DSA Code of Ethics: What Member Companies Promise
The DSA Code of Ethics is the rulebook every Direct Selling Association member company agrees to follow. It covers earnings claims, product claims, cooling-off periods and inventory buybacks, but it is a self-regulatory code, not law, and it applies only to DSA members.
Key facts
- Who it covers: member companies of the U.S. Direct Selling Association and their salespeople
- Buyback: repurchase of marketable inventory within 12 months at not less than 90% of original net cost, less set-offs
- Cooling-off: a written withdrawal period of at least three business days
- Earnings claims: must be truthful and substantiated
- Status: self-regulation; enforced by a Code Administrator
What the DSA Code of Ethics Says
The Code, originally adopted in 1970, is a condition of DSA membership. It is organised around consumer protection (accurate descriptions, written terms, a cooling-off period), protection of salespeople (accurate information on the opportunity, restrictions on large entrance fees and inventory loading) and truthful earnings and product claims. DSA states that members commit to provide accurate information about compensation, base earnings claims on documented facts, discourage unreasonably large inventory purchases and repurchase inventory on reasonable terms.
Inventory Buyback and Cooling-Off Rules
The Code requires member companies with a plan that involves buying products to repurchase marketable inventory, sales aids, tools and kits within twelve months of purchase at not less than 90 percent of the salesperson’s original net cost, less appropriate set-offs and legal claims. Read the nuance in why the 90% rule matters, and see how inventory pressure shows up in inventory loading in MLM. The Code also calls for a written cooling-off period of at least three business days for consumer purchases, applied to in-person, mail, phone and online sales.
Earnings Representations
The Code defines an earnings representation broadly, including statements about actual or potential sales or profits and lifestyle claims such as homes, vehicles and vacations tied to income. Salespeople must receive enough information to understand that earnings vary significantly, and companies must keep documentation to substantiate claims. This overlaps with FTC guidance covered in FTC business guidance on multi-level marketing and the practical steps in how to read an income disclosure statement.
How the Code Is Enforced
DSA appoints an independent Code Administrator, and member companies must cooperate with complaint investigations. Annual compliance reports summarise complaints by Code section. In the 2023 report, for example, only about 1% of allegations concerned earnings representations. Separately, DSA funds the Direct Selling Self-Regulatory Council, run by BBB National Programs, which monitors claims across the whole U.S. channel; see what the DSSRC does.
Limits of Self-Regulation
A code protects you only if the company is a DSA member, and DSA membership is not a government approval. Law, including FTC rules and state statutes, still sets the minimum. Check whether your company is a member, but do not stop there. Our MLM vs pyramid scheme guide explains the legal tests regulators apply.
Key Takeaways
- The DSA Code covers DSA member companies only.
- It includes a 90% inventory buyback within 12 months and a cooling-off period.
- Earnings claims must be substantiated and not misleading.
- Membership is not a substitute for your own research.
Frequently Asked Questions
Is the DSA Code of Ethics legally binding?
It is a condition of DSA membership and a self-regulatory instrument, not a law. Member companies agree to follow it and to cooperate with its Code Administrator.
What is the 90% buyback rule?
DSA member companies must repurchase marketable inventory, sales aids, tools and kits within 12 months of purchase at not less than 90% of net cost, less appropriate set-offs and legal claims.
Does the Code cover earnings claims?
Yes. It requires earnings representations to be truthful, substantiated and presented with enough context for a reasonable evaluation.
How do I know if a company is a DSA member?
DSA publishes its membership information on dsa.org. Confirm membership there and read the company’s own policies as well.
Sources
- DSA: Code of Ethics
- DSA: Code of Ethics compliance report, 2023
- DSA: Direct Selling Self-Regulatory Council
- FTC: Business Guidance Concerning Multi-Level Marketing
QastMe does not endorse any company. Information is for education only and is not financial or legal advice. Earnings in direct selling vary widely, and most participants earn little or no money. Review each company’s income disclosure statement before deciding.
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