What are the key trends in the legal and business environment in today’s world?

A global $2 billion-dollar industry has great press, but it must be self-regulating, looking out for the consumers and distributors. Regulatory agencies today want MLM companies to have a great product and sell to real consumers. What does that mean? Personal use. Does the product stand on its own? Do real consumers buy it? Are you selling product or the opportunity?

Read the full description and watch the full video.

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Some network marketing companies get creative with their consultant titles by calling them coaches, chocolatiers, guides, and ambassadors.

Generally, distributors, consultants, representatives, independent business owners (IBOs), member, etc. all describe a salesperson who sells products for a direct selling company. Although, it is common for party plan companies to use more artistic names such as stylist, artist, beauty consultant, etc.

In typical network marketing companies, IBOs are generally titled more generically, with titles such as distributors, associates, and independent sales representatives.

Party plan companies usually use a group (or party) selling approach, whereas network marketing companies use a person-to-person model. 

Some MLM companies get creative with their consultant titles by calling them coaches, chocolatiers, guides, and ambassadors.

The title of a distributor doesn’t really matter; although it is important, from a legal standpoint, to use the term “independent” in front of the title, to assure proper independent contractor status.

Visit www.mlmlegal.com and www.mlmattorney.com for more information on the network marketing industry.

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As industry experts, MLM attorneys commonly know more about multilevel marketing and direct selling than most of their clients.

An experienced and seasoned direct sales attorney can be the single most valuable resource that a MLM company can ever utilize. Look for a professional who has represented leading direct selling companies as well as startup companies.

As industry experts, they commonly know more about multilevel marketing and direct selling than most of their clients. In fact, more than half of the conversations with clients involve discussions about the MLM industry, rather than mere legal aspects of running a direct sales company. And over time, such an experienced “consigliore” may become the most trusted business advisor to a company and a vital member of the business team.

Apart from tremendous insight into the “business,” an experienced network marketing attorney can answer in five minutes what would take a business attorney five hours to research. And, the business attorney would likely still not completely understand the issue, let alone the solution.

The direct sales industry has – for better or for worse – provoked vast amounts of legislation and regulatory control that multilevel marketing attorneys must navigate.

A brief list of regulations, legislation, and legalities that experienced MLM attorneys, such as Jeff Babener, of Babener & Associates, must commonly appraise include:

– Pyramid statutes

– MLM statutes

– Business Opportunity Rule

– Securities

– FTC regulations

– Postal regulations

– FDA rules and regulations

– Distributor relationships

– Vendor relationships

– Distributor discipline

– Trademark

– IRS and tax regulations

– International expansion

– Sales tax

– Marketing

– State law and registration

– And, legal review of sales kit contents, which include:

1) Consultant agreements

2) Policies and Procedures

3) Product brochures

4) Compensation plan

5) Marketing plan presentations

6) Forms, from receipts to multiple owner applications, etc

At the very least, a direct sales company should not enter the marketplace without legal review of its marketing program. Hiccups caused by having to respond to regulatory agencies, consultant complaints, vendor conflicts, etc. can be bad for any MLM business and its reputation.

For more information, watch the video The Legal Issues of Starting and Running a MLM Company.

Visit www.mlmlegal.com and www.mlmattorney.com for more information on recruiting MLM consultants.

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Our next Starting and Running the Successful MLM Company Conference takes place October 24th & 25th, 2013 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register.

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Have you ever wondered what happens in an MLM trial?

Have you ever wondered what happens in an MLM trial?

In this presentation, MLMLegal.com gives you a rare, front row seat into the complexities of an MLM trial.

In more than six hours of video, partitioned in more than a dozen 25 minute segments, watch cross-examination and direct examination of expert witnesses led by lead trial counsel, Jeffrey Babener, MLM trial attorney and editor of MLMLegal.com.

Consider this a mini-trial course on MLM and regulatory enforcement.

The case profiled in these videos is Kentucky v. Travelmax International. Travelmax was a marketing company that sold travel education products and travel bookings and services through a network of MLM distributors. Its travel bookings had risen to several million dollars per month.

