There exists tension between the direct sales industry and industry regulators as to the role of “personal use” of products and services by distributors of MLM companies. The broad and ambiguous language in pyramid legislation has contributed to the problem. Pyramid statutes have always prohibited the payment of commissions in a multilevel program unless based upon the “sale of goods or services.” To whom must those goods or services be sold in order to avoid being a pyramid? The distributor, the end-consumer, or both?
Almost all major direct selling companies have defined “retail sales” to include sales to non-distributors, as well as sales to distributors for actual use or consumption (distributors like to use the products they sell too). Many regulatory officials, however, have maintained that the “mark of legitimacy” is found in the programs where primary sales revenue comes from sales to non-distributors, i.e. consumers. Continue reading