Watch the video to see what expert MLM Attorney Jeff Babener has to say.

The word “opportunity” is a generic term for the chance to advance, better one’s economic state, health, social position.

However, in the context of direct selling, “opportunity”, in addition to the chance to make money, is a reference to the “business opportunity” of a direct selling/MLM marketing program. Two dozen states and the FTC regulate the offering of business opportunities in a parallel fashion to their regulation of franchise opportunities. Because of the low threshold of entry fees, typically, modestly-priced at-cost sales kits, the business opportunity of MLM companies is generally exempt from state business opportunity laws.

In addition, the FTC has indicated that it generally does not view the offering of an MLM opportunity to trigger the FTC Business Opportunity Rule. Of course, multiple states have adopted specific MLM statutes to provide guidelines for the offering of a MLM opportunity. All of these statutes can be found in the statutes library at our website.

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.

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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Front loading generally refers to a process in which a MLM company, or a sponsoring distributor, encourages a new distributor to purchase far more product than is commercially reasonable under the circumstances. Often the “push” is explained to the recruit as necessary to qualify in the plan. This is an unacceptable practice is often one indicia of a pyramid scheme.

On the other hand, virtually all regulatory agencies recognize that a purchase of an “at cost” sales kit is an acceptable practice in the mainstream of leading direct selling companies. Such mandated kits are typically in the $50-$100 range. They generally entail “hard copy” or online supply of sales and marketing materials as well as ongoing sales and marketing materials updates for a year. Typically the mandated sales kit does not include product and generally a company offers an optional deluxe kit that may include product. Such an optional kit, which is often referred to as a “fast start” kit, may contain several hundred dollars of product. This is not unusual. Although the same regulatory standards on upfront mandated purchases are applicable to party plan companies as they are to other companies, it is not unusual to see party plan companies mandate a beginning starter kit that contains a wide array of products, with a price tag several hundred dollars. Regulatory agencies are very liberal in their view of such mandated purchases in party plan companies because party plan companies are so overwhelmingly retail oriented and the movement of product to retail customers is the norm, and not the exception, for party plan companies.

Sign up FREE for our newsletter, MLM News Global, and keep updated on industry news, scams, video highlights, and relevant articles.

Learn more about the network marketing business 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 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.

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

Check out the many educational videos offered by Jeff Babener at the Video Library.

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

There are two issues that have surfaced in recent years: 1) social networking, and 2) frequent migration of distributors between companies. With social networking concerns, companies have had to decide on positive protocol for consultants who socialize through technology. In terms of the migration of consultants, companies have often found themselves constantly revisiting policy that both protect the livelihood of all its distributors while also protecting the interest of the company. These issues are constantly under review. Most companies continue to revisit these issues multiple times.

Certainly, it’s not a good idea to make frequent changes in a compensation plan because it undermines faith in the company. Companies should also try and limit the number of changes in basic agreements and also be able to justify any of the changes being made. Companies that claim to be partners with their consultants should walk the talk. They should be saying that their interest lies in protecting distributors and consumers, not just the company. They have a responsibility to protect the livelihoods of thousands, or millions, of consultants who depend on income from the company. This is important because when companies disassemble, consultants who have spent all of their time building organizations and find them being stolen or taken elsewhere are deeply hurt.

In the direct selling industry, the word ‘change’ can send a certain group of people into orbit. Companies that are making adjustments or enhancements to their policies and procedures or compensation plan must carefully communicate those changes to sellers, especially the leadership of the company. Leaders need to be prepared to deliver messages and to have the messages palatable to the rest of the sales force.

If you are 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.

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

This Video Explains Which Statement is True: Celebrity Endorsements Improve Marketing or Celebrity Endorsements are a Double-Edged Sword.

In the conventional advertising world, celebrity endorsement is very effective. Among the factors for effectiveness includes the fame of the celebrity, the connection with the product or service, whether or not the celebrity is a user and whether or not the statements of the celebrity appear as truly authentic or merely a “pay for endorsement.”

