We have hosted more than 70 national conferences on starting and running a direct selling, network marketing, MLM or party plan company. We have started and advised many of the leading companies in the industry and we have a “big picture” that may be difficult to find elsewhere. We are big believers in education and our website, www.mlmlegal.com, is hopefully evidence of this, with hundreds of articles, cases, statutes, and scores of videos. We take a particular satisfaction in helping entrepreneurs pursue their dreams and the consequence is often the creation of thousands of jobs and opportunities. And at our conferences, we have started many companies that are today, household names. It has been a pleasure and honor to assemble professionals in these conferences to assist individuals to create “something from nothing.”

At the conference, we facilitate relationship-building, networking, and the educating of MLM entrepreneurs. We bring direct selling experts from around the country to one location to coach attendees on software, technology, compensation plans, sales kits, recruiting, funding, capitalization, legal, and many other topics that are imperative to any MLM executive. Attendees are educated in a classroom-type setting by industry experts and then are offered one-on-one time to speak with any (or all) expert they choose. Our goal is to harness long-term relationships, while educating the next generation of network marketing entrepreneurs about the strength and credibility of the MLM industry. An industry that supports millions of people around the world.

As the creator and host of the original MLM Startup Conference, we support the MLM entrepreneur and play a key role in establishing new companies in the industry through our event. If you’re starting, or thinking of starting a network marketing company, we highly recommend that you attend. This is the best, and most longstanding, conference offered anywhere.

Are you interested in attending the Starting and Running the Successful MLM Companyconference? Visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

For more encouraging words to achieve success in network marketing, visit Attorney Jeff Babener’s websites: www.mlmlegal.com and www.mlmattorney.com.

Visit us at www.mlmlegal.com to learn more.

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Vocal critics are abundant in the direct selling industry, but the positives drown out the negatives. It’s not hard to find a loud voice criticizing the direct selling industry through a quick Google search. And it is true… there are many pyramid/Ponzi schemes, primarily internationally based, that parade themselves as MLM/direct delling… and they are not. They are merely pyramid headhunting recruitment schemes that often use bogus products and services as an excuse to move money. The entire emphasis of such organizations is to cause investors to pay money and cause others to do the same, with a thin veneer of an actual product or service. In fact, the revenue to pay commissions instead comes from distributor payments and not sales to the ultimate user.

Despite this, the facts remains MLM and direct selling are a major part of the fabric of commerce. Statistics on 2014 sales, compiled by the World Federation of Direct Selling Associations, indicate global sales of $183 billion and 100 million distributors. In the U.S., there are 18 million distributors posting $35 billion in sales. Numerous direct selling companies are traded on the NYSE.

Many direct selling companies have histories dating back to the 1800s (see our MLM company profiles page to read over 700 MLM company profiles). Avon, alone, dates back 130 years. Companies like Avon, Mary Kay, and Tupperware have long and credible company histories and support thousands of households in the U.S. and internationally. Network marketing has a lengthy history of reputable companies. This industry supports millions of independent consultants in the United States and abroad.

Finding a Good MLM Company

How do you find a good MLM company for you? There are ways to make sure that a direct selling company is a good business and ethical. First, contact the industry association websites, such as the Direct Selling Association (DSA), to see if the company is a member and if they abide by the DSA’s Code of Ethics.

Secondly, if you’re considering becoming a part of a startup network marketing company, learn how to recognize some red flags. Is the company offering a tangible product or service? Make sure that the company offers a product or service, and not something intangible, such as prayers or wishes. Does the company ask for an unreasonably-high investment to join? Startup kits average anywhere from $50-$150. If a company is asking for $500 for their startup kit, perhaps you should begin asking more questions. This alone is not a sign of a company operating illegally, but can be a sign to look for additional clues for questionable practices. Does the company focus its mission on primarily recruiting new members and not focus on the sale of product (or service) to the end consumer? A legally-operated MLM company will have a primary focus of selling products (or services) to the consumer, not just in recruiting new consultants.

