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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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.

MLMLegal.com is famous for squashing MLM myths, spreading knowledge about the network marketing industry, and distributing resources to anyone who visits our website.

Teenage Mutant Ninja Turtles (depicted here in true Babener-fashion by Jeff Babener’s grandson, Sammy) are famous for battling petty criminals, evil overlords, mutated creatures, and alien invaders. MLMLegal.com is famous for squashing MLM myths, spreading knowledge about the network marketing industry, and distributing resources to anyone who visits our website.

Every year MLMLegal.com adds a comprehensive project to its website. Whether it is videos on network marketing, well-researched articles, library of legal cases, or a video miniseries, each year our website is expanded upon. This year is no different.

In 2014, MLMLegal.com committed the highly-regarded article “BurnLounge Appeal Decision: Guidance on Pyramid v. Legitimate MLM and the Role of Personal Use in Pyramid Analysis” to the website.

In 2015, we plan to add 63 new videos to our website and Youtube Channel on the topic of MLM education. Below are some of the topics to be discussed by MLM Attorney Jeff Babener in this new video series:

• What’s the Difference between MLM, Network Marketing, Party Plan and Direct Sales?
• What Is a “Pay to Play?”
• How Much Does It Cost to Start a MLM Company?
• How Do I Raise Capital to Start My MLM Business?
• What Is the Benefit of Recruiting Experienced Distributors?
• What about Gifting Clubs?
• Why Do I Need an Experienced Network Marketing Attorney?
• What Do I Do with Distributors Who Go Passive (for MLM Executives)?
• What Do I Do with Distributors Who Go Passive (for MLM Distributors)?
• What Key Factors Determine the Growth of Network Marketing Companies?
• Do You Have Some Tips for Generating Network Marketing Leads?
• Do You Have Some Tips to Become a Successful Network Marketing Distributor?
• Are There MLM Companies That Have Achieved Success on a Low Budget?
• Since You Are a MLM Attorney, Why Would You Host the MLM Startup Conference for the Executives of Startup and Existing Companies?
• If I’m a New Distributor Then Should I Focus My Selling In Areas Where Other Distributors Are Successful Or Should I Focus On Untouched Territory?
• I Own a MLM Company. How Can I Determine Cost of Goods? In Other Words, How Do I Price My Products for Retail, Distributor and Direct-To-Consumer Sales?
• Do I Need To Worry about Merchant Account Processing? Should I Have Just One Merchant Account?
• If a Sales Kit or Startup Fee Is Several Hundred Dollars, Then Is This Considered “Frontloading”?
• How Do I Create a Compensation Plan That Guarantees That I Am Legal?
• I’m Starting a MLM Company. I Am Going to Have Distributors Earn Income by
  Referring Others, Is This Legal?
• What Should I Look for When Hiring a Vice President of Marketing?
• What Is the Typical Price of an at-Cost Starter Kit in the Industry?
• Can I (as a MLM Executive) Pass the Costs of Website Development, Marketing Materials, Etc. Down to Distributors?
• How Do I Find Top Distributors?
• In an Absolute Nutshell, What Are the Two Main Causes of a MLM Company Failing?
• As a Distributor, Can I Use Display Booths to Sell My Company’s Products? Is There a Limit on the Time I Can Spend Selling at a Booth?
• In Regards to Event Sales, Such as Fairs, Kiosks, Vending Machines, Etc., Am I Authorized to Sell My Company’s Products at Such Events?
• Why Do MLM Companies Require Distributors to Use Replicated Websites Rather Than Distributor-Created Websites?
• What about Raising Capital to Start Your Network Marketing Company?
• How Many People Would I Need in My Organization to Make Over $10,000?
• Are Network Marketing Companies Mostly Moving to All-Digital/All-Online Starter Kits? Can It be Done in a Way That Ensures a High Perceived Value?
• What Regulatory Changes Are Affecting Network Marketing Companies?
• What Should I Look for in a Company When Choosing Back Office Software?
• How Important Are Celebrity Endorsements? Do They Help Marketing or Is It a Double-Edged Sword?
• How Often Should Companies Renew Their Policies and Procedures to Make Them Relevant in Today’s Marketplace?
• Do You Want to Attract MLM Professionals or MLM Junkies into Your Direct Selling Company?
• How Have Raiding Rules Evolved in Direct Selling Contracts and Policies and Procedures?
• What Happens if Consultants Raid Anyway?
• What Are the Most Important Things to Remember When You Host a Distributor Recognition Event?
• Do Incentives Increase Sales? How Worthwhile Are Consultant Incentives?
• What Do Startup Companies Think about Long Term Professional Relationships?
• What Is the U.S. and International Trend in Recognizing the Validity of Personal Use by Distributors in Pyramid Cases?

So, keep your eyes on MLMLegal.com this year. We will have a lot of new content added to our website and we want you to be a part of it! Run, learn and get lost at MLMLegal.com!

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.

