Whether your compensation plan is binary, matrix or an Australia 2-Up, and regardless whether your products are financial services, educational, health products, or vitamins, the answer is: The same legal principals apply no matter what your compensation plan is and no matter what your product is.

The questions you should be asking are “What is it that people are paying” and “Why are they paying it?” If you’re selling a quality product at a fair price to consumers then you are likely operating legitimately. If you’re running a program in which you are merely moving money or are selling overly-priced products to distributors who are buying into the compensation plan only to quality, then you probably have an illegitimate compensation plan structure.

State agencies and the FTC took a look at compensation plans and products in various spectrums. On a spectrum of compensation plans, a party plan that is retail-oriented is at the favorable end of the spectrum.  As we move across the spectrum, binary plans, particularly binary plans that have distributors buy multiple business centers moves to the far end of the spectrum, nearer to the territory of being a pyramid.

Companies that are marketing different types of products are looked at differently in terms of “Live and Let Live.”  At the conservative end of the spectrum, products that are used for daily household use, telecom, dietary supplements and vitamins – even if there is substantial personal use – state agencies understand that the product is being used and there is little to lose.  At the other end of the spectrum, and one that involves intense scrutiny, are products that are high-ticket items, like financial seminars, financial education programs, consumer benefit programs, and particularly, things that are intangible; states look at these and they ask the question “Who is buying it and why?”

If you think you can operate a legal business selling prayers or wishes you’re dead wrong.

States want to know that retail sales are making it to the end-consumer (not just the distributor).

For more information on compensation plans, check out the article “How to Analyze Compensation Plans.”

Expert MLM Attorney, Jeff Babener, has put together a lot helpful videos on compensation plans. Here are just a few. Visit our main website, mlmlegal.com, for more information on all aspects of running a legitimate direct selling business.

How Do I Create a Compensation Plan That Guarantees That I Am Legal?

What Compensation Plans Do Distributors Generally Prefer?

Role of Compensation Plan in a Successful Direct Selling Company

Is the Compensation Plan the Driving Force of Success?

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

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.

As a theoretical goal, the regulatory position is admirable. The fact is that personal use in the direct selling business creates high sales revenue for many companies from the moment of their inception.

For many years after the 1979 Amway decision, a “live and let live attitude” prevailed between the MLM industry and regulatory community. Although periodic legal skirmishes occurred, the industry and regulators appeared to be content to “agree to disagree.” Instead, the focus on legal investigation was upon inventory loading, cash pyramids, phony products, and earnings hype.

The comments of a federal appeals court in a 1996 class action case involving a company called Omnitrition invigorated the debate on personal use. In that decision, which involved an interim ruling in the case, the federal appeals court questioned whether or not a network marketing company could be viewed as legitimate if its sales were not derived from nonparticipant customers (i.e. distributors). The language in the decision was heavily criticized by the MLM industry, and the Direct Selling Association (DSA), in fact, filed an amicus brief citing the importance of personal use in direct selling marketing programs. However, the decision stood firm. In the trial court’s ruling, the court recognized that products purchased for personal use by distributors constituted a retail sale in the same fashion that sales to nonparticipants would constitute a retail sale.

In the aftermath of the decision, both state and federal regulatory agencies were emboldened to sue or obtain consent decrees against network marketing companies which contain very restrictive requirements regarding recognition of personal use by distributors. State agencies were all over the board on their position. Some demanded 50 percent sales to non-distributors. Some demanded 70 percent sales to non-distributors. Some demanded 80 percent to non-distributors. Even the FTC awakened after 20 years of dormancy and demanded that more than 50 percent of sales be to non-distributors in various consent decrees.

The aggressiveness of government activity was alarming to the industry. The industry quickly marshaled forces, and in short order, at least four states adopted legislation specifically recognizing personal use as a legitimate end destination for products. Other states were likewise targeted for such legislation and the industry was of the belief that a trend would be started that ultimately would be recognized by all state and federal agencies. So strongly did the industry feel about it, that its leading trade association, the DSA, undertook consideration of a formal amendment to its ethics code which would recognize that, for purposes of a pyramid analysis, a retail sale would include sales to nonparticipants, as well as sales to participants for actual use or consumption.