Be sure to investigate any opportunity that you are considering joining and due your own due diligence. And, if you are starting your own network marketing company, it would be wise of you to hire a credible MLM attorney that specializes in direct selling law.

And probably your best educational resource: check out the hundreds of articles, videos, company profiles, etc. at MLMLegal.com.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Visit us at www.mlmlegal.com to learn more.

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This newsletter offers recent news, videos, company profiles, and weekly articles delivered to your inbox on a timely basis. Each newsletter contains top news stories in the network marketing industry, the most recent MLM scam alerts, timely articles on the direct selling industry, and so much more.

Make sure you’re not the last to know about top MLM news stories, or to hear about the latest scam reports. Our timely headline reporting will keep you up-to-date on stories that affect everyone in the network marketing industry.

We will also make sure you receive a “Video of the Week” on industry educational topics, such as distributor education, industry Q&A, executive interviews, MLM startup, and pyramid schemes.

Each newsletter features the profile of a direct selling company, like Avon, Mary Kay, and Amway, or perhaps a startup multilevel marketing company that you haven’t heard about yet! MLM News Global also highlights two featured articles on industry-related topics, such as pyramid schemes, compensation plans, recruiting, lead generation, legal analysis, software, and more.

The MLM News Global Newsletter is presented by industry educator, MLM legal expert, and network marketing business consultant, Attorney Jeff Babener.

Sign up today to receive valuable MLM, network marketing, direct selling content, an imperative to anyone in the direct selling industry. Join our newsletter today!

Check out our Archives for past issues.

Learn more business tips at www.mlmlegal.com and www.mlmattorney.com.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Our next Starting and Running the Successful MLM Company Conference takes place in Las Vegas. View our conference flyer and speaker list online.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

Visit us at www.mlmlegal.com to learn more.

A post on Facebook is really no different than a mass email.

Clearly, while consultants are with a company they are asked not to get involved in raiding activity. Network marketing companies have mixed opinions on post-termination behavior. Most companies ask that consultants not raid the downline for a certain period of time after they stop consulting for the company. Companies that ask this of their consultants argue that the consultant’s Facebook profile is basically an email list; a post on Facebook is really no different than a mass email. Not many companies specifically outline post-termination rules in their policies and procedures; however, most companys’ position on the issue is effectively the same as if you started sending emails to everyone in your downline once you left the company.

Several approaches have been noted, including the drafting of agreements where companies and distributors have bifurcating social media pages. Basically, consultants would have a personal and professional Facebook page. This causes a bit of a dilemma because many consultants will make close friends with those in their downline. Perhaps not everyone fits into a personal or professional-only account. Companies look at it as more black and white. Companies see it as a consultant holding a lengthy email list, whether it be on Facebook or Twitter, etc., and once they’ve sent our an announcement saying “come join me at my new company…” then it is just as if they are sending a mass email to their downline. Both perspectives are understandable, and so far, there is no industry-wide solution to the problem.

Your best educational resource on the web: check out the hundreds of articles, videos, company profiles, and more at MLMLegal.com.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Our next Starting and Running the Successful MLM Company Conference takes place in Las Vegas. View our conference flyer and speaker list online. Participate in our Innovation Campaign for your chance to receive TWO FREE TICKETS to attend our next conference.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

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MLM Expert Attorney, Jeff Babener offers ten FTC vs. Vemma litigation bullet points.

On August 17, 2015, the FTC filed a complaint in U.S. District Court in Arizona, seeking a permanent injunction against Tempe-based Vemma International Holdings, Inc., a long-time direct selling marketer of health-related products. The FTC was successful in obtaining a temporary restraining order, which shut the company and froze its assets. Further proceedings for a hearing on a preliminary and permanent injunction and other relief were set to the future.

