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Publisher’s Perspective Mlm Industry Needs a Distributor’s ‘Bill of Rights’

Our country’s founding fathers saw fit–and had the wisdom–to protect the rights of all minorities. Today, the United States of America is a country whose many minorities frequently combine in different ways and shapes to create a majority. Had the founding fathers lacked the wisdom to protect all minorities, this country would either be in total chaos today or would have broken apart long ago.

A similar opportunity now exists for the direct sales/network marketing industry to put its house in order. Failure to do so will inexorably lead to chaos. There are more than ten million distributors working for direct sales and network marketing companies in the US. Additionally, there are between 2,000 and 3,000 companies in our industry who have supreme control in establishing, maintaining, and interpreting policies and rules regarding their distributors.

Since I know of few enlightened companies in our industry–ones which consider their distributors as partners–I can only assume that up to ten million distributors have minimal or no rights. They are at the mercy of the ever-changing corporate policies and whims. Sometimes, those changing corporate policies are wise and fair improvements. Frequently they are not.

For the betterment of the direct selling/network marketing industry, I am suggesting that all companies in the industry adopt the following Distributor Bill of Rights for all their distributors–or better yet, even improve upon the ideas we’re presenting here. These “rights” are not listed in any particular order or priority.

1. Distributors have the right to own and operate their own independent contractor business.

The independent contractor status is fundamentally the most important facet in the survival of the entire industry. Yet many companies refuse to recognize the “independent” part of their dealings with contractors, especially when doing so will work toward their disadvantage. Rather, they threaten distributors with restrictive and controlling policies and initiatives.

For instance, distributors should have the right to sell their distributorships whenever they wish and to whomever they choose, brooking no interference. Distributors should have the right to build and operate their business in any legal manner that they choose. Since the distributor is independent, he or she should be able to join as many companies as he or she wishes without undergoing the threat of losing his/her distributorship and seeing income cut off.

2. Distributors’ personal business relationships should be honored and left untampered with.

Distributors should be able to join other companies in any capacity they wish, whether it be to just buy at wholesale or to build an additional income. Companies should realize that many relationships between distributors and their downlines were securely in place long before the distributor became a network marketer or direct seller. For instance, many distributors sponsor siblings, relatives, and life-long acquaintances into their business. Some companies refuse to recognize that a distributor’s sales force is an integral part of the distributor’s–not just the company’s–business.

Certainly we would all agree that companies not only have the right–but a duty–to protect raids by other operations on their distributor’s sales organizations. However, distributors should retain the right to offer other income opportunities to those they have personally sponsored. Many companies don’t agree.

They claim that the distributor’s application and agreement is with the company and not the sponsor. In doing so, they ignore the fact that the sponsor’s name is also on the contract. Additionally, there is a verbal contract between the sponsor and the new distributor to build a business together. This is not only healthy–it is a legally necessary relationship between a sponsor (as manager) and the new distributor (as a trainee).

When companies contend that an independent contractor cannot sponsor a long-term business acquaintance into another MLM company, it is not only ludicrous but can and does threaten the independent contractor status.

Few would disagree that cross sponsoring should be prevented when possible. However, what constitutes cross sponsoring is open to interpretation. It must be recognized that–due to the independent status of distributors–a distributor from a lower level could even end up in another company’s downline in a mutual upline. If this occurs because of direct effort of the mutual upline–and can be proven–it may be grounds for disciplinary action. However, if this occurs because of efforts of other distributors in that upline’s sales organization, then this is simply a case in which the independent contractor from lower levels is exercising his or her independent rights. If this is the situation, any disciplinary action should be halted or dropped, depending on when this information comes to light.

3. Distributors have the right to a fair and equal contract.

Almost every direct selling/network marketing company inserts an escape clause (in its favor, of course) in every distributor’s contract. The companies exercise this clause unilaterally when they want to change their compensation plan, or alter or eliminate any or all policies and/or rules they wish.