Our next Starting and Running the Successful MLM Company Conference takes place October 27 and 28, 2016 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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The Tennessee language is similar to language adopted in more than a dozen state statutes, which recognizes personal use, so long as it is coupled with consumer safeguards to avoid inventory loading and to provide for a reasonable inventory repurchase policy. In 2014, the state of Tennessee adopted such a pyramid test:

(8) “Pyramid promotional scheme”:

(A) Means any plan or operation by which a participant gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other persons into the plan or operation rather than from the sale and consumption of goods, services, or intangible property by a participant or other persons introduced into the plan or operation; and

(B) Includes a plan or operation under which:

…. (ii) A participant, on giving any consideration, obtains any goods, services, or intangible property in addition to the right to receive compensation.

(C) Nothing in this part may be construed to prohibit a plan or operation, or to define a plan or operation as a pyramid promotional scheme, based on the fact that participants in the plan or operation give consideration in return for the right to receive compensation based upon purchases of goods, services, or intangible property by participants for personal use, consumption, or resale so long as the plan or operation does not promote or induce inventory loading and the plan or operation implements an appropriate inventory repurchase program.

(House Bill 2356 approved by the Governor, April 25, 2014 and effective July 1, 2014)

For the complete language of the new Tennessee legislation, visit the Tennessee Statute page located at MLMLegal.com’s MLM Law in 50 States section.

In the last 10 years, distributor personal use, as a legitimate end destination for product/service has been increasingly recognized by courts, legislatures and regulators:  In 2013 and 2014, two EU tribunals; now counting, more than a dozen U.S. states have amended MLM statutes; in 2004, an FTC advisory opinion applauded efficiencies of MLM “buying clubs”; even the most recent U.S. Ninth Circuit Court of Appeals decision, BurnLounge, recognized personal use purchases that were not merely incidental to the business opportunity. The emerging legal standard, legitimate vs. pyramid, is not the existence of personal use, but rather, whether the predominant motivation for distributor expenditure is to qualify for reward in the MLM program as opposed to purchase for personal use or resale.

Read Tennessee State Law at our website.

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. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

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

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. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

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

By Jeffrey A. Babener
© 2016

On June 2, 2014, in the case of FTC v. BurnLounge, the U.S. Court of Appeals for the Ninth Circuit issued a seminal decision, affirming a lower court finding that the BurnLounge MLM (multilevel marketing) program was an illegal pyramid scheme, in violation of section 5(a) of the Federal Trade Commission Act, a decision that will dramatically impact the landscape of direct selling to provide guidance on two fundamental legal issues:

(1) What activity constitutes a “pyramid scheme?”

(2) What is the role of “personal use” (by distributors) in pyramid case analysis?

Stakeholders: “We Won!!” Proxy Wars…….

Victory has 100 fathers and defeat is an orphan. John Kennedy (1961)

As with any inconclusive war, the stakeholders offered immediate statements of victory or vindication.

That is, other than BurnLounge. BurnLounge lost, and a permanent injunction was affirmed.

However, BurnLounge was a proxy war on the tests for “pyramid” and the role of “personal use” in pyramid analysis, among the interested parties, short sellers of publicly traded direct selling companies, publicly traded direct selling companies, industry spokespersons such as the DSA, the FTC, MLM critics, etc.

Each, in turn, issued press releases or statements claiming victory and validation of their respective positions.

The BurnLounge decision offered guidance for all stakeholders and a clear message for “going forward.”

To Short Sellers:

Rethink your criticism of direct selling companies. Distributors’ personal use is a legitimate end destination for product sales. Criticism of personal use is not a valid criticism. So long as distributor purchases are not merely incidental to the business opportunity, such purchases in reasonable amounts for personal use, coupled with rewards for one’s own purchases, as well as use by non-distributors and other distributors is as legitimate as a sale to a non-distributor customer, and is not a basis for a pyramid.

To the FTC:

Congratulations, you won this case on the facts presented. However, since the Omnitrition case (1996), you have been arguing the wrong legal standard on personal use for more than 15 years, albeit a slight diversion in a 2004 FTC Advisory Opinion that recognized legitimacy of personal use. The court pointed out: “The FTC counters that ‘internal sales to other Moguls cannot be sales to ultimate users consistent with Koscot.'” The court proceeded to roundly reject this contention noting that this argument is not “supported by the case law.” And so the message to the FTC is that personal use criticism will not be accepted in the future and the FTC should look back to its 2004 Advisory Opinion position.

To the Industry:

Accept your victory on recognition of personal use as a legitimate destination for product and representative of “sales to ultimate users.” However, “get your act together,” and adopt “best practices” methods and rules that promote product use over mere recruiting. The presence of personal use is not “a free ticket out of trouble.” It will be viewed as part of a legitimate MLM, but it is only one factor for the case by case fact based analysis of the “economic reality” of an entire program in which the acid test will be that the predominant and primary motivation of distributor purchases is for personal use or resale and not merely to qualify for rewards in the program by personal purchases and recruitment of others to do the same.

