riod in door-to-door selling, some individuals have rightly pointed out that abuses do exist in other forms of retail marketing. They have suggested that any form of cooling-off period should extend to all types of retailing. Therefore, the committee will consider very carefully whether the direct selling method of marketing, which is an old and respected form of selling, nevertheless leaves the buyer particularly susceptible to certain types of unscrupulous sales tactics.

The committee is well aware that direct selling provides a livelihood for a great many fine, outstanding American citizens. I would like to reemphasize strongly, therefore, that this committee has no intention or desire to harm these people or to impair their economic welfare. You may be sure that we will listen carefully to the suggestions of these witnesses during today's and tomorrow's hearings, so that we will avoid any unintended impact with the proposed bill.

The first witness this morning will be Mr. Lloyd E. Deilke, president, National Association of Direct Selling Companies, from Winona, Minn.

Mr. Deilke, we welcome you to the Senate Commerce Committee. I see you have a statement. Would you proceed as you wish?

STATEMENT OF LLOYD E. DEILKE, PRESIDENT, NATIONAL ASSOCIATION OF DIRECT SELLING COMPANIES, WINONA, MINN.

Mr. DEILKE. Thank you very much, Senator Brewster.

Ladies and gentlemen, and our student visitors in the rear of the room, as has been indicated, my name is Lloyd E. Deilke and I am president of the National Association of Direct Selling Companies, a trade association organized in 1910, to insure high standards by the member direct selling companies and to protect the consumer, and our industry, from irresponsible selling techniques. I have been connected with the direct selling industry and this association for over 29 years. We have left behind most of the undesirables who have been unable to compete with the great growth of reputable, reliable, direct selling companies. We have won consumer confidence through brand identification that guarantees quality.

The NADSC, as the association is called, is the only national trade. association representing direct selling as a method of distribution. There are several fine commodity-type associations in our industry also, but their emphasis is primarly on commodity matters as distinguished from the method of distribution representation.

We have in our association approximately 250 of the leading direct selling companies in America, including such companies as Avon Products, Inc., the Electrolux Corp., the Fuller Brush Co., Watkins Products, Inc., the W. T. Rawleigh Co., Furst-McNess Co., the West Bend Co., Stanley Home Products, Tupperware Home Parties, WearEver Aluminum, Inc., Sarah Coventry, Inc., Beeline Fashions, Inc., Jewel Tea Co., Inc., Stark Bros.' Nurseries & Orchards Co., C. H. Stuart & Co., Amway Corp., Rena-Ware Distributors, Inc., and many, many other fine companies well known to consumers throughout America.

Direct selling is America's oldest method of merchandising and distribution. Over the years, direct selling has launched many new products now found in almost every household. It has, therefore, created

mass markets which support many important industries. Its influence on the development of modern merchandising techniques and its contribution to America's thriving consumer goods industry can hardly be overestimated. Today, direct selling is one of the four principal distribution channels for consumer goods and services, along with the retail store, direct-by-mail solicitation, and the mail-order catalog. We are extremely proud of the career and earnings opportunities our industry makes available to millions of men and women on a full- or part-time basis, including the opportunities we offer to college students, senior citizens; in fact, anyone desiring to augment his income. There is a place in our industry for practically all of those people we hear about today who need economic help, and there is no greater shock absorber against unemployment than direct selling. As a part of our industry's picture, also, is the importance of direct selling to thousands of manufacturing and packaging companies supplying the needs of direct selling companies. Briefly, therefore, direct selling is an extremely important segment of the marketing economy of America and, I respect fully submit, that it behooves all of us to be careful about what we do that might adversely affect this important part of the American economy.

Now, as far as the specific provisions of S. 1599 are concerned, our opposition can be summed up rather simply and succinctly. I am sure that many of you have already received letters both from our companies and from their salespeople-not expressing concern over the so-called cooling off principle for which this bill provides, but stating strong opposition to the singling out of door-to-door sales for special and discriminatory Federal legislative treatment.

I respectfully submit to you that, unless all of the four principal retail methods of distribution are treated equally and fairly by the Senate Commerce Committee and the Congress of the United States, we, in the direct selling industry, will suffer irreparable damage to our prestige. Such discriminatory legislation could nullify much of the progress our association has made over the past 60 years.