In 1996, the State of Kentucky filed suit, contending that Travelmax was a pyramid scheme under Kentucky laws. The state secured a temporary restraining order, without benefit of hearing. However, under state court procedures, the court was mandated to set formal hearings to determine if the temporary restraining order should be continued. In a series of hearings spanning from late 1996 to early 1997, trial on this issue was held. At the conclusion of the hearings, the Court ruled against the State of Kentucky and in favor of Travelmax, dissolving the temporary restraining order and permitting the company to continue its business in Kentucky, pending further hearings.

In the Court’s Findings of Fact, Conclusions of Law and Order, the Court summarized its position and encouraged the State to work with Travelmax as its business proceeded in Kentucky:

Thus, the court can find no violation of the consumer protection statutes, and therefore, no threat of harm to the public. The compliance procedures of the company are sufficient to provide for the protection of the citizens of the Commonwealth, pending the outcome of the other litigation in this matter. The court strongly encourages the Attorney General’s office to take full advantage of the apparent willingness of Travelmax to cooperate in overseeing its Kentucky operations.

See the actual Opinion and Order of the Kentucky Court [PDF]: www.mlmlegal.com/travelmaxorder.pdf

In fact, in the ensuing period after the favorable ruling for Travelmax, the State of Kentucky and Travelmax did come to an agreeable resolution and settlement that would avoid the necessity of formal hearings.

The educational opportunity here is unique. In most court hearings, a court reporter listens and transcribes the official transcript of testimony and argument. The transcription becomes the official record of the case. In the Travelmax hearings, no court reporter was present. Instead, the entire hearing was videotaped by a court videotaping system, and the videotape became the substitute official transcript record of the proceedings. The court’s record of court proceedings are public records and thus the record of the Travelmax case is a public record. In this case, the videotape record was subsequently digitized, and then extensive excerpts of cross examination, direct examination and argument by lead trial counsel, Jeffrey Babener, were organized for online presentation.

In the following video excerpts of the Travelmax trial, several of the trial participants are featured:

Jeffrey Babener, lead trial counsel for Travelmax.

Jeffrey A. Babener, of Portland, Oregon, is the principal attorney in the law firm of Babener & Associates. For three decades, 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 advisor to such leading companies as Avon, Herbalife, NuSkin, USANA, Melaleuca, Excel Communications, ACN, Nikken, 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. He has served as trial counsel in cases, involving direct selling, throughout the U.S. He has served on the Lawyers Council and Government Relations Committee of the U.S. Direct Selling Association and as General Counsel, and Board Member, for the Multilevel Marketing International Association.

James M. Shake, trial court judge in the Travelmax case. Judge, Circuit Court, Jefferson County, Kentucky.

Dr. Charles King, expert witness for Travelmax. Professor, Graduate School of Business, University of Illinois at Chicago. Professor King has studied and taught on the subject of direct selling at the University-level for many years. He has published extensively in the area. He has led specialized classes on direct selling and appeared as an expert witness in federal and state cases.

Michael Sheffield, Scottsdale, Arizona, expert witness for Travelmax. Mr. Sheffield has chaired a leading management consulting firm in the direct selling field. He has counseled many of the major direct selling companies, has lectured and published extensively and appeared as an expert witness on direct selling in federal and state cases. He is an acknowledged expert in MLM compensation plans and operations of direct selling companies.

Al Anolik, San Francisco, California, expert witness for Travelmax, is acknowledged as one of the foremost legal and business experts in the field of Travel. He has advised many of the leading travel businesses and has appeared as an expert witness in major litigation. He has published and lectured extensively in the travel field and has substantial experience in the implementation of the travel business through the direct selling channel of distribution.

Dr. William Keep, expert witness for the State of Kentucky in the Travelmax case. At the time of the trial, Dr. Keep was an assistant professor of marketing at the University of Kentucky. The focus of his expertise was “retailing” as opposed to MLM and Direct Selling. He has published extensively in the field of business and testified in court cases. Subsequent to the Travelmax case, Dr. Keep studied the field of direct selling further and published in the subject area.

The following video segments provide an insider’s view into an MLM trial:

Introduction to MLM and Direct Selling

Lead Travelmax Trial Counsel, Jeffrey Babener, explains to the Court the scope and breadth of the MLM industry with an overview of legal issues pertinent to the industry and to the trial of a pyramid case in the State of Kentucky. In addition, focus is made on the leading pyramid case in Kentucky involving Dare to be Great (1974).