Such a scenario has been a common approach for the FTC. The most recent actions resulted in permanent injunctions against BurnLounge and Fortune Hi-Tech Marketing. For a summary of the most significant federal actions during the past few decades, please see:

Herbalife: What Short Sellers Missed on the Way to the Press Conference…

Jeffrey Babener (2013)

The primary accusation against Vemma is that its program focused on recruitment rather than sale of product to the ultimate user, thus rendering the program a pyramid scheme and a deceptive practice under FTC legislation. In addition, the FTC has charged that Vemma is deceptive in its earnings representations.

FTC vs. Vemma Litigation Bullet Points:

1. (a) This case affirms the BurnLounge standard requiring emphasis on sales to ultimate users, which includes nonparticipant retail customers and personal use in reasonable amounts. Primary motivation for distributor purchases should be destination to ultimate users and not to qualify in the plan for compensation.

See: BurnLounge Appeal Decision: Guidance on Pyramid v Legitimate MLM and the Role of Personal Use in Pyramid Analysis

Jeffrey Babener (2014)

(b)       Contrary to some industry comment, autoship is not under attack, but rather the method of its promotion and implementation and amount, which suggests the primary motivation for purchasing is not for sales to retail customers/ultimate users or reasonable amounts for personal use, but rather to induce purchasing to qualify for commissions in the plan.

(c)        A similar analysis is applicable to up-front, fast-start packages.

2. The FTC alleges several accusations that Vemma is not complying with the BurnLounge standard, and, thus is a pyramid.

(a)       Emphasis not on use or retail but purchasing to qualify.

(b)       Distributors are told to give away product.

(c)        Little evidence of retailing or emphasis on retailing or teaching or training to retail.

(d)       Up-front emphasis on buying fast-start packs of $500-$600, plus sign up for $150 per month autoship to qualify for commissions, rather than servicing an actual need.

(e)       The FTC asserts that the Vemma program emphasis was about distributor purchasing and getting recruits to do the same, rather than sale of product in reasonable amounts for the needs of retail sales and personal use by distributors.

(f)        And the FTC no doubt had complaints from parents of college students, and parent lawyers, for targeting vulnerable college age students with promises of fast wealth from working “the system” of buying and recruiting. The FTC complaint focused heavily on accusing Vemma of abuse by targeting young individuals. Clearly, this is a sore point for the FTC, and it has been a concern of some industry observers even prior to the FTC case. The last time this criticism was made was when Equinox and Trek Alliance were shut by the FTC for the same reasons. In a way, this action is Equinox redux.

3. The FTC does not condemn, nor attack the MLM model (nor personal use), but rather goes out of its way to call out Vemma practices, which it contends makes Vemma an illegitimate pyramid. (See the FTC press release and complaint for FTC’s highly pejorative characterization of the facts.)

“…an alleged pyramid scheme, Vemma Nutrition Company, that lures college students and other young adults with the prospect of getting rich without having a traditional 9-to-5 job.”

‘Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization,’ said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.”

4. Vemma is accused by the FTC of deceptive earnings claims, potentials and hypotheticals as to how distributors could earn substantial income. Vemma published an earnings disclosure, but it was inadequate and deceptive to show the entire picture by limiting disclosure to earnings of active distributors rather than disclosing earnings of all individuals who signed up, of which the vast majority had no income.

5. Autoship: Rumors of its demise are exaggerated. In the future, autoship will continue as a form of orderly ordering… the legal key will be “tracking” how that product is consumed or sold to ultimate users. After the Vemma case, all other cases will demand “tracking” evidence to determine what will clearly become cases that are “fact driven.”

6. As the FTC v. Vemma action unfolds, the outcome will be “fact driven” on the issue of “primary motivation” for distributor purchasing. The FTC has made it clear that it believes that the facts show that Vemma operated a “recruitment” machine that targets college age students with promises of wealth for merely using the system to “buy and recruit” rather than “sell and use,” i.e., per BurnLounge, the product was incidental to the opportunity. The FTC’s complaint does its best to present a factual picture that the Vemma program implementation and distributor purchasing patterns are dominated by “recruitment and qualify” motivation rather than sales to be used by “ultimate users,” whether they be outside retail customers or distributors for personal use.