The use of celebrity endorsement is far less successful in the direct selling industry. In fact, the advertising model for MLM is quite different than conventional advertising. In conventional distribution, such as retail stores, internet or broadcast media, companies pay advertising dollars and endorsement fees to promote the brand. However, in direct selling, the commissions and rewards paid to distributors are effectively the advertising dollars that would be paid in other channels of distribution. Instead, the branding, in direct selling, is accomplished by the promotion of the sales network of the direct selling company. Looking at the success of major companies such as Avon, Mary Kay, Tupperware, Herbalife, etc., the branding task has been accomplished by the distributor force, and generally without the use of celebrity advertising.

One final note on celebrity advertising is that the Federal Trade Commission (FTC) has adopted significant rules on endorsements and testimonials to require clear disclosure to consumers of relationships between endorsers and the advertising company. For a detailed discussion, see www.mlmlegal.com article on this subject:

FTC Guidelines on Endorsements and Testimonials Resource Center.

If you are 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.

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

The MLM industry has, during the last 20 years, developed positive working relationships with regulatory agencies such as attorneys general and the FTC (Federal Trade Commission). There was a time, however, back in the 1970s, when the FTC challenged the legitimacy of the direct selling industry as being a pyramid scheme. They accused Amway of operating illegally and Amway prevailed in a very famous 1979 case [below] where it was held that the network marketing industry is a legitimate business model and the business opportunity is not a pyramid scheme.

No legal ruling has been more impactful on the direct sales industry than The Landmark Amway Case.

Afterwards, regulatory agencies and the industry went quiet until the 1990s when it was questioned whether or not product-using consultants were a legitimate end-destination for products or whether consultants were simply retail customers. There has been an ongoing tug of war between the MLM industry and the FTC in terms of determining whether or not personal use should have an impact on a company’s legitimate operations. The industry, with the cooperation of attorneys generals in more than a dozen states, were able to amend legislation in those states to recognize that personal use of product by distributors is a legitimate end-destination, just as if it were a retail sale.

More recently, about four years ago, the FTC decided to update its Business Opportunity Rule [below] (which is more oriented toward franchises or programs that require substantial investments). The proposed draft would have completely encompassed direct selling companies to the point that it would have been onerous to offer a MLM, network marketing, direct selling opportunity in the marketplace.

Read the article “FTC Exempts MLM/Direct Selling from FTC Revised Proposed Business Opportunity Rule.”

For instance, one of the proposed rules would have stated that if you approached your neighbor, for instance, about joining a network marketing company then you would have to wait a week before returning to follow up with them on their decision. This waiting period would not have been very conducive to offering a business opportunity, and therefore, not very practical for the network marketing industry. The industry responded to the proposed rule. Over 17,000 comments poured into the FTC from MLMLegal.com, the DSWA, the DSA, distributor associations, and direct selling companies indicating that they thought the rule was overreaching.

The net result gave rise to the FTC amending its proposed rule to carve out an exception for direct selling/MLM companies. Direct selling companies would not be included in the rule. This was a victory for the industry since it didn’t want onerous rules inhibiting the more than 15-16 million people in the U.S. industry from operating a legitimate MLM business.

At this time, we are in a fairly good regulatory environment. Every direct selling company at any one time, however, is being sent questions of inquiry from regulatory agencies such as the Federal Trade Commission and attorneys general. This is simply part of doing business in this industry. So, when you see that a company has been sent inquiries or investigative demands from regulatory agencies, it’s not always a good idea to jump to conclusions about the legitimacy of its operations. The regulatory agencies are just doing their job.

In the end there is always a balance of regulation that needs to be reached. Direct selling companies do it best when they take some initiative on their own to promote consumer protection by looking out for both their consumers and consultants. The reason the FTC ratcheted back on the business opportunity is because of the large influx of comments that flooded in from industry leaders, including MLMLegal.com and the DSWA. Industry-leading groups have the ability to mobilize large groups of people who are passionate about the network marketing industry and that helps our industry serve a great purpose.

MLMLegal.com keeps you updated on changes being made in the direct sales regulatory environment. Visit our network marketing news pages or MLMLegal.com for the latest information on the network marketing industry.

If you are 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.

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

The issue of depth of levels seemed to be a major focus prior to the internet and other non-postal (mail) means of communication. In the late 1980’s, the U.S. Postal service examined the numbers of compensation plan levels to make a determination, whether or not, in its opinion, the depth of levels created a “lottery” element under U.S. Postal lottery laws, that forbid payment based on chance.