Notwithstanding the ongoing debate on personal use, the industry seems to thrive in almost all states. These is no question; however, that the “personal use” issue is a thorny issue and one issue upon which the industry and regulators must carry on an earnest ongoing dialog to reach a consensus that protects consumers, distributors and network marketers.

Learn more about the multilevel marketing industry and personal use. Watch expert Attorney Jeff Babener’s videos:

What Is the U.S. and International Trend in Recognizing the Validity of Personal Use by Distributors in Pyramid Cases?

Is There a Message to the Direct Selling Industry on Next Steps after the Burnlounge Case on Personal Use?

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

A good MLM company, seeking longevity in the marketplace, will put a lot of effort into training their distributors on how to manage and build their business. Businesses will provide online training, event training, and incentives.

Not every MLM company has the same opportunity, or compensation plan. There are many types of compensation plans and many variations on the original compensation plans (stairstep, unilevel, breakaway, matrix, binary). Each compensation plan and MLM company is unique in how it approaches consultant training.

Regardless of what compensation plan you’re using, there are common distributor training techniques among all companies and compensation plans. From a legal perspective, MLM companies must be realistic about their distributors’ statistics for success. It is not easy to become a MLM multimillionaire. Only a small percentage of distributors achieve such high success. Therefore, when legitimate direct selling companies present their training, management and support programs to encourage and train distributors they use some (or all) of the techniques in the list below.

If distributor training in your company sounds a little like this list, then it is likely looking good from a legal perspective. A MLM company opportunity should prioritize some or most of the following:

1. Enhance distributors’ self-image.
2. Enhance the image of the network marketing industry as a whole.
3. Educate distributors about the direct selling, MLM industry.
4. Create a realistic picture of what it takes to succeed in operating a network marketing business.
5. Help distributors understand the responsibility of being in business for themselves.
6. Make product education paramount in training programs.
7. Develop business management skills.
8. Help consultants understand the dynamics of people-interaction or person-to-person relationships.
9. Teach (or encourage the learning of) new business technology application to the business, such as computer software programs and website platforms.
10. Help distributors understand the basic concepts behind the network marketing method of distribution.
11. Create an appreciation of ethical standards.
12. Teach distributors how to run a small business, such as managing taxes, distributor networks and accounting.
13. Work on goal-setting and planning; develop one, two, and three plans, rather than promote unrealistic instant success schemes.
14. Develop the art of prospecting (finding and recruiting new distributors for your downline).
15. Help distributors understand the concept of commitment.
16. Learn to value the contribution of others in their home business.
17. Prepare to give effective presentations.
18. Learn how to deal with objections, rejections, and discouragement; helping distributors understand that an objection is nothing more than a question in disguise.
19. Develop an understanding of the legal issues impacting the network marketing industry and the individual distributor business owner.
20. Help distributors understand the art of duplication and the power of setting an example (in recruiting).
21. Help consultants understand that people are involved in network marketing for different reasons; allow those who are interested in the business opportunity to develop at their own pace and resist the urge to pressure satisfied consumers to engage in the business opportunity if they simply want to remain customers.

When MLM companies work to encourage their distributors to work hard, learn about the business, and have realistic expectations, then they are working to support a network of distributors that will last a long time.

If a direct selling company tells you that you’ll become a millionaire in a month then the chances are likely that they are not operating a legitimate business. Remember, if it’s too good to be true, then get out quick!

Would you like to learn more about distributor training, legal MLM compensation plans, or the MLM industry in general? Watch some of MLMLegal.com’s videos, presented by MLM Attorney, Jeff Babener. Visit MLMLegal.com for the most trusted MLM legal information on the web.

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

Our last conference boasted 71 companies from 23 states and 8 countries, including Canada, United States, Ghana, Israel, Spain, Russia, China, and Germany!

(PRWEB)March 24, 2016

The Starting and Running the Successful MLM Company conference will be held May 20, 2016.

For more than 30 years, leading industry experts have educated the executives of starting and existing MLM, direct selling, network marketing, and party plan companies on how to structure their compensation plans, legalize their companies, recruit key employees and top-ranking distributors, develop business models, generate leads, fund their business, establish their website and technology platforms, better understand the direct selling industry, and so much more.