Major Impact of the BurnLounge Case…

To read the full article, visit MLMLegal.com.

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 October 27 and 28, 2016 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

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

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.

Part One

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 where it was held that the network marketing industry is a legitimate business model and the business opportunity is not a pyramid scheme.

Afterwards, regulatory agencies and the industry went quiet until the 1990s. It was then 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 (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.

For instance, one of the proposed rules would have stated that if you approached your neighbor 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.

These blog posts are paraphrased from the DSWA interview with Nikki Keohohou. Visit our website to view the entire interview: Executive Interview by the DSWA – “Legal Hotspots for Direct Selling Companies” with Jeff Babener.

Click here to read Part Two.

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 October 27 and 28, 2016 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

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

View the video on our website: mlmattorney.com or mlmlegal.com; or view it on Youtube.

In this hour-long video, Jeff Babener addresses network marketing industry topics such as:

– Distributor raiding

– Pyramid scheme

– Personal Use

– Legal

– Social media

– Recruiting and communication

– Noncompete agreements

– Distributorships with multiple companies

– Company and consultant responsibility

– Startup

– Trademark

– Regulatory

– Compliance

– Funding startups

– Training and education

– Federal Trade Commission

– Keys to startup success

– Passion for company vision and products

– Determination

– Success strategies

– Regulatory environment

– Legal services

To watch the video visit: https://www.youtube.com/watch?v=rzX1sXgTg_Q&feature=youtu.be or visit our blogs to read more: www.mlmlegal.com and www.mlmattorney.com.

The conference will be held May 15th & 16th 2014, which is quickly approaching!

MLMLegal.com Launches the  Innovation Campaign  for the May 15 & 16, 2014 MLM Startup Conference!

Fill out the short survey here to receive two free tickets (worth $345.00!) to the next MLM Startup Conference in Las Vegas!**

For over 26 years MLMLegal.com and Babener & Associates has hosted the most prestigious MLM conference for executives of startup and existing direct selling companies. In celebration of our 67th conference, we are offering two complimentary tickets* — worth $345.00! — to attend the esteemed event in Las Vegas, Nevada.

In our ongoing effort to offer the absolute best network marketing conference available, we invite you to participate in our May 2014 Innovation Campaign. To receive your two free tickets, fill out our Innovation Campaign form by following the link below.

We invite the input, ideas and innovation from the very MLM company owners who are in the startup and launch phases of their companies. We strive to offer the best conference in the United States. MLMLegal.com always covers current issues and events at all of our conferences, but this time it is different! We want your input in the Innovation Campaign!

Are you an owner or executive of a startup of existing direct selling company? Do you want to attend the 67th Starting and Running the Successful MLM Company Conference for FREE?! Fill out our short survey below! Share with us your experience as a network marketing entrepreneur!

Fill out our  Innovation Campaign  form to receive your two free tickets today! Also visit this page for additional information on the May 15 & 16, 2014 MLM Startup Conference

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

How do you find out more information?

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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

Contact Us: REGISTER TODAY! 503-226-6600 or 800-231-2162

The next MLM conference will be held May 2014 in Las Vegas (keep a look out for the October and February conferences as well). Each day will begin at 9:00AM and end at 4:00PM, when the one-on-time will begin and end around 7:00PM. For more information visit: http://www.mlmlegal.com/srs2.html or call 800-231-2162/503-226-6600. Registrations are taken by phone and questions are always welcome.

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

About Attorney Jeffrey Babener: Conference Host and Chairman, Editor of www.mlmlegal.com, as well as the leading direct selling attorney in the United States — With over 25 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, 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 64 national conferences on direct selling.

View the Press Release HERE.

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

View the video on our website: mlmattorney.com or mlmlegal.com; or view it on Youtube.

In this hour-long video, Jeff Babener addresses network marketing industry topics such as:

–          Distributor raiding

–          Pyramid scheme

–          Personal Use

–          Legal

–          Social media

–          Recruiting and communication

–          Noncompete agreements

–          Distributorships with multiple companies

–          Company and consultant responsibility

–          Startup

–          Trademark

–          Regulatory

–          Compliance

–          Funding startups

–          Training and education

–          Federal Trade Commission

–          Keys to startup success

–          Passion for company vision and products

–          Determination

–          Success strategies

–          Regulatory environment

–          Legal services

To download the entire audio file visit http://dswa-org.s3.amazonaws.com/audio/2014-03-19_InterviewWithNickiAndJeffreyBabener.mp3, or visit our blogs to read more: www.mlmlegal.com and www.mlmattorney.com.

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

Find us on our social networks:

Google+

LinkedIn

Twitter

Facebook

Our next Starting and Running the Successful MLM Company Conference takes place May 15th & 16th, 2014 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register. If you’d like to see how you can get free tickets to the next MLM Startup Conference, visit our Innovation Campaign page.

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

What do you do