The $32 billion direct-selling industry has gotten criticized for years by everyone from consumer activists to Wall Street tycoons. Now it’s getting heat from within.
Avon Products (AVP), one of the best known multi-level marketers (MLMs), stunned the industry earlier this month when it resigned from the Direct Selling Association, a trade association that it helped found. Avon’s stated reason for leaving the organization is that its ethics standards are not stringent enough.
The standards, which the DSA has argued are so strict that many multi-level marketers are unwilling to join, don’t strike the right balance between recruiting new salespeople and developing a viable business, according to Jennifer Vargas, a company spokeswoman.
“We think the code of ethics needs to be stronger,” Vargas said in an interview with CBS MoneyWatch.
Unlike other multi-level marketers (MLMs), Avon doesn’t require its 6 million independent sales representatives to purchase excess inventory from one another and places limits on the amount of profits they can earn from recruiting other members. Avon only allows representatives to profit from the sales of “three generations” of their organization, meaning people who are recruited by the independent businessperson.
“We do not promise commissions on infinite sales,” writes Cheryl Heinonen, the company’s chief communications officer, in