Did you miss the last MLM Startup Conference? In attendance were over 100 people, representing 71 companies from 23 states and 8 countries (Canada, United States, Ghana, Israel, Russia, Spain, China, and Germany). The companies in attendance represented the entire spectrum of company development, from startups to established companies. All attendees registered for our conference in order to learn more about the network marketing industry, grow their companies, meet experts in the industry, and educate themselves on the MLM industry.

The next MLM Startup Conference takes place May 20, 2016 in Las Vegas. View the conference flyer page at http://www.mlmlegal.com/srs2.html to learn more.

This is the original MLM Startup Conference — responsible for launching many industry-leading companies — perfected over the course of a quarter of a century to ensure the highest quality of information, most knowledgeable experts, and most practical advice from qualified experts.

Join us May 20, 2016 at our next conference! Over the course of the day, attendees will hear from a multitude of the best industry experts, and if they choose, can sign up to meet with the speakers for individual one-on-one time. A full list of speakers and their biographies/credentials can be found at http://www.mlmlegal.com/bio.html.

The educational information gained by attending this event is invaluable. Here are just a few of the testimonials from past attendees:

“We have a traditional business at the moment and we are looking to take it into the realm where it’s more personalized, it’s more about building people and an experience. It has been absolutely worth our trip. We are looking to take our business to the next level and build relationships.”

“The reason I came to the show was to learn more about how to launch my direct sales company. I’m very comfortable and accustomed to selling through more traditional networks; however, I believe that the product that I’m launching is more suitable for direct sales; to get direct-to-consumer faster and in greater sales.”

“[I’ve] been in network marking for 30 years [but] we are learning a lot of things about how to launch, how to reach the people we need to have, and again, the things that are required to make a successful company, not only for us but especially for our customers and for our affiliates.”

Each attendee will receive a free copy of the Starting and Running the Successful MLM Company Manual.

How do you find out more information?

Visit our website:
http://www.mlmlegal.com

Visit our blogs:
http://mlmlegal.com/MLMBlog/
http://www.mlmattorney.com/blog/

Watch the Conference Videos or many of the other educational MLM Videos!

• MLMlegal Releases New Film on MLM Startup Conference — Produced by Networkingstar.com
• The MLM Startup Conference in Las Vegas
• MLM Startup Conference — A Must for Executives of Startup and Existing MLM Companies
• Since You Are a MLM Attorney, Why Would You Host the MLM Startup Conference for the Executives of Startup and Existing Companies?

Contact Us: Register Today, 503-226-6600 or 800-231-2162

The day will begin at 9:00AM and end at 5:30PM, then from 5:30PM-8:30PM there will be one-on-one time with the speakers. For more information, visit: http://www.mlmlegal.com/srs2.html or call 800-231-2162/503-226-6600. Registrations are taken exclusively by phone and questions are always welcome.

Presented by one of the most trusted individuals in direct selling and MLM, Jeffrey Babener, Editor of MLMLegal.com.

About Attorney Jeffrey Babener: Conference Host and Chairman, Editor of MLMLegal.com, as well as the leading direct selling attorney in the United States – With over 30 years of experience as a direct selling attorney, Jeffrey Babener has advised leading companies in the MLM/Direct Selling industry, ranging from Avon to Nikken, to Herbalife, to Melaleuca, to USANA, and to Excel Communications, Nerium International, plus many more. He’s been published in national magazines such as Money, Inc., Atlantic Monthly, Entrepreneur magazine, Direct Selling News, Direct Sales Journal, Success magazine, Money Maker’s Monthly, among countless others. He’s authored several books, including his most popular Network Marketing: What you should know. Mr. Babener has chaired more than 70 national conferences on direct selling.

Lastly, learn how you can receive two free tickets to attend the October 2015 Starting and Running the Successful MLM Company Conference by visiting our Innovation Campaign page.

View the press release at PR Web.

