Tuesday, 12 October 2010

IDSA's Code of Ethics is a bunch of jokes

These are some of the rules in the Code of Ethics of the Indian Direct Selling Association. A look at them reveals that this code is more in breach than in observance. Let us examine one of after another point of this code and how they are observed.

Self-Regulation: This Code is not law, but its obligations require a level of ethical behaviour from Companies and Direct Sellers which conforms with or exceeds applicable legal requirements. Non-observance of this Code does not create any civil law responsibility or liability. With termination of its membership in IDSA, a Company is no longer bound by this Code. However, the provisions of this Code remain applicable to events or transactions that occurred during the time a Company was a member of IDSA.

This rule speaks volumes. There is no compulsion on anybody to observe this rule. There is not a single incident of cancellation of membership of any company.

Inventory: Companies shall not require or encourage Direct Sellers to purchase Product inventory in unreasonably large amounts. Companies shall take reasonable steps to ensure that Direct Sellers who are receiving compensation for downline sales volume are either consuming or reselling the Products they purchase in order to qualify to receive compensation.

Many companies flout this rule. Herbalife is a glaring example. Herbalife induces people into buying products in bulk on the pretext that they would get maximum discount. There are hundreds of people laden with un-saleable Herbalife products with them. Even Amway indulged in this activity. One Mrs Sujata of Vijayawada complained about products worth Rs. 3 lakh remained with her. But Amway did not take the products back.

Termination: If requested upon termination of a Direct Seller’s relationship with a Company, Companies shall buy back any unsold, resaleable Product inventory, promotional material, sales aids and kits, purchased within the previous twelve months and refund the Direct Seller’s original cost, less a handling charge to the Direct Seller of up to 10% of the net purchase price. The Company may also deduct the cost of any benefit received by the Direct Seller based on the original purchase of the returned goods.

Ms B Sujata of Vijayawada, after the death of her husband ran from pillar to post asking Amway officials to take back the products worth Rs. 3 lakh remained with her after her husband’s untimely death. But nothing happened.

Earnings Claims: Companies and Direct Sellers shall not misrepresent the actual or potential sales or earnings of their Direct Sellers. Any earnings or sales representations made shall be based upon documented facts.

This is one rule blatantly violated by all the IBOs or distributors or consultants or whatever name they are given. One Ms. Padma told me personally that her earnings are Rs. 68,000 per month. But one look at her two-room rented shack tells the real tale. A housewife in Vijayawada boasted to an auto rickshaw driver that their income was Rs. 70,000 per month which resulted in a dastardly attack on her person. And an ENT surgeon prescribes Amway products as if they are medicine to his patients.

Business Information: Information provided by Companies to prospective or existing Direct Sellers concerning the opportunity and related rights and obligations shall be accurate and complete. Companies shall not make any factual representation to a prospective Direct Seller that cannot be verified or make any promise that cannot be fulfilled. Companies shall not present the advantages of the selling opportunity to any prospective recruit in a false or deceptive manner.

This is also blatantly violated. All the upline members tell the prospective new members is that it is a good business opportunity and if they recruit more people they could earn a lot of money and retire early in life. It would take just 2 to 5 years to earn sizable amount of money and later they could enjoy the rest of life. The gullible would never realize that it is a mirage.

Recruiting: Companies shall not use misleading, deceptive or unfair recruiting practices in their interaction with prospective or existing Direct Sellers.

The recruiting practice is totally misleading, deceptive and unfair. They always induce the prospective members with huge profits and early retirement in life. The interaction with the prospective or existing direct sellers would be completely false and totally deceptive.

Referral Selling: Companies and Direct Sellers shall not induce a person to purchase goods or services based upon the representation that a Consumer can reduce or recover the purchase price by referring prospective customers to the Direct Sellers for similar purchases, if such reductions or recovery are contingent upon some uncertain, future event.

It could safely be said that without inducement there is no direct selling at all. This rule is nothing but hypocrisy. Every distributor tells the new member to recruit more members in order to earn more money. Amway India’s 6-4-3 is the glaring example. Some other companies blatantly advertise in their brochures about the binary scheme which is mathematically impossible.

Fairness: Direct Sellers shall respect the lack of commercial experience of Consumers. Direct Sellers shall not abuse the trust of individual consumers, or exploit a Consumer’s age, illness, lack of understanding or unfamiliarity with a language.

In the referral marketing or network marketing, the distributors tend to abuse the trust of the consumers. Otherwise they could never recruit a single member.

Prohibited Practices: Direct Sellers shall not use misleading, deceptive or unfair sales practices.

This is the rule all distributors unscrupulously breach every day. They always mislead the distributors and follow deceptive and unfair sales practices while selling the products or recruiting new members.

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