What you need to know about Mary Kay
If the FTC's new proposed Business Opportunities Rule becomes a Rule, then all you will know about such direct sellers as Mary Kay will become available in a two page disclosure document.
But as reported on Pink Truth: The blog formerly known as Mary Kay Sucks Mary Kay's General Counsel wrote an extensive letter to the FTC in opposition to the proposed Business Opportunities Rule.
The letter opposing the FTC's reform of the Franchise Rule can be read here.
The basic gist of Mary Kay's opposition to the new disclosure requirements is this: 1) we are a reputable company with our own internal consumer protection scheme, Reputation, and 2) the proposed disclosure would be costly, Cost.
Mary Kay, like many other direct sellers and franchisors, however completely fail to understand the relation between Reputation and Cost. Let us suppose, despite the withering attack by Pink Truth on Mary Kay's claim to honesty and integrity in its dealings with its sales force, that Mary Kay represents the high water of integrity.
Should Mary Kay have to disclose its high character to potential recruits, if that disclosure is costly -assuming as we have done that they are of the highest rank?
Well, the answer is yes. This surprising inference is due to what economists call the "market for lemons". As Steven Woda wrote in a different context about eBay resellers, credible signals of reputation have to have teeth and must be costly to maintain.
If Mark Kay was on the direct seller, with no new entrants on the horizon, then the case for mandatory disclosure is weaker. But Mary Kay and the other direct sellers have the reputation of the direct market selling industry to maintain, as will as their own individual reputation.
In the new world of speedy access to bad facts, in which sites like Fighting Fatigue, and Up Your Cadillac, along with other general network marketing sites such as Falseprofits are asking difficult questions, Mary Kay would be foolish not to adopt the FTC's new regulation with gusto and indeed improve upon it.
