The Origin and Development

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The Origin and Development of Direct Selling
Prof. Der-Fa Robert Chen
Direct Selling Research Center National Sun
Yat-sen University //www.dsrc.nsysu.edu.tw
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• The Origin and Development
• of DS In USA

1. 1855 Southwestern Publishing House at
Nashville, Tennessee began direct selling
practice by selling Bible.
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• 1886 AVON Company at Winchester, New Hampshire
  began selling perfume door-to-door,Avon ladies
  went everywhere.

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• 1910 the antecessor of Direct
• Selling Association, the Agents
• Credit Association, established at
• Binghamton,New York?

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• 1930 Home Party Plan Method first adopted by
  Stanley Home
• Products.

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5.1945 Multi-level Marketing (MLM) compensation
plan was developed Lee Mytinger and William
Casselberry who worked for Nutrilite Company that
sells nutrition products.
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6.1951 Tupperware Company solely used Home Party
Plan Method to sell kitchen containers.
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7.1959 Amway was established by two Nutrilite
distributers at Ada Michigan, selling household
cleaning products.
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8.1963 MaryKay was established at Dallas Texas
using uni-level marketing plan. The special
inspiration culture brought up by its creator,
Ms. Mary Kay Ash, made a hit.
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9.In 1960s the fraudulent MLM companies came into
the market and made a lot of disputes and
financial damages to the general publics. A
notorious example was the 1964 Holiday Magic
Inc,in California. It used a head-hunting scheme.
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• In late 1960s the US Federal Trade Commission
  (FTC) began prosecuting the fraudulent MLM
  companies.
• They were calledPyramid
• Sellingand the image of MLM was spoiled

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• In 1975 FTC prosecuted Amway for fraudulent
  practice. After four years of law suit,in 1979
  the FTC made a decision that Amway was not a
  fraudulent MLM company. The decision promoted the
  image of Amway and its business took off since
  then.

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12.In 1978 World Federation of Direct Selling
Associations(WFDSA)was established at Washington
D.C. The Direct Selling Association of each
country is its member. WFDSA tries to promote the
decent practice of direct selling and the image
of direct selling.
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2. Fraudulent DS went everywhere

• In 1960s?70s fraudulent DS went to Europe and
  Japan.
• The European countries called it?Snow Ball
  System?, Japanese called it?Silver Rat???Money
  Rat???Rat Club?.

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14. The notorious example in Japan1965?World
Family Association?, in the form of money
gathering scheme?
15.In 1979 Japan passed the legislation to
regulate the activities of DS.
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16.In 1976 some Japanese came to Taiwan to set
up?Chun-Hua Health Association?, in 1978
established?Tai-Chia Corp.?. Both companies were
fraudulent DS and brought a massive financial
disaster to the general public. People regarded
DS as Rat Club since then.
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3. DS in Taiwan
17.In 1982 Amway came to Taiwan and brought the
decent operation of DS here.
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18. In 1986 the Chairman of Taiwan English
Magazine Corp, Mr. Charles Chen, initiated
the?ROC DS Social Club?. In December 1990 the ROC
DSA was officially established and became the
30th member of WFDSA.
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19.In 1992?Fair Trade Law?and?Regulation on
MLM?were legislated and the Fair Trade Commission
was in charge of the MLM business. The MLM became
an officially legitimate business operation.
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• ?Regulation on MLM?was revised in 1999?2002?2003,
  respectively.

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4. DS in Mainland China

• In 1990 a joint venture of Avon and Chinese was
  established in Guan Zou, that brought DS business
  into Mainland China.

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• In 1994 State Administration for Industry and
  Commerce (SAIC) issued ?Notice about Prohibiting
  illegal Activities in MLM?.
• Shanghai Government published
• ?Shanghai temporary Regulation on MLM?.

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23.In 1995 Amway, Sun Rider got the permission to
run MLM in Mainland China. They are the first
group of international companies to get the
permit?
24.In 1996 SAIC officially approved 41 MLM
businesses. Among them 17 are joint ventures with
international business.
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25. In 1997 SAIC officially published ?Regulation
on MLM??
26. In 1997 there were many conflicts between the
consumers and the MLM businesses.
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• 27. In April 1998 State Council ordered to
  prohibit any MLM activity.
• In November 1998 State Council announced 10
  companies to be allowed to operate in an adjusted
  manner.

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28.In 2001 China entered WTO and promised to open
the domestic market in 3 years. The prohibition
against direct selling were supposed to be lifted
in December 2004.
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• 29. The Administration Codes of Direct Selling
  and the Prohibition Codes of MLMwere published
  in September 2005.
• The Codes of Prohibiting MLM were in effect on
  01 November 2005 and the Codes of Direct Selling
  Administration were in effect on 01 December 2005.