One of the major factors in elevating industry standards has been the virtual elimination of the itinerant salesman; 88 percent of direct selling salespeople work in the community in which they live. They are seldom strangers making quick sales. Frequently, they are neighbors, interested in repeat sales, backed by old reliable companies who guarantee the quality of their products. Often, they call by appointment or invitation.

For many consumers, particularly those not close to large city stores, direct sellers have brought them merchandise of a quality, style, and price, that would never have been available to them if our industry did not exist. For many consumers, the social aspect of direct selling has brightened their lives.

Direct selling has given increased purchasing power to people who are able to work only because of the flexible work schedule possible in our industry. For many, the income has meant college educations and family luxuries they might otherwise have not been able to afford.

To justify the singling out of the direct selling industry for special legislation, one would have to first establish that other retailing methods operate according to higher standards. The facts, however, belie this supposition. On November 30, 1966, Mr. R. S. Wild, vice

president of the National Better Business Bureau, speaking before the Illinois Association of Chamber of Commerce Executives, pointed out that the number of complaints expressing consumer dissatisfaction against direct sellers is no greater than it is for other retail methods. The percentage of complaints, in fact, duplicates the percentage of the total national sales volume that direct selling represents-about 3 percent. Mr. Wild reported:

The Association of Better Business Bureaus International keeps statistics on all complaints registered with the Better Business Bureau. In a given year it will catalog a half million or more complaints of consumer dissatisfactions. At the end of last year, the National Better Business Bureau surveyed local bureaus about "gypster" activities in their communities and . . . Direct Selling had no significant role in the same.

It would seem to me that on the basis of this record, the passage of this bill would be pretty much like killing the dog to get the flea on the tail. I respect fully submit that in your consideration of this bill, you keep in mind the good consumer protection, covering all methods of retail selling, guaranteed by existing laws as well as by the Federal Trade Commission, the Food and Drug Administration, and related agencies.

Without belaboring the point, I believe that every reasonable and fairminded person will have to agree that in all industries, businesses, and professions, there are some "bad actors" and that this situation applies not only to our industry but to all forms of retailing. In the January 31 issue of the Washington Post there was an article covering the testimony of Paul Rand Dixon, Chairman of the Federal Trade Commission, before a Senate District Commerce Subcommittee and with the exception of a very minor reference to door-to-door salesmen near the end of the article, entitled "The Poor Pay More," he talked exclusively about the problems in the "stores."

As I mentioned earlier in this statement, our industry has no quarrel with the basic principle of "cooling off." We never could have built the direct selling industry to its present position if we hadn't been mindful of the best interests of the consumer. We are, therefore, on record in support of consumer protection. I respect fully submit, however, if the cooling off type of consumer protection is considered necessary in the public interest, that any and all legislation providing for the same should be written to apply to all forms of retailing and not just to direct selling alone. Anything less would represent discrimination against and disparagement of our entire direct selling industry. Accordingly, we have prepared a draft bill for submittal to you and your committee, after these hearings. In the spirit of your opening remarks this suggested change is only a working document. We believe, however, it offers a fair and equitable answer to deal with all types of selling abuses as the bill is applicable across the boards to all retailing and in our judgment furnishes the consumer the protection you seek but without imposing hardships, burdens, or discrimination on legitimate and respected business operations.

Thank you very much.

Senator BREWSTER. Thank you for your complete statement. We do have a few questions we would like to address to you. Do you have any indication that companies find it considerably more difficult to police the conduct of their salesmen and their representations when they make sales in the home rather than in the store?

In other words, is it more difficult to control door-to-door salesmen than salesmen in a store?

Mr. DEILKE. First of all, as was pointed out, in the early days of direct selling most of it was on an itinerant basis. People traveled from community to community and sold from community to community. However, now direct selling, as it is typically practiced within our industry among my members, is as we pointed out, 88 percent local. Your neighbor and my neighbors, your friends and my friends. These are housewives, these are people who are a part of all of the community. They are people who are desirous of augmenting their income for one reason or another. These are the same type of people as you and I.