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

Some legal case authorities claim that if a consultant announces that they are going to join another MLM company on Facebook then it’s protected under freedom of expression by the First Amendment. Therefore, a company cannot accuse a consultant of raiding their downline for distributors. Other courts and cases have suggested that consultants separate out their Facebook downline from those of friends and family.

It is very common for consultants to have friends on their social media accounts who are friends and customers, or co-workers and friends, or family friends and work friends, as well as also being someone they know in their direct selling business as customers or sponsors. Since many consultants often sell to their warm market first, distributors often know their customers or sponsor as friends, relatives, or church members. This causes some issues to arise for the MLM company.

A common issue that the industry is grappling with right now occurs when a consultant leaves a network marketing company and joins another MLM company, then begins promoting the second company to their Facebook friends (or other social networks) and to the people who are in their downline organization from the first company. The question is often asked as to whether or not this is considered distributor raiding. The industry has not come to a consensus on this issue yet. Many MLM companies, however, do ask that consultants who leave their company and start selling for another company, not raid their sales organization because they’re damaging the livelihood of all of the other consultants left behind. The industry is working its way through this issue but has not come up with concrete solution to the problem yet.

There is conflicting legal case authority on the issue. Some legal case authorities claim that if a consultant announces that they are going to join another MLM company on Facebook then it’s protected under freedom of expression by the First Amendment. Therefore, a company cannot accuse a consultant of raiding their downline for distributors. Other courts and cases have suggested that consultants separate out their Facebook downline from those of friends and family. But, as we saw above, Facebook friends do not always fit into black and white categories. Often, your friend is also your co-worker. Your relative is also your customer. Your neighbor is also your friend. The courts have argued that Facebook is, in a way, simply a sophisticated means of sending emails because each post is like sending out a bulk email to several hundred people. From this prospective, deciding on whether or not there is a conflict is complex.

We will let you know if the courts come to a deciding factor anytime in the future. In the meantime, if you are in a similar position, we recommend that you read your company’s policies and procedures to see their specific policy on the topic of consultant raiding. You will also find hundreds of articles on our website(s) and blogs on the topic of distributor raiding.

Here are a few that may be of interest to you:

Why do MLM Companies Require Distributors to Use Replicated Websites Rather than Distributor-Created Websites?

Executive Interview by the DSWA – “Legal Hotspots for Direct Selling Companies” with Jeff Babener – Video

Can I and should I join multiple companies and establish multiple downlines?

MLM Company Policies on Social Networks and Distributor Raiding

How Have Raiding Rules Evolved in Direct Selling Contracts and Policies and Procedures? – Video

How Have Raiding Rules Evolved in Direct Selling Contracts and Policies and Procedures?

Has There Been Cases Won or Lost on the Topic of Social Media and Distributor Raiding?

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.

If you don’t start it right, you can’t expect to get it right.

For over 27 years MLMLegal.com and Babener & Associates has hosted the most prestigious MLM conference for executives of startup and existing direct selling companies. We’ve provided some statistics and overview of our last MLM Startup Conference:

Our February Conference, the 66th national Conference on starting and running a direct selling/network marketing/part plan/MLM company, involved approximately 70 companies, representing roughly 28 states and six countries, ranging from the U.S., Canada, South America, Mexico, U.K., Europe, Africa, and Asia.

Speakers at the Conference have served as professional advisors to such companies as Avon, Amway, NuSkin, Usana, Melaleuca, Nikken, Herbalife, and many of the leading direct selling companies.

The Conference topics discussed included industry knowledge, legal environment, compensation plan development, technology, staffing, payment systems, recruitment, ecommerce, social networking, and internet marketing.

You too can attend the Starting and Running the Successful MLM Company Conference, which takes place in February, May and October. To see if you qualify to attend, visit our Conference Information page. Also, to see how you can attend for free, visit our Innovation Campaign page. To register for the next conference, call 800-231-2162.

For more information on the network marketing industry visit www.mlmlegal.com and www.mlmattorney.com.

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Our next Starting and Running the Successful MLM Company Conference takes place May 15th & 16th, 2014 in Las Vegas. Check out the Innovation Campaign for information on how you can get two free tickets to the MLM Startup Conference in Las Vegas. Call 503-226-6600 or 800-231-2162 to register.

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