In a recent email sent out to all active Scentsy representatives, they were asked to support a proposed amendment to the Federal Trade Commissions Act that was introduced earlier this year. Scentsy aims to direct their representatives to the Direct Selling Association where they can show their advocacy for the campaign. However, we found the contents of this email rather vague and decided to dissect it a little further.
The email sent out by the Scentsy News Team states “In July, a bill was introduced in the House of Representatives that would raise the bar on all direct-selling companies while cracking down on those that take advantage of the direct selling business model. This bill would help consumers avoid illegal scams such as pyramid schemes and help guide legitimate direct selling companies on acceptable, ethical business practices.”
This all sounds great so far, who could be against that?
They go on to show (a small portion) of the proposed amendment in the email. H.R. 3409 would “amend the Federal Trade Commission Act to prohibit pyramid promotional schemes and to ensure that compensation is not based upon recruitment of participants into a plan or operation, but on sales to individuals who use and consume the products or services sold, and for other purposes.”
The FTC has been coming down on direct-sales companies over the last few years and at first glance, this proposed amendment seems to align with their goals to protect the sales consultants. Scentsy claims to support this document as it appears it will ensure compensation is not based on recruiting a downline, but instead for producing sales to end consumers.
The actual context found within this proposal raised some eyebrows as we dug deeper. H.R. 3409 indicates that not only would the end consumer need to be an actual customer, but that any company that has a reasonable buyback program could not fall under the category of an illegal pyramid scheme. Ok if you’re following this, all seems good so far.
Here’s where the things seemed to take a deceptive twist. The bill can be interpreted to excuse any company that requires an inventory purchase, or as they call it ‘inventory loading’, from any unfair business practice charges if they offer a reasonable buyback program and sell to an ‘ultimate user.’
Within the amendment, there are no further elaborations on definitions they use. Terms such as ‘inventory loading’ have always been subject to interpretation; definitely a red flag. Without any limitations set in place on what an unreasonable amount of inventory to require a consultant to purchase is, or without any definition of what a reasonable timeframe to sell is, we have a little too much wiggle room for comfort. Isn’t that how companies have got away with it in the first place?
Furthermore, the verbiage of an ‘ultimate user’ states “…an individual who consumes or uses the product or service, whether or not the individual is a participant in the plan or operation.” So, representatives who purchased those expensive starter packs could theoretically be held accountable for all that product because there are no ‘guidelines’. This doesn’t seem right.
One Scentsy rep had this to say regarding the email. “At first glance, I thought this would be great for the industry. I think what the FTC was aiming for makes sense but the actual guidelines were so unclear I feel like companies can just make up their own rules, and Scentsy wants me to support that? I can tell you first I won’t be signing anything until I feel comfortable a company won’t be forcing products down my throat.”
Essentially, by only highlighting the parts that ‘sound good’, they are urging Scentsy consultants to push in favor of a proposal that will protect the company best. Consultants need to fight so these terms are clearly defined before any free passes are given to companies trying to empty your bank account. A little advice for Scentsy staff; make sure and include ALL the terms if you want your participants to support a change in the law.