which takes one year in which time “the company’s business plan is reviewed to verify compliance with all provisions of DSA’s Code of Ethics” - you then have to pay “Membership Dues”. Any company accepted to the DSA must pay these membership dues according to its website. The Dues are “based on the yearly total of direct sales a company generates. This does not include any retail or catalogue sales a company may have, only the direct selling portion of the business”. This means that the distributors who represent these various member companies products are in essence subsidizing the DSA since its their sales in which the DSA gets a percentage of for the participating company to continue to preserve its membership.
So the question is, if the distributors are in essence subsidizing the participating companies dues, why doesnt the DSA support these distributors more? Yes, the DSA says on its website that member companies will “Repurchase 90% of the marketable inventory and sales aids you have purchased within the past 12 months if you decide to leave the business” but what happens when the company goes out of business? what happens when there is no “marketable” inventory such as companies like YTB and others who sell services and not products and then the big question, who determines what “marketable inventory” is? Clearly if the company went out of business there is likely to be little to no market for the inventory, yet conceivably speaking, when the company was in business and a member of the DSA, those sales representatives helped contribute hundreds if not thousands, if not tens of thousands of dollars to the DSA and are now left with nothing.
We have hundreds of messages from Weekenders distributors who worked very hard to generate money for the company - a percentage of which went to preserve its membership with the DSA - and now have nothing at all. There is no information as to how they can recoup any of the inventory they are stuck with and no information as to how to contact that DSA member company (or former). What the DSA should do is recognize that its bread is buttered indirectly from the millions of distributors who are selling products that generate fees back to the organization and create a fund to support them in cases like Weekenders. Since they supported the organization when the company was healthy, why should they be abandoned when the company screws up and goes out of business or has shady practices? As well, there should be a policy that if an organization receives more than 20 calls to the Better Business Bureau, they are put on suspension for a year until such time that the number of complaints drops. YTB had over 90 complaints in 3 years just in the eastern Missouri and southern Illinois region alone!
While the DSA says it generates its revenues from the 200+ member companies, the truth is there are MILLIONS of distributors who are actually subsidizing these membership fees and the question remains what does the DSA truly offer to those that are paying its dues?
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Natural Health Trends announced that the Securities and Exchange Commission has finally completed an investigation into the company involvement with two former executives charged with fraud.
