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April 1999

 

Legal

Is Database Purging Fair? - Paul Greenberg

A distributor called us recently with the following complaint:

"My company recently started purging its database of inactive names, and in a matter of two months, my downline has shrunk from around 10,000 to around 5,000! Even if those people haven't ordered recently, their contact information is valuable and represents hard work to me and others in my organization. I want continued access to those names-- help!"

We asked Paul Greenberg, Network Marketing attorney, to share the legal perspective on database purging. Here's what he had to say....

My assumption is that a company who purges a database has thought through how valuable the names are, if at all-- whether they represent people who will buy product or not. They've probably attempted one or more campaigns to see if those people can be resurrected as customers and found that they couldn't be.

The company and the distributors share an equal interest in increasing sales and retaining customers-- a company wouldn't want to purge viable names from its database any more than a distributor would. The only place where the interests might diverge is over the matter of cost and when to say it's gone on long enough-- it doesn't cost the distributor anything for an inactive person to stay on the company's list and receive company mailings because the company assumes that expense. Hopefully, if a company comes to the conclusion that inactive names in its database no longer represent potential sales, it will give the field notice of a pending purge. That's the distributors' cue to make contact with those people if they wish to.

This comes back to the perpetually confusing issue of who has "rights" to a downline. It comes up between distributors-- Joe claims that his upline is "messing" with his downline-- and, most frequently, when a distributor wants to prospect her own downline for another business and is prohibited by her company. Some would argue that it's fine for her to do that in the name of competition and the free market; others say as long as you only approach people you personally sponsored, then it's okay. Still others, myself included, argue for the sanctity of the sponsoring relationship that is unique to Network Marketing.

If you have a downline of 500, then many of the same people you claim in your downline are also in the downline of many others, so the claim is not accurate. As a lawyer, I advise companies to prohibit all such activity to protect the sponsoring relationship, because even if people only contact those they personally sponsored, carefully and unethically applied pressure can easily cause a daisy-chain through an organization, which doesn't benefit the company or the distributors who've been working to build businesses.

This question skirts the same issue of "rights" to a downline, but I don't think it has to. Distributors and their companies do not have to be at odds over the issue of deleting inactive names from a database. There are legitimate reasons for doing it, and companies have the legal right to do so.

My advice is: Know your company's policy about database purging. If there are people you've signed up as distributors or customers who have since become inactive, be alert to when their name will drop off the mailing list. There's no reason why you and your downline can't keep track of this and make contact. As long as they're inactive, they aren't contributing to your commission check anyway, so why wait to contact them until they're about to drop off? The sponsoring relationship you have with them gives you an advantage that will serve both you and your company's efforts to those people involved. If they're truly "old and cold," which you can find out, then the names don't represent value to your or your company.

Paul Greenberg practices law, with a specialty in Network Marketing, at 1875 Century Park East, Ste. 700, Los Angeles, CA 90067; 310-277-6109.

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Reprinted with permission from Upline, Upline Legal - April 1999, 888-UPLINE-1, http://www.upline.com

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