With questions arising around other members of the Direct Selling Association, a longtime member of the 104-year-old group decided ethics concerns and a regulatory storm made it difficult to stick around.
Avon and Herbalife may have a lot in common as far as business models go, but it’s not exactly the kind of thing that the cosmetics giant wants to play up anymore.
This month, Avon Products chose to leave the Direct Selling Association (DSA)—a group that represents the direct sales and multilevel marketing space in the U.S.—at a time when the industry has started to draw negative attention. In the case of Herbalife, the company has long found itself a target of hedge-fund manager William Ackman.
Avon, the world’s fifth-largest beauty company, decided that it no longer wanted to get caught in the crossfire of a regulatory fight that could cost the company much goodwill. Last week, Avon executives sent a letter to members of the DSA, announcing Avon’s departure and expressing concerns that the DSA’s ethics standards would not be enough to prevent fraud.
Further, Avon suggested that the association had gotten too focused on other members.
“We believe the association’s agenda in the U.S. is overly focused on the issues of a few specific brands rather than industry-wide challenges,” Avon Senior Vice President of Corporate Relations and Chief Communications Officer Cheryl Heinonen wrote in the letter to DSA.
Some, such as Politico‘s Byron Tau, took the comment as a broadside against Herbalife, which is currently facing a class-action lawsuit over claims that the company is based on a pyramid scheme, though Herbalife is reportedly close to a settlement over the claims. Herbalife has long denied that its business model is illegal.
Understandably, the DSA expressed disappointment that Avon—a firm that had been with the association since its 1910 launch as the Agents Credit Association—would leave the trade group.
“Our association is far better-equipped to address the challenges and opportunities of our industry when all of our member companies stand together,” the association told Politico. “We remain committed to the highest level of marketplace ethics and consumer protection and wish Avon well as it charts its future course in the United States.”
In later comments to The Washington Post, Heinonen—a onetime member of the DSA’s board—emphasized that the letter was intended to highlight the firm’s desire to focus on multilevel marketing rather than on fraud dangers.
“It’s really an exciting place to be right now, and I think that as an industry, I think that’s where many of us would like to be focused,” she said.
The association remains a member of the World Federation of Direct Selling Associations (WFDSA), along with local and regional affiliates.