Addressing the Modern-Day Compliance Issues in Direct Sales

Jun 10, 2020 7:00:00 AM / by McKinley Oswald

To view the full video of Judy Hammerschmidt’s conversation with McKinley Oswald, click here.

Compliance has always been a concern in the direct sales industry. It used to be common for the legal counsel from a direct sales company to send someone in disguise to hotel meetings to see what was being discussed and how leaders were violating the company’s policies and procedures. Fast forward thirty years, and modern technology has presented a whole new set of issues. Social media has created a platform and given a voice to direct sellers that they didn’t have before. While this has provided powerful benefits for the growth of the business, it also presents some real challenges when it comes to addressing compliance concerns.

Direct Sales Masterclass - Judy

Judy Hammerschmidt, former international chief counsel of Herbalife, has over 25 years of experience within direct sales. With her vast legal experience comes unique insights about the history of compliance, how things have changed, and the approach that companies can take today to stay ahead of these issues.


Social Media: The New Era of Compliance

Technology has dramatically changed the issues that direct sales companies have to deal with. The dawn of social media created a way for direct sellers to have a voice 24 hours a day, seven days a week, 365 days a year. Companies no longer need to sneak into distributor’s meetings to see what they are saying. They can see it live just by going to Facebook, Instagram, and other social networks.



With the invention of social media and the advancement of technology, the original gig economy has become cool. It now removes some of the stigma of sitting down with a flipchart and allows people to create real connections on social media or through an app on their phone.


“Where the Verb products are extraordinary, is that they allow the technology to connect  and remove the need for a hotel meeting.”

– Judy Hammerschmidt


Verb’s unique social media sharing tool also allows the company to create compliant suggested messages and provide approved content for their people to share. This creates a way for them to help control the message and initiate these social conversations.


COVID-19 Compliance Issues

Direct sales companies have historically found success in times of recession, and COVID-19 has been no different. Many companies are having some of their best months and providing unique solutions, from both a product standpoint, as well as a business opportunity. But with that success has come a new set of compliance issues. Distributors making claims about how their supplements can cure disease or their opportunity can easily replace an income put companies in a dangerous situation. The FTC has taken notice and has sent several warning letters to prominent companies in the industry.



Non-Compliant Claims on the FTC Radar:

  1. Supplement products that will boost your immunity
  2. Income opportunities that provide a way to make money easily

Neither of these claims are true. The industry is full of fabulous products that can help support health, but they don’t prevent or cure disease. In addition, while many companies provide a unique opportunity to earn income, it isn’t easy, and you will have to work in order to achieve your goals.

What should companies look for? Typically, it is an overly enthusiastic recruiter or distributor who is doing everything they can to enroll someone on their team or sell product to a new customer. Often, it is just excessive excitement coupled with the fact that the distributor doesn’t know what they should or shouldn’t say. Utilizing technology to allow them to be the messenger without being the message can help you make major strides in regard to compliance.

Verb’s Unique Solutions that Address Compliance

  • Centralized Location for Approved Content: Give the field compliant content that they can share with prospects
  • Create Suggested Messages: The app provides a suggested compliant message that your legal team can approve
  • Localize for International Markets: Different markets have different sets of compliance rules and the app allows you to segment content by market/language
  • Mobile Learning Management System: Verb’s Learn product allows companies to create courses to educate and train their salesforce


Learn: Verb’s Learning Management System (LMS) Makes Compliance Easy

An educated distributor is much less likely to make egregious claims. Many companies have sought the right solution to educate and ensure that their salesforce knows the compliance rules that they need to adhere to as they build their business.



“Verb’s Learn platform can make a huge difference if you get one of those letters from the FTC because you can show the courses and efforts you are making to educate on compliance. It shows that you are taking it seriously.”

– Judy Hammerschmidt


Learn’s LMS functionality can start from the moment you onboard a new distributor. Providing courses on compliance, systems, and products can help get them started right and give them the knowledge base of what is compliant and what isn’t. Verb has been working with Judy Hammerschmidt on three unique courses that will be available within Learn for our app clients. These courses will help educate distributors on the compliance rules as they relate to products, income, and international business. And, the best part? These courses will be available for free!


Segmentation—Creating a Customer Pathway

It used to be that most direct sales companies didn’t even know who their customers were. Companies assumed they were selling to customers when it may have been that distributors were just filling their garages with products. Now there are two distinct parts of the business: Companies have to develop customers and unique products for them, and they need to create a separate journey for people who are looking for a business opportunity.



“The single biggest change that has happened in the industry is that for decades, the customer of the company was the distributor. Now companies are accounting separately for their customers. Gone are the days of the distributors filling their garage as they now have a direct line to the company.”

– Judy Hammerschmidt


Verb’s Platform Provides Unique Tools for Customer Acquisition

  • Sampling: Distributors can send samples through the app to allow their customers to try a product before they buy it
  • Customer App: The Verb customer app creates a completely separate customer pathway, allowing the company to educate and communicate directly to the customer
  • Learn: Product education is key—an educated consumer is a continued consumer
  • Be the Messenger: The tool gets it right every time and never makes a compliance error—give the field the right tools to share


Compliance: Be Proactive or Your Hand May Be Forced

Companies can no longer put their head in the sand and ignore compliance issues. Utilizing technology to address these issues can help your company make huge strides in these areas. Taking steps to be proactive can ensure that your company gives the field the tools they need to build their businesses in a way that will be safe for both them and your company.




Topics: Business, Technology, Marketing, Best Practices, Direct Sales, Sales Enablement, Verb App, Income, Masterclass, McKinley Oswald, Judy Hammerschmidt, Herbalife, Compliance

McKinley Oswald

Written by McKinley Oswald

President of Global Sales for Verb

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