An Inside Look at a MLM Trial – Jeff Babener Explains Direct Selling in Travelmax Trial – 1997

An Inside Look at a MLM Trial – Jeff Babener Explains Direct Selling in Travelmax Trial – 1997

Cross-examination of Dr. William Keep by Lead Travelmax Trial Counsel, Jeffrey Babener

Although Dr. Keep was called by the State of Kentucky as an expert witness to support the State’s case on pyramiding, the cross-examination, which focused on the credentials of Dr. Keep, revealed that Dr. Keep’s special area of focus was in the area of “retailing” and that his background and study in MLM/Direct Selling/Network Marketing was limited. The cross examination and voir dire (examination as to credentials as an expert) covers a wide range of legal and business issues in the direct selling field. In the end, Dr. Keep did not claim to be qualified to testify either as to the legitimacy or illegitimacy of the Travelmax marketing program. The cross-examination appears in the following segments:

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial 1997 – Part One

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial 1997 – Part One

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Dr. William Keep – TravelMax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Three

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Three

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Four

An Inside Look at a MLM Trial – Dr. William Keep – TravelMax Trial – 1997 – Part Four

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Five

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Five

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Six

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Six

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Seven

An Inside Look at a MLM Trial – Dr. William Keep – Travelmax Trial – 1997 – Part Seven

Direct Examination of Dr. Charles King by Lead Travelmax Trial Counsel, Jeffrey Babener

As a student and Professor of MLM/Direct Selling/Network Marketing, Dr. King was called to explain an overview of the direct selling industry, a discussion of leading companies, a discussion of the indicators of legitimacy of a direct selling company and a discussion of the elements of a marketing program that would pose pyramid issues. Dr. King testified, in detail, regarding the Travelmax program, opining that the quality of the product, and the implementation of numerous consumer safeguards caused the Travelmax program to be in the mainstream of legitimate direct selling companies.

An Inside Look at a MLM Trial – Dr. Charles King in Travelmax Trial – 1997 – Part One

An Inside Look at a MLM Trial – Dr. Charles King in Travelmax Trial – 1997 – Part One

An Inside Look at a MLM Trial – Dr. Charles King in Travelmax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Dr. Charles King in Travelmax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Dr. Charles King in Travelmax Trial – 1997 – Part Three

An Inside Look at a MLM Trial – Dr. Charles King in Travelmax Trial – 1997 – Part Three

Direct Examination of Michael Sheffield by Lead Travelmax Trial Counsel, Jeffrey Babener

As a leading expert on MLM/Direct Selling/Network Marketing, Mr. Sheffield provided an overview of the industry, a detailed discussion of compensation plans offered by leading direct selling companies, the importance of quality products to a direct selling offering, an explanation as to appropriate consumer safeguards expected to be part of legitimate direct selling companies and a discussion of elements of pyramid schemes that should be avoided by direct selling companies. He testified that, after a thorough review of the Travelmax product and marketing program, he was of the opinion that the program was a legitimate direct selling marketing program and fit into the mainstream of leading companies in the direct selling field.

An Inside Look at a MLM Trial – Mike Sheffield in Travelmax Trial – 1997 – Part One

An Inside Look at a MLM Trial – Mike Sheffield in Travelmax Trial – 1997 – Part One

An Inside Look at a MLM Trial – Mike Sheffield in Travelmax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Mike Sheffield in Travelmax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Mike Sheffield in Travelmax Trial – 1997 – Part Three

An Inside Look at a MLM Trial – Mike Sheffield in Travelmax Trial – 1997 – Part Three

Direct Examination of Al Anolik by Lead Travelmax Trial Counsel, Jeffrey Babener

As a leading expert in both the travel business and travel law, Mr. Anolik provided an overview of the travel industry, a discussion of travel product offerings and explanation of the types of education offered to those interested in pursuing full or part time careers in travel. Mr. Anolik testified in detail as to his examination of the Travelmax business, that he was of the opinion that the Travelmax offerings were of high quality and that achievement of millions of dollars in monthly travel bookings was indicative of a reputable and legitimate travel business.