Is this fair? In essence, no matter when a distributor comes on board, he or she is signing a contract that states the distributor will obey all policy, rule and/or compensation plan changes the company chooses to implement–immediately or at any time in the future.

That’s great for the company. But it’s disastrous for long-term distributors because it ignores the great deal of time, money and effort seasoned distributors have invested to build a large and growing business–a business which mutually benefits the company and the distributor.

When the company implements far-reaching changes unilaterally, the only recourse the distributor has is to walk away from all his or her hard work, financial investment, and income flow. In theory, it is possible and legal to take away all a distributor’s commissions if the company wishes. And some companies have!

For a company’s long-term stability, it often faces the necessity of changing policies and rules. Quite often this is necessary to meet the requirements of new laws. Sometimes compensation plans need to become more competitive. However, what’s wrong with consulting all distributors to get their input prior to instituting changes? What’s wrong with the intended changes not infringing on the distributor’s rights? Or not threatening the distributor’s independent contractor’s status?

When companies sign up distributors under one set of policies and procedures and then significantly alter them, distributors should have a right to recourse. Why? Because a sound argument could be made that the companies were operating under false pretenses when they created the earlier policies and procedures, knowing full well they’d alter them later, to the ultimate detriment of the distributors.

In some cases, these changes could even be considered a breach of contract, and injurious to a distributor’s business and income. If this argument can be proven in a court of law, financial as well as punitive damages may be assessed the company by the court.

4. Distributors have the right to market and advertise their business in a legal, ethical manner.

As an independent contractor, a distributor owns his business. Therefore, the distributor should be able to market and advertise in any legal, ethical manner he sees fit.

Although this does not give the distributor the right to use the company’s name and trade marks without approval, distributors should have the right to identify themselves as independent contractors of the companies they represent with any of their marketing and advertising.

It’s always smart for companies to provide pre-approved ad slicks to distributors. This way, they know the message they want to disseminate will enter the marketplace correctly.

Savvy direct selling/network marketing companies also have in place–or rapidly construct after a successful launch–the mechanisms to quickly approve any distributor-created ads, or to aid distributors if improvements are needed.

A company should appreciate the fact that distributors frequently shoulder the majority–if not all–of the company’s advertising costs. Making the moves we’ve detailed above underscores that appreciation.

However, for companies to heavy-handedly restrict any legal, ethical method for a distributor to build a business could be considered by some to be a restraint of trade. Again, when companies attempt to control the independent contractor’s business to this degree, it threatens the latter’s independent status.

5. Spouses of distributors have the right to operate their own independent contractors’ businesses.

Many companies–believe it or not–restrict not only the right of a distributor’s spouse to own his/ her own business, but also have identical restrictions applying to the distributor’s offspring and other family members. Some companies apply these restrictions within their company only, while others attempt to extend the identical restrictions to all direct sales/network marketing organizations anyone might consider joining.

The fallacy in this thinking is that it assumes independent contractors have control over actions that their family members and spouses may or may not take. This stance also discriminates against the spouse and, in some cases other family members as well. It also is in direct conflict with cultural trends impacting the US today.

Most families require more than one income merely to subsist. By denying a spouse or a family member the opportunity to enter direct selling/network marketing, these companies are woefully out of step with the times, and are discriminating against spouses and/or family members. Furthermore, enforcing this restriction ignores the fact there are thousands of network marketing companies which may independently attract spouses and other family members to our swiftly-expanding industry. And finally, these restrictive prohibitions run roughshod over the legal rights and independence of these individuals.

In instances in which companies attempt to restrict a distributor’s family members from joining other MLM companies, the offenders are attempting to legally bind those family members under a contract which the family members didn’t sign, weren’t necessarily aware of, and certainly had no right to reject, nor to negotiate more favorable terms, nor to receive something of value for the rights they were relinquishing. Many would argue that such clauses are legally unenforceable, because nothing of value was exchanged for the right that was being relinquished, and because the involved parties to such an agreement didn’t sign said agreement.