7. Of course, Vemma will argue a completely different characterization of the facts. Vemma will be obliged to prove the opposite. The “facts” will determine the outcome.

If the FTC allegations on incomplete earnings disclosure are correct, the FTC has a point that merits correction… But certainly not a shut down.

If the FTC is factually supported that distributor purchases are “dead ended” to garages and basements or given away, then there is a real pyramid problem. 

However, if Vemma can demonstrate that distributor purchases actually make their way to “ultimate users,” whether retail customers or personal use in reasonable amounts, then the wholesale ordering mechanisms of fast start packages and autoship subscriptions are not really a challenge for pyramid analysis.
The entire direct selling industry has been offering fast start packages and autoship ordering for a half century. If product is making its way to a destination to be used by ultimate users, then a program is a legitimate direct selling/MLM program, and not a pyramid.

8. How will the facts play out? Without extensive discovery, it cannot be determined at this stage. (Presumably, in its sealed filing, the FTC provided significant fact scenarios to support its position). However, if extensive discovery is needed at this point, a temporary restraining order and preliminary injunction seem inappropriate on the pyramid issue, particularly for a company, Vemma, whose roots, including its predecessor company from which Vemma was “spun out,” New Vision, go back almost 25 years. Nevertheless, this is a reality of this matter. Historically, the FTC has done a good job on the “fact gathering” even though it has been wrong on or misstated the state of pyramid law. (It was roundly rebuked by the U.S. Court of Appeals for the Ninth Circuit for its stated legal position that distributor “personal use” should not be considered in pyramid analysis.)

9. How long will this litigation process take? Had the FTC merely asked for injunctive relief and a preliminary injunction, Vemma would be in a stronger position to see through the litigation. However, the fact that the court ordered an asset freeze and appointed a receiver does not bode well for Vemma. And although a preliminary injunction hearing was set for a very short period of time after the temporary restraining order, case history suggests that most companies, including Vemma, are not prepared to present factual testimony at a preliminary injunction hearing on short notice. The net result is that companies often stipulate to continue the temporary restraining order for months while they gather evidence. And the remainder of the litigation may go on for months or years all the while that a company is shut down and not in control of its assets. Similar scheduling scenarios for companies such as BurnLounge, Fortune High Tech Marketing, Equinox, Trek Alliance, spelled a death knell to the future of those companies, all of whom became “dead man walking.”

In the last two decades, MLM companies, which have been subject to a receiver and asset freeze at the commencement of FTC litigation, have not emerged “alive.” If Vemma survives the process, it may be viewed by some as an outlier. Unless Vemma can immediately compile a mountain of evidence to refute the FTC fact allegations on “product movement,” it is more than an uphill battle.

10. Lessons learned for the future for MLM companies… and for which they should start “yesterday:”

(a) Track product to its final destination. Bottom line, is that companies should be able to document that product makes its way on to and is used by ultimate users.

(b) Marketing emphasis should always be on product first, and opportunity second.

(c) Employ procedures to avoid inventory loading.

(d) Employ procedures to mandate and guarantee retailing.

(e) Do not make claims of wealth, fast wealth, easy money, or sure fire systems, nor effectively invite the FTC to inquire into a program based on earnings hype and systems based on distributor “purchasing” rather than distributor “selling” and “using.”

(f) Do not boldly target demographic markets that the FTC might view as vulnerable to hype and abuse. Such groups may be young people or poor populations.

(g) Do not play fast and loose with earnings disclosures. To be transparent, always indicate the percentage of new sign ups who have no earnings, i.e., what percentage of new distributors actually make money.

In FTC vs. Vemma, who owns the facts?

