Kevin Thompson, an attorney and managing partner at Thompson Burton, announces that Tennessee passed the Direct Selling Association (DSA) model legislation on network marketing and describes his role helping secure legislative support. He explains core elements of the bill: paying commissions on internal consumption is permissible provided there is no "inventory loading" (defined as incentives to buy more inventory than can be used or sold within 90 days) and a 12-month buyback policy on commercially reasonable terms (with spelled-out exceptions for spoliation, apparel/jewelry, and seasonal products). Thompson emphasizes industry unity, consumer safeguards (generous refunds, income disclosures), criticizes pyramid-like practices and specific failures (e.g., TelexFree, Zeke Rewards), and cites the Herbalife/Bill Ackman controversy as an example of organized opposition. He frames the law as making Tennessee a safer place to operate for network marketing companies.
Questions this video answers
Incentives for people to buy more inventory than what they can use or sell in a 90 day period.
A 12 month buyback policy on commercially reasonable terms (with exceptions for spoliation, apparel/jewelry, and seasonal products).
Joe Mariano (Direct Selling Association).
Chapters
Hi everyone, Kevin Thompson here, mlm, attorney and managing partner at Thompson Burton. And I've got some exciting news to share with you guys. And before I get into it, I do want to say that my 6 year old son smoked me in a half mile race. I'm a former track athlete and as a dad, number one, it shows me how out of shape I am. Number two, my son's pretty fast, so he also beat a few hundred kids in his age group. I'm still really high on that accomplishment that happened a couple days ago. I'm excited about that, thought I'd share it with you. But what you're probably more interested in is this other thing that I'm going to share. Tennessee passed the DSA model legislation with respect to network marketing. We got it done. So this is a really big deal for me. It represents a significant step because four years ago, independent, without talking to anybody, I came up with my own network marketing law here for the state of Tennessee. And the legislators here, they gave it a shot, they ran it and we tried to get it passed. And there were some holes in it. It really wasn't a good bill, it wasn't great. Bottom line is we didn't get it done. DSA had some exceptions with it. This was back before I could even afford to join the Direct Selling association. So there wasn't even a twinkle in my eye. That was several years ago. Fast forward to recent times and the story is on my blog post. But I got to thinking that, you know what, when it comes to the serious issues that we're dealing with right now in the country, you know, talking about health care and tax reform and all these issues that we deal with and we see on the news, it's really discouraging when you see legislators that cannot compromise, that they die on every single hill. And because of that, nothing gets done. And who suffers? We do, we do, as citizens. And so I was thinking, you know what? The DSA model legislation, it's actually pretty good. It's not perfect, it's not 100% of what I wanted, but it's good enough. So I picked up the phone, I called Joe Mariano and said, you know what, I want you guys to get behind it. I want to work as a team. Let's get this thing done here in Tennessee. I think we can make it happen. He communicated support. I reach out, contact the legislators here in my area, and we got it done. So I'm really happy. The gist of the bill is pretty simple. You know, the idea of paying commissions on internal consumption, it's legal, it's legitimate, which no secret there, provided that there's no inventory loading components in the plan. Which inventory loading is defined as incentives for people to buy more inventory Than what they can use or sell in a 90 day period. Also, there needs to be a 12 month buyback policy. Under commercially reasonable terms. So if there's a spoliation issue, it doesn't have to be 12 months. And of course, if you sell apparel or jewelry, or if products are seasonal, it doesn't have to be 12 months. Those exceptions are clearly spelled out. The bottom line is, you know, people in this industry, not people, we, us, we need to learn how to work together. We need to learn how to set aside the differences, Acknowledge the things that we do agree on, and advance the agenda. There's so many people out there that talk about elevating the profession. And we're going to make the profession better. But there are no meaningful ideas that come out of those forums. And out of those discussions. We need some concrete ideas. What does it mean to elevate the profession? What needs to happen? What sort of standards do you want to live by and operate under? Those are the discussions that we need to have. That's why I contacted the dsa and we got the model legislation done. Because here's the deal. The industry is under attack. And you've got wall street investors, and you've got companies, and you've got distributors. And all these different parties are just shooting at each other. And if we're unified on what we agree on. And by the way, if you think about it, we agree on a lot. If we're unified on what we agree on, We're a significant force. But as individuals, as competitors, we're weak. And it shows right now. Because right now, the opposition is more organized. And they're inflicting a lot of pain. Most notably right now with herbalife. With what they're having to endure with bill ackman. He is exploiting the gray and the law. Mischaracterizing the law. To make a case that herbalife is a pyramid, which supports his short thesis. In the company. So unified, we're tough to beat. Dispersed, we got a hard road in front of us. So, bottom line, if more states take a similar approach. To what tennessee has done and several others, I think right now it's up to eight or nine. If more states take ownership and address the issue head on, it makes it more and more difficult for people like bill ackman. To craft a really nasty narrative. And argue that various companies are illegal pyramid schemes. Don't get me wrong, the network marketing space is not perfect. And we do have some bad companies out there. We got companies out there selling thousand dollar lemonade, right? They're selling crap product and they rely on opportunity driven demand to move the product. We've got that problem. But if we can at least support the idea that these companies need consumer safeguards, they need generous refund policies, they need sufficient income disclosures. Just these basic elements will be a better industry. Because the bottom line is the scams. They can't offer generous refund policies. They can't offer income disclosure statements. They can't operate without revenue sharing deals. Right? The whole revenue sharing thing, get over it. Stop. It's got to stop. Telex Free is a train wreck. Zeke Rewards was a train wreck. And yet here we are still discussing it. The idea of buying more of something with the hopes of giving it away in an effort to increase earning potential. Stop. Just stop. If you don't support the product, if you don't believe in the product, then don't join the company. Do not join a company because it has an impressive pay plan. So that's a tangent. Bottom line. The bill passed in Tennessee. I had to eat some crow, but I was willing to do it. Really happy to say that I did it. We did it. The firm did it. In conjunction with the dsa. I think it's a significant accomplishment. And for clients of mine, I can now say, you know what, Tennessee is a pretty safe place to operate with respect to network marketing. You don't have to go to Utah to get it done. So lots of good stuff happening. You guys take care. And of course, if you have questions, I'm not hard to reach. See you.