6. Distributors have the right to be treated in a courteous, truthful manner.

The direct sales/network marketing companies that engage the services of distributors should be truthful and courteous in all dealings with distributors. This corporate honesty should extend to any/all the claims made for: (a) products/services; (b) the financial health of the company; (c) the experience levels, professionalism, and accomplishments being claimed by its corporate management, and (d) compensation, with all its many ramifications, i.e., what it pays out and when, etc.

7. Distributors have the right to expect companies to perform and provide support.

Companies should ship products on time and pay commissions on time. Companies should follow their own standards and not have double standards. Professional training and sales aids should be made available and provided at reasonable cost. Communication channels should be readily accessible for all distributors.

8. Distributors should have the right to recourse without being subjected to retaliatory threats and intimidation.

All companies should provide a mechanism to enable distributors to bring complaints to a distributor board and/or a corporate board without threat of losing income or being subjected to other disciplinary actions. A mechanism for a third party or an arbitration board should also be provided by the company.

9. Distributors should have the right to join any legitimate association of their choosing.

Distributors should enjoy the rights and privileges that come with joining any association, industry or otherwise, without threat or disciplinary actions, assuming said association is legitimate and pursues worthwhile goals and objectives.

Until now, companies have held the upper hand. The threat of halting the distributor’s flow of income has given distributors the feeling that, when combating their companies, they are in a “David vs. Goliath” situation. In the past, when a distributor lost his or her income from a company unjustly during a disagreement, the distributor felt he or she had little recourse. Without income, distributors felt helpless to take on the powerful and, quite often, well-funded companies.

But recently, several distributors have successfully sued and won large settlements against several companies. So the worm could be turning.

In the past, distributors have felt they had little choice but to sign the distributor applications provided by the companies. However, recently more and more would-be distributors have realized this simply isn’t true. They know that all they need do is cross out offensive clauses and unfair policies, and initial their changes before they sign the contract.

If the company accepts the contract with these changes, the distributor is home free. If not, the distributor can go to another company that doesn’t propose these restrictions to begin with, or willingly dispenses with them when challenged by distributors who cross them out. When–and if–all current distributors and all recruits make these “improvements” in unfair applications, offending companies will have little choice but to institute well-deserved improvements.

Distributors with companies lacking advisory boards (made up of distributors) can request such boards be created. It is imperative that these distributor advisory boards retain and exercise the right to report back to the distributors what stance they have recommended the company take regarding each and every complaint or dispute they hear.

These are all things that should be done. Now let’s look at what should be avoided. While distributors should have the right to join an existing association, very recently some top distributors considered forming an independent distributor organization. But had they thought things through? We suggest not.

For instance, such an association could be detrimental to companies and the industry as a whole. Here’s why: Open conflicts and debates would be aired not only in the courts, which is fitting enough, but in the media as well, which isn’t. This could further erode the reputation of the industry.

These distributors decided to join the Multi Level Marketing International Association (MLMIA) instead, under its distributor branch. This was a wise move! The MLMIA provides a forum for distributors and companies to resolve their differences without drawing the attention–and possible ire–of the general public.

A mediation or non binding arbitration board is being developed by the MLMIA to help resolve disputes between corporations and distributors. The MLMIA will provide distributor training and certification programs as well.

The MLMIA also provides distributors with newsletters, discounts and other benefits. The cost for a distributor membership in the MLMIA is only $50 annually. It offers the distributor the best hope to protect their distributor rights.

Returning for a moment to the Distributor Bill of Rights we are proposing, the reader should realize that–unfortunately–there are many companies in violation of this Distributor Bill of Rights today. These companies have remained unidentified in this column in the hope that they will change such unfair policies and initiatives without having Money Makers Monthly identify them and thereby possibly injure the businesses of thousands of independent contractors as well. In the long run, it is every direct sales/network marketing company’s best interests to protect the rights and interests of their individual distributors and to observe–to the letter–the Distributor Bill of Rights we’ve proposed above.

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