An Inside Look at a MLM Trial – Al Anolik in Travelmax Trial – 1997 – Part One

An Inside Look at a MLM Trial – Al Anolik in Travelmax Trial – 1997 – Part One

An Inside Look at a MLM Trial – Al Anolik in Travelmax Trial – 1997 – Part Two

An Inside Look at a MLM Trial – Al Anolik in Travelmax Trial – 1997 – Part Two

For more information on this subject and other important issues in the area of MLM, Direct Selling and Network Marketing, please visit http://www.mlmlegal.com.

Download a PDF version of this Opinion and Order of the Kentucky Court.

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

Apart from general pyramiding accusations, the direct selling industry can learn from the Federal Trade Commission’s (FTC) specific allegations of improper activity. The FTC includes front loading as inappropriate activity stating:

Front-loading or inventorying of product in which excessive product purchases are viewed as prohibited consideration for the requirement that individuals make an initial investment of product purchased to engage in the opportunity.

In the August 1999 case FTC v. Equinox the FTC accused the company of making recruits engage in the following inappropriate front loading activity:

New recruits were front-loaded with $5,000 inventory purchases by being encouraged to “buy-in” at the managerial level.

MLM marketing plans which result in inventory loading distributors should be taken very seriously and avoided. Here are five ways to tell if the direct selling company you are considering joining is reputable or perhaps may be operating as a pyramid scheme:

• Promotions where the business opportunity is the “product.” If there is no legitimate product or service being sold, but only the opportunity itself, then chances are that the promotion is a pyramid scheme.
• Products that are sold at inflated prices. Sometimes pyramid promoters try to mask their true intent by selling a product. Often, the product will be vastly overpriced and thus unlikely to generate much retail activity, thereby indicating that the real item being sold is the compensation plan.
• Programs that require inventory “loading.” A legitimate MLM opportunity doesn’t require you to buy unreasonable amounts of inventory to begin your business.
• Programs that require substantial initial cash investments. According to MLM Attorney Jeff Babener, many states consider a required up-front investment of $500 or more to be “substantial” and thus likely to attract the attention of law enforcement.
• Programs that require mandatory purchase of peripheral or accessory products or services. Some pyramids seek to hide their true face by allowing a minimum price for a “start-up” kit and then compelling the investor to buy more expensive items such as training or demonstration materials. Jeff Babener believes that business-start-up kits and selling aids should be sold at company cost.

For more information on front loading, visit www.mlmlegal.com.

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Hi, I’m Jeff Babener of MLMLegal.com, and I’d like to talk to you today MLMLegal.com. Don’t leave home without it.

At first glance, one might question the role of the MLM law expert in a marketing-driven industry. However, your MLM lawyer may be the single most valuable resource that you will ever utilize.

There are very few in the gene pool who have intimate, practical knowledge, as well as legal knowledge of the business; often understanding the business better than most of his or her clients. It is a unique blend of marketing, practical knowledge, and experience combined together, with practical legal experience, that may cause the MLM lawyer to answer questions (off the top of his or her head) in five minutes what would take a typical business lawyer five years to research. And, in which case, they would still probably not understand the issues, let alone the solutions. For better or for worse, the practices of the MLM industry have induced scores of legislation and regulatory control, such as pyramid statutes, MLM statutes, Business Opportunity, security, FTC, and postal regulation. Notwithstanding the success of the industry, there is always tension between the regulatory community and the MLM industry. Overzealous regulators and rouge operators guarantee that this state of affairs will always exist.

Later issues with distributor relations, distributor discipline, FDA, trademark, tax, and international expansion arise. It is easy to see why the MLM attorney is probably the first person with whom you should establish a relationship and with who you should grow. That person is a trusted business advisor and a member of your business team.

At a minimum, you would be premature to jump into the marketplace without a legal review by MLM Legal Counsel of the most basic of sales kit contents. The basics include representative agreements, policies and procedures, product brochures, marketing plan presentations, as well as various forms, ranging from retail receipts to auto ship, to multiple owner applications, etcetera.

Responding after the fact to regulatory agencies over deficient materials or answering distributor complaints for slip shot documentation is too little, too late. And it will be too bad for the start up MLM business.

Wishing you the best in your direct-selling business, I’m Jeff Babener.

For more information visit our websites: www.mlmlegal.com and www.mlmattorney.com.

