The Origin and Development of Direct Selling

Prof. Der-Fa Robert ChenDirect Selling Research Center

National Sun Yat-sen University //www.dsrc.nsysu.edu.tw

1.The Origin and Development of DS In USA

1. 1855 Southwestern Publishing House at Nashville, Tennessee began direct selling practice by selling Bible.

2.1886 AVON Company at Winchester, New Hampshire began selling perfume door-to-door,Avon ladies went everywhere.

3.1910 the antecessor of Direct

Selling Association, the Agents

Credit Association, established at

Binghamton,New York 。

4.1930 Home Party Plan Method first adopted by Stanley Home

Products.

5.1945 Multi-level Marketing (MLM) compensation plan was developed Lee Mytinger and William Casselberry who worked for Nutrilite Company that sells nutrition products.

6.1951 Tupperware Company solely used Home Party Plan Method to sell kitchen containers.

7.1959 Amway was established by two Nutrilite distributers at

Ada Michigan, selling household cleaning products.

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.

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.

10.In late 1960s the US Federal Trade Commission (FTC) began prosecuting the fraudulent MLM companies.

They were called“Pyramid Selling”and the image of MLM was spoiled

11. 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.

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.

2. Fraudulent DS went everywhere

13.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 」或「 Rat Club 」 .

14. The notorious example in Japan ： 1965 「 World Family Association 」 , in the form of money gathering scheme 。

15.In 1979 Japan passed the legislation to regulate the activities of DS.

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.

3. DS in Taiwan

17.In 1982 Amway came to Taiwan and brought the decent operation of DS here.

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.

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.

20.「 Regulation on MLM 」 was revised in 1999 、 2002 、 2003, respectively.

4. DS in Mainland China

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

22.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 」 .

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.

25. In 1997 SAIC officially published 「 Regulation on MLM 」。

26. In 1997 there were many conflicts between the consumers and the MLM businesses.

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.

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.

29. “The Administration Codes of Direct Selling” and “the Prohibition Codes of MLM”were 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.