And furthermore, over the years, realizing this problem, the fact that the sales person is removed from the home office of the company, more attention and more work has been done by the members of this organization in the careful and processional screening of sales people applications.

În addition, for a long time direct selling was conducted primarily out of a so-called home office, with nothing in the field between the company and the sales person. This, however, has drastically changed. We now have field management and field organizations all the way from the area to the district to the local level. So there is this personal knowledge of and contact with these people to a greater extent today than before.

Senator BREWSTER. What effect, if any, have the six-State cooling-off laws had on the big, ethical members of your industry?

Mr. DEILKE. In the first place, these laws have been in effect a relatively short time. This is a thing that is difficult for us to appraise because the factors involved, at least for the time being, are nebulous, indefinite, and hard to put your finger on.

What I am trying to say is we do not know how many prospective sales people that we were about ready to enroll, or who were thinking about direct selling as a career, have said no to us because of the stigma attached to our particular way of doing business by the pure fact of enactment of this discriminatory type legislation which has enjoyed tremendous coverage. This is one day's mail of newspaper clippings resulting from the passage of this type of law at the State level. All of these are very unfavorable. The headlines would scare most people away, either from the standpoint of going into our business or perhaps opening their door for us. Nobody knows yet, but we do believe that those laws have been detrimental to us or I don't think we would be here right now.

Senator BREWSTER. Since you have these cooling off laws in some six States and it is my understanding some 10 or 11 other State legislatures are currently considering similar proposals-might it not be easier for your big national distributors-the sales organizations-if we had a consistent policy across all of America rather than creating the very distinct possibility that your companies will be faced with some 50 different sets of regulations?

Mr. DEILKE. That is absolutely right. We would favor national legislation on this subject, properly drawn as we have suggested, to meet the total problem.

If it were to apply to all forms of retailing, we would be just as happy as you will be.

Furthermore, in our working draft bill that we have talked about, we have put in a preemption section based upon the Child Protection Act of several years ago, a uniform type of approach to preemption. That would again help to assure the principle of uniformity that you would like to see and we would like to see, also.

Senator BREWSTER. You believe that most national distributors would like to have a consistent policy across America which would be applicable in all States?

Mr. DEILKE. They already have it as a matter of business practice. Our companies have for many, many years followed the idea that the consumer-if a sale won't hold up for a reasonable period of time, it wasn't a good sale in the first place. But they do this voluntarily. This is part of the image. This is the thing that they have been doing that separates the good guys from the bad guys.

Senator BREWSTER. Do your members have trouble recruiting competent sales personnel for door-to-door sales?

Mr. DEILKE. Recruiting is the No. 1 problem for the direct selling industry. Therefore, we get awfully excited and awfully concerned when things like this come up that make the problem more difficult than it is anyway in these days of high and full employment.

Senator BREWSTER. An article about the Avon Co. appeared in the February 25 New York Times. You mentioned the Avon Co. It states: A new pool of potential selling representatives would seem to be available among young mothers and matrons freed by expanded leisure time.

Don't these housewives make up a possible pool of new sales personnel, and isn't it true that perhaps one of the reasons why some people are reluctant to go into this business is because of the threat of violence and crime in the streets of America today?

Mr. DEILKE. There are really two questions there.

Senator BREWSTER. Yes.

Mr. DEILKE. To answer the first question, because of the high employment and full employment generally, our companies have been working toward the concept of using more and more part-time women. That point is also involved in this legislation because we know from over the years that women are more sensitive to this type of imagedestroying things than a man would be who was going into this business on a full-time basis. Women will shy away, we find, from entering into our industry for very minor reasons. And certainly all of these horror stories, so-called, that have been appearing for the past year or so, have been detrimental to our ability to attract women, housewives and mothers, into our industry.

Senator BREWSTER. Now the second part of my question.

Mr. DEILKE. As far as the street problem is concerned, I think we all would like to see some improvement. But I don't understand where the problem on the streets involves the direct selling method of distribution.

Senator BREWSTER. If we had a Federal statute that weeded out the unscrupulous salesmen, wouldn't it really improve the image of your industry?

Mr. DEILKE. Yes, sir. If it would do it in a general and not discriminatory way. These people, the occasional bad actors, as we call them, are