Or, visit these links for more information:

Why You Should Trademark Your MLM Company Name

Profile of the Leading MLM Law Firm – Babener & Associates and MLMLegal.com

An Introduction to Direct Selling and The Basics of MLM

Recruiting Advice from an Industry Expert – The MLM Fairytale “Network Marketing and Frogs”

Jeffrey Babener’s Youtube Channel Reaches 60,000 Views

Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes Video

Profile of a Leading MLM Law Firm – Babener & Associates Video

How Does a Business Lawyer become a MLM Lawyer? Video

Is a MLM Lawyer a Typical Lawyer? Video

What is the role of an Experienced MLM Legal Counsel? Video

CNBC.com Cites Legal Expert, Jeffrey Babener on FTC Business Opportunity Rule

The Role of MLM Legal Counsel – Why Hire a MLM Attorney

Where to Find MLM Startup Tips and Answers from an Industry Expert

An Interview with Industry Expert and Advocate, Jeffrey Babener

Interview with Expert MLM Attorney – How to Handle Compliance Discussions with your Distributors

Make sure to visit our blogs for the latest information on the direct selling industry: MLMLegal Blog Home and MLM Attorney Blog Home. HINT: Chose a category to narrow your search for discussion topics!

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And, as always, visit MLMLegal.com, the best MLM resource on the web. The next Starting and Running the Successful MLM Company Conference is quickly approaching! On February 21^st and 22^nd, 2013 we are hosting the MLM Conference for the 25^th year! This is now our 63nd annual conference (held almost consistently three times per year over the last 24 years). All executives/owners of MLM, direct selling, network marking, and party plan companies are welcome to attend. This is the original MLM Startup Conference, hosted and perfected by direct selling industry expert, MLM Attorney Jeff Babener. Call 503-226-6600 or 800-231-2162 to register. (Can’t make this event? Our next Conference takes place May 16^th & 17, 2013 in Las Vegas! Call our office to register today!)

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

CNBC – January 9, 2013

In his article, Commentator Greenberg discussed the effect lobbying dollars spent by the Direct Selling Association (DSA) and Herbalife assisted in the exclusion of consultants from the Business Opportunity Rule, enacted by the Federal Trade Commission (FTC).

Attorney Babener’s (editor of www.mlmlegal.com and www.mlmattorney.com) widely read article titled “The New FTC Business Opportunity Rule – MLM/Direct Selling Exemption Recognized” was quoted saying:

In March 2012, the direct selling industry has occasion to celebrate what a united industry, companies and distributors, can achieve if everyone pulls oars together in the same direction. The fruits of their labor are apparent in a newly-forged, positive relationship with the primary federal agency that regulates a channel distribution…”

He added: “In its final FTC Business Opportunity Rule, the FTC stated its clear intention to relieve companies and distributors from what might have been very onerous conditions of recruitment that would have dramatically impaired the ability of distributors to build their businesses.

Jeff Babener’s positive impact on the direct selling industry is widespread. His comments on the proposed FTC Rule were cited several times in the FTC Staff Report, and his efforts, along with many others in the industry, contributed to the FTC decision to effectively exclude MLM, Direct Selling, and Network Marketing Companies, and their millions of distributors, from potentially onerous impact on the Direct Selling Industry.

See his comments to the FTC: FTC Proposed Business Opportunity Rule: MLMLegal.com Speaks Out.

To read more about the Proposed Business Opportunity Rule, visit the following links:

FTC Guidelines on Endorsements and Testimonials
FTC Guidelines Resource Center
FTC Guidelines Endorsements and Testimonials: Detailed Analysis
FTC News Release on Endorsements and Testimonials
FTC Complete Guidelines Release
FTC Short Version Guidelines Release
FTC Examples of Material Connection
FTC Regulation of Advertising

What is the Relationship between MLM and the FTC? Video

Make sure to visit our blogs for the latest information on the direct selling industry: MLMLegal Blog Home and MLM Attorney Blog Home

Find us on our social networks:

Google Plus: http://plus.google.com/u/0/115279960045099999909#115279960045099999909/posts

LinkedIn: http://www.linkedin.com/in/mlmlegal

Twitter: http://www.twitter.com/BabenerLawFirm

Myspace: http://www.myspace.com/mlmlegal

Facebook: http://www.facebook.com/profile.php?id=696968133

And, as always, visit MLMLegal.com, the best MLM resource on the web.

Next MLM Conference in Las Vegas is February 21 & 22, 2013! Call 800-231-2162 to register today!

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