SECTION 6: Network Marketing and the Law
By Jeffrey A. Babener
Excerpted from Network Marketing: What You Should
Know, Jeffrey Babener, Legaline Publications
MLM consultant practice tips. MLM Raiding
issues are a continuous challenge for MLM Companies. Many problems
may be avoided by appropriate MLM Legal language in MLM distributor
agreements and MLM Policies. Guidelines for activity during the MLM
distributorship and after the MLM distributorship are imperative.
MLM Legal and MLMLegal.com and Babener and Associates provides
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be reviewed by an MLM Consulting standpoint by a MLM Consultant and
MLM Legal and MLM Law professional and programmed by a MLM Software
and MLM Technology provider.
Refunds for MLM Distributors.
If the trends continue, the vast majority of network marketing companies will be offering the standard benefit of a one year 90 percent refund policy to distributors who have decided that the opportunity was just not for them. How does it work? Let's say you decide to join a network marketing company that sells cosmetics or vitamins or consumer products and you buy inventory to sell to your customers. Under the emerging policies of many companies, you will have up to a year to second guess your decision, cancel your participation in the opportunity, return your product, less a 10 percent handling charge, and get your money back.
A number of states with such multilevel marketing legislation, such as Maryland, Massachusetts, Wyoming, Louisiana, and Georgia, mandate varying degrees of buy-backs by network marketing companies. Even Puerto Rico has such a statute. In the typical buy-back legislation, companies are required to buy back inventory and sales aides at 90% of net cost to terminating distributors. Buy-back periods range from 90 days to forever.
Over the years, many companies have adhered to the guidelines in these statutes, some have complied only where required, and others have ignored the legislation. Some companies charge back upline distributors for commissions paid on returned merchandise, while others have deducted upline commissions from refunds, which dramatically reduces the actual buy-back refund. With such inconsistency and growing incidents of "inventory loading abuse," many leaders in the network marketing industry thought it was time to make a commitment to self regulation and industry standards on buy-backs. Such a move, it was thought, would send a message to regulators that the industry can address its own problems without new onerous regulation.
Thus, after sincere soul-searching and with some anxiety, member companies of the Direct Selling Association adopted a recent ethics rule mandating buy-back policies for terminating distributors. Although many of the hundreds of network marketing companies in the U.S. do not belong to the DSA, the DSA a Washington D.C.-based trade association, does claim more than 100 members, including many of the largest companies in the industry. Adoption of the buy-back standards by DSA member companies impact billions of dollars of annual sales and millions of participating distributors. Because of the member of major companies adopting the policies, the rules will effectively be seen as a benchmark and industry standard for network marketing.
The DSA standards parallel to a large extent buy-back policies in many of the states with such legislation. Under the rules, companies must agree to buy back from terminating distributors inventory and sales aides in resalable condition for a period of 12 months from purchase at 90% of the net cost to the distributor. Upline commissions may not be deducted from the refund. Promotional items or products with seasonal or short lives are not subject to buy-back if companies disclose this fact to distributors in advance. In addition, and importantly, the buy-backs don't apply to two specific situations where distributor manipulation is taking place: (1) where distributors are disposing of inventory merely to switch to another company or move whole groups of distributors to another competitor (the intent of the rule is to protect the individual who wishes to leave the business, and believes he or she was mistaken in buying more inventory than could be sold); and (2) where a distributor, in order to qualify for a bonus or other benefit, has falsely certified that the previously purchased inventory has been resold.
There is probably plenty of debate in the industry about the appropriate length of time of the buy-back. Some industry leaders believe 60 or 90 days is plenty of time to decide to remain in or exit the business. Nevertheless, in light of some regulatory positions that the buy-back period should be unlimited, the time period for the rule was chosen at 12 months in order to make a strong statement about the commitment of industry companies to look after the welfare of its distributors.
The buy-back rules have drawn applause and praise
from state regulators. Many believe that the creation of an industry standard
would go a long way toward answering criticism in their state about "hit
and run" and "rape and pillage" images of network marketing companies.
It was thought that adoption of such buy-back standards by industry companies
would reduce the need for intervention and enforcement by state agencies.
DIRECT SALES consultant practice tips.
DIRECT SALES Companies should join DIRECT SALES Trade organizations. DIRECT SALES trade organizations provide educational assistance
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SALES Regulations and DIRECT SALES Laws. DIRECT SALES Legal and
MLMLegal.com and Babener and Associates provides expert DIRECT
SALES Consultant and DIRECT SALES Consulting advise on DIRECT SALES
corporate, DIRECT SALES software, DIRECT SALES Compensation, DIRECT
SALES Taxes, etc. DIRECT SALES Consulting is an important component
for DIRECT SALES startup. Careful Choice of DIRECT SALES Software
is another component of DIRECT SALES Corporate. An DIRECT SALES
Consultant and DIRECT SALES Law and DIRECT SALES Legal is part of the
DIRECT SALES Startup Team. DIRECT SALES Compensation must be reviewed
by an DIRECT SALES Consulting standpoint by an DIRECT SALES Consultant
and DIRECT SALES Legal and DIRECT SALES Law professional and programmed
by a DIRECT SALES Software and DIRECT SALES Technology provider.