Various cases and consents sorted out a safe harbor (at least from the U.S. Postal Office standpoint) for at least four levels (not necessarily agreed to by the direct selling industry). Separately, the Postal Service looked for evidence of “supervisory requirements.” Most companies adopted specific supervisory requirements of sponsors to demonstrate some managerial activity by distributors.

For the past 25 years, little recruitment activity is conducted by U.S. mail and it has been a long time since the U.S. Postal Service has expressed a serious interest in this subject. The issue of levels in a company’s compensation plan has not been the focus of the FTC or state attorneys general in the enforcement of pyramid laws. Instead, the focus for the last two decades has been on the whether or not product/service is purchased in reasonable amounts, the presence of anti-inventory loading and “buyback” rules and an emphasis of sale of product/service to the “ultimate user” as opposed to an emphasis on mere recruitment of new distributors whose primary motivation to make payments or purchases is to qualify in the income opportunity.

Watch the video for a detailed explanation by Jeff Babener, Editor of MLMLegal.com. View all of our new videos and more on our new and improved website: MLMLegal.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.

Your cost of goods is calculated as your acquisition or manufacturing cost. The more frequent question we come across relates to pricing. Most MLM experts agree that you must have adequate margins to pay commissions and to make a profit. Different products and services carry different profit margins. In addition, smaller margins may be satisfactory with high-priced products because there is still room for profit. Most MLM companies are likely to pay total commissions equal to between 30 and 45 percent of the price sold to distributors for resale, or prices for which consumers buy directly from the company. A typical company will try to achieve a minimum 5-7 times markup to allow for commissions, overhead and profit. Typical markup for resale by distributors is 25% of their purchase price. A good place to visit this issue is at the MLM Startup Conference, offered by www.mlmlegal.com, where experts discuss margins, pricing, profit, proformas, and a whole lot more.

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 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.

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

Front loading generally refers to a process in which a MLM company, or a sponsoring distributor, encourages a new distributor to purchase far more product than is commercially reasonable under the circumstances. Often the “push” is explained to the recruit as necessary to qualify in the plan. This is an unacceptable practice is often one indicia of a pyramid scheme.

On the other hand, virtually all regulatory agencies recognize that a purchase of an “at cost” sales kit is an acceptable practice in the mainstream of leading direct selling companies. Such mandated kits are typically in the $50-$100 range. They generally entail “hard copy” or online supply of sales and marketing materials as well as ongoing sales and marketing materials updates for a year. Typically the mandated sales kit does not include product and generally a company offers an optional deluxe kit that may include product. Such an optional kit, which is often referred to as a “fast start” kit, may contain several hundred dollars of product. This is not unusual. Although the same regulatory standards on upfront mandated purchases are applicable to party plan companies as they are to other companies, it is not unusual to see party plan companies mandate a beginning starter kit that contains a wide array of products, with a price tag several hundred dollars. Regulatory agencies are very liberal in their view of such mandated purchases in party plan companies because party plan companies are so overwhelmingly retail oriented and the movement of product to retail customers is the norm, and not the exception, for party plan companies.

Sign up FREE for our newsletter, MLM News Global, and keep updated on industry news, scams, video highlights, and relevant articles.

Learn more about the network marketing business at www.mlmlegal.com.

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

Your cost of goods is calculated as your acquisition or manufacturing cost. The more frequent question we come across relates to pricing. Most MLM experts agree that you must have adequate margins to pay commissions and to make a profit. Different products and services carry different profit margins. In addition, smaller margins may be satisfactory with high-priced products because there is still room for profit. Most MLM companies are likely to pay total commissions equal to between 30 and 45 percent of the price sold to distributors for resale, or prices for which consumers buy directly from the company. A typical company will try to achieve a minimum 5-7 times markup to allow for commissions, overhead and profit. Typical markup for resale by distributors is 25% of their purchase price. A good place to visit this issue is at the MLM Startup Conference, offered by www.mlmlegal.com, where experts discuss margins, pricing, profit, proformas, and a whole lot more.

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.

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