BurnLounge set the standard for years to come. The decision in case after case, including FTC vs. Vemma, will be “fact driven“… is distributor behavior driven by product sales to the ultimate user or is it driven by recruitment?

In the end, he, who owns the facts, will prevail.

Stay Tuned.

For detailed analysis of the Vemma case and an actual copy of the FTC vs. Vemma lawsuit, please visit www.mlmlegal.com 

Jeffrey A. Babener, of Portland, Oregon, is the principal attorney in the law firm of Babener & Associates. For more than 30 years, he has advised leading U.S. and foreign companies in the direct selling industry, including many members of the Direct Selling Association. He has served as legal advisor to various NYSE direct selling companies, including Avon, Herbalife, USANA, NuSkin, etc. He has lectured and published extensively on direct selling and many of his writings will be found at www.mlmlegal.com , of which he is Editor. He is a graduate of the University of Southern California Law School, where he was an editor of the USC Law Review. Post-USC Law, he served a one-year term appointment as a law clerk to the Hon. David W. Williams, U.S. District Court, Central District of California. Mr. Babener is an active member of the State Bars of California and Oregon. He has served as trial counsel in numerous direct selling cases in federal and state courts for 30 years.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Our next Starting and Running the Successful MLM Company Conference takes place October 22 and 23, 2015 in Las Vegas. View our conference flyer and speaker list online. Participate in our Innovation Campaign for your chance to receive TWO FREE TICKETS to attend our next conference.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

Sign up for the MLM News Global newsletter for top headlines, news stories, scam alerts, videos, articles, and more information on the network marketing industry.

Visit us at www.mlmlegal.com to learn more.

A Conversation with Jeff Babener Video Series: Is cross-sponsoring legal? What rights does the distributor have? What rights does the MLM companies have? Can a company legally ask that distributors only work for one company at one time? Distributors are independent contractors. But companies may lose distributors through raiding. What are your rights? And if cross-sponsoring is legal, is it a good idea?

Watch the video to learn the legalities of cross-sponsoring from both the distributor’s and the company’s perspective. To view more videos in this series, visit MLMLegal.com.

Visit us at www.mlmlegal.com to learn more.

A Conversation with Jeff Babener Video Series: Distributors who recruit spouses, children, just to qualify for the bonus program is considered stacking. Watch the video. And to learn more visit www.mlmlegal.com.

Watch the video.

For more information about the legal industry and MLM, visit MLMLegal.com.

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Multi-level marketing is a diverse and varied industry, employing many different structures and methods of selling.

Although there may be significant differences in how multi-level marketers sell their products or services, core consumer protection principles are applicable to every member of the industry. The Commission staff offers this non-binding guidance to assist multi-level marketers in applying those core principles to their business practices.

The FTC offers 18 common questions about MLM and running a direct selling business.

1. What is direct selling? What is multi-level marketing?

Direct selling is a blanket term that encompasses a variety of business forms premised on person-to-person selling in locations other than a retail establishment, such as social media platforms or the home of the salesperson or prospective customer.

Multi-level marketing is one form of direct selling. Generally, a multi-level marketer (MLM) distributes products or services through a network of salespeople who are not employees of the company and do not receive a salary or wage. Instead, members of the company’s salesforce usually are treated as independent contractors, who may earn income depending on their own revenues and expenses. Typically, the company does not directly recruit its salesforce, but relies upon its existing salespeople to recruit additional salespeople, which creates multiple levels of “distributors” or “participants” organized in “downlines.” A participant’s “downline” is the network of his or her recruits, and recruits of those recruits, and so on.

2. Under Section 5 of the FTC Act, what is an MLM with an unlawful compensation structure, which is sometimes called a pyramid scheme?

The most widely-cited description of an unlawful MLM structure appears in the FTC’s Koscot decision, which observed that such enterprises are “characterized by the payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to the sale of the product to ultimate users.” In re Koscot Interplanetary, Inc., 86 F.T.C. 1106, 1181 (1975).1

1 This document is focused specifically on MLM practices that may violate the FTC Act. It does not address other types of unlawful structures that do not involve the right to sell a product or service, such as chain referral schemes (sometimes called “chain letters”) and Ponzi schemes.

