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July - August 1999

 

Legal

DSA Annual Convention Report

Since the Direct Selling Association (DSA) recently held their annual conference in San Diego, California (May 23-25), we asked DSA Senior Vice President and Legal Counsel Joseph Mariano to give us an overview where the DSA will be at legal work on behalf of Network Marketing for the coming year. For the most part, he says, it's completion of some big, important projects that are at the top of his agenda. Lasting change takes time, and they're in it for the long haul. Currently, DSA is focusing on projects involving the Internal Revenue Service, Attorneys General around the country, and the American Medical Association. Here's a status report:

The Internal Revenue Service (IRS) Training Video

When the DSA first started on this project, we covered it in this column back in April of last year. "The goal of the videotape," Mariano told us then, "is to give IRS field auditors a better understanding of this business. We suggest that the IRS not audit people by virtue of them being direct sellers, and that they not, in the context of those audits, unfairly interpret the issues that have been the source of at least some anecdotal problems in the past-- particularly the hobby-loss deduction area."

The current progress update is very positive-- the video should be nearing completion as you read this. Mr. Mariano says the DSA is very pleased with the results of the video negotiations and production, which will result in better training for IRS agents in recognizing Network Marketing business practices.

Educating the Attorneys General

Many states have concerns about illegal pyramids, and some Networkers have come under intense scrutiny because of it. In an effort to protect their citizens from fraud, some states have been tempted to enact or interpret laws to lump pyramids and Network Marketing together in the category of illegal activity.

To protect law-abiding entrepreneurs, DSA has been meeting with the Attorneys General to acquaint them with ways to distinguish between exploitative schemes and the legitimate business of Network Marketing. A tool the DSA has developed for this purpose is the anti-pyramid model. By using the model, a state's law enforcement personnel can easily see the differences between legal home-based business and a scam.

Five Attorneys General have already met with the DSA, and the state of Montana has adopted the anti-pyramid model. Several more meetings are on schedule.

Doctors and Direct Selling

The American Medical Association (AMA) has become concerned over what it perceives as questionable ethics of doctors selling nutritional, dental, or skin care products to their patients. The AMA sees a potential conflict of interest, possibly even a risk of undo influence, in doctors promoting-- either in their offices or elsewhere-- products from which the doctors earn profit.

The DSA sees this as a misplaced fear, particularly since doctors are already selling their expertise. If they want to promote a product to further support a patient's health, that is no more prone to professional misconduct than the practice of medicine itself.

Since various members of the AMA do not want to see their direct selling options limited, they are coordinating with the DSA to present a balanced view of the issue at the annual AMA meeting (this summer in Chicago). The AMA is a private, not government, organization, but it is large enough to have as strong an impact on the industry as a legislative body. -- TH

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

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