Compliance Is Key to Industry Growth

Forbes

When Bill Ackman of Pershing Square Capital Management launched his attack against Herbalife at the close of 2012, he apparently hoped to make a fortune and at the same time take down a very large, very successful company that he alleged was using a questionable business model. As a result of his actions, he may have accomplished just the opposite, thanks to the direct selling industry itself and its supporters.

In the first half of 2013, Herbalife has proven itself stronger than the $1 billion short sell of one activist investor. In March, Herbalife’s stock rose with the announcement that Ackman rival Carl Icahn had bought a 13.6 percent stake in the company. Following record first quarter earnings, Herbalife saw its shares rise above pre-allegation prices in May.

In the wake of Ackman’s accusations, Wall Street embraced not only Herbalife but other direct selling companies as well. USANA initially rose 107 percent and Nu Skin 70 percent—with both companies reaching all-time highs despite starting the year at depressed prices following Ackman’s short.

Forbes contributor Richard Levick asserts that the key to Herbalife’s stability goes beyond the company and its financial backers to the direct selling industry itself. The standard of transparency and compliance permeating the industry makes these companies secure buys as well as financially appealing ones.

The Direct Selling Association sets the tone of the industry with its stated mission to “ensure that the marketing by member companies of products and/or the direct sales opportunity is conducted with the highest level of business ethics and service to consumers.”

We have shared the perspective of DSA leadership about the industry’s response to those who attempt to discredit it. You can find examples here and here. In its efforts to educate the public about the industry, the DSA also recently launched directselling411.com, a site featuring industry facts and stats as well as video messages from both government officials and academics who share their knowledge and perceptions of the direct sales channel.

The industry’s efforts to regulate itself have caused government regulators to take notice. Levick quotes one such regulator, Bob Paul, who claims the DSA Code of Ethics is “one of the best that I have seen.” According to Paul, any company that abides by such a code “should never have a problem with the Federal Trade Commission.” It seems that the industry’s investors would agree.

Read the full piece from Forbes.

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About Direct Selling News
Direct Selling News Magazine has been serving direct selling and network marketing executives since 2004. Each issue of Direct Selling News offers content on topics that shape the dynamics of our industry.

One Response to Compliance Is Key to Industry Growth

  1. Pingback: Nu Skin Stock Jumps to Record High | Direct Selling News Blog

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