3. How do MLMs with unfair or deceptive compensation structures harm consumers?

READ MORE.

Visit us at www.mlmlegal.com to learn more.

1. Multi-level marketing (MLM) classes are taught at Harvard Business School.
2. Network marketing has produced more millionaires than any other type of business.
3. MLM will dominate the economy in the 21^st century.

Unfortunately, these statements are “urban” MLM myths that are over the top and damage the credibility of distributors and companies, as they promote the truly positive opportunities of direct selling.

1. Historically, the Harvard statement preceded the actual teaching of MLM classes. A Harvard case study on a company such as Mary Kay, or a lecture by someone like Mary Kay, was twisted into the proposition that MLM was part of the curriculum. This assertion was not true, yet it was repeated over and over. Since that time, various universities such as University of Illinois at Chicago or Utah Valley State University and others have instituted courses. Many professors have joined the ranks of scholarly articles on direct selling. And so there is plenty to talk about without misrepresenting the facts.
2. Let us address the myth of networking marketing producing the most millionaires compared to any other type of business. Of course, MLM has had its share of millionaires, and a few billionaires from such companies as Amway. They can be found on America’s wealth lists. It is a vast overstatement in a country with 300 million people, and where there are about 16 million distributors with statistics indicating that only 1-2% make enough money to amount to a full-time living, to have millionaire-expectations. In fact, the exaggeration has prompted the FTC and state Attorneys General to demand, and leading companies have acceded, to post average earnings disclosures which accurately show the experience of typical distributors in their program. Again, there is room to be proud of the opportunity and success of many, but overreaching earnings claims taints the potential recruitment pool.
3. Will MLM dominate in the 21^st century? The simple answer is: No. Keep in mind that U.S. MLM sales hover in the $30 billion range in an economy of that posts $17 trillion, i.e. about 1/5 of 1% of national revenue. MLM will play an important role, but, again, there is no useful purpose in being caught in an exaggeration.

For more information on any topic on network marketing that comes to mind, please visit www.mlmlegal.com and www.mlmattorney.com.

MLMLegal.com is bustling with educational content for direct sellers and startup/existing MLM companies! Be sure to visit us often!

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Visit us at www.mlmlegal.com to learn more.

With the costs of the compensation plan, attorney’s fees, software, hiring staff, recruiting consultants, creating/designing products, the list goes on… starting a direct selling company can be expensive and difficult! We understand how complex it is to tackle a MLM startup. That’s why we offer the Starting and Running the Successful MLM Company Conference.

We offer MLM entrepreneurs a way to network with experts from all sectors of the direct selling industry: legal, recruiting, technology/software, compensation plans, funding, generate leads, website and back office, business model, and more – all in one place, for one affordable price ($195 for the first attendee, each additional is $150).

So, if you’re starting a MLM, network marketing, direct selling company, or just thinking about starting a MLM company, come join us at the MLM Startup Event/Seminar in Las Vegas! The Hosts are Business Consultant and MLM Legal Expert, Jeff Babener, and MLM Compensation Plan Consultant, Mike Sheffield.

Our next conference takes place October 25 & 26, 2018 in Las Vegas (who doesn’t want a good reason to go to Las Vegas?). We even offer the Innovation Campaign for those who are on an even tighter budget.

Visit our website, www.mlmlegal.com, or our conference page to learn more and to see the full line-up of speakers. Read testimonials and watch our invitation videos. Anyone who is starting or running a MLM, network marketing, direct selling, party plan company is welcome to attend.

Call us at 800-231-2162 to register.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

Sign up for the MLM News Global newsletter for top headlines, news stories, scam alerts, videos, articles, and more information on the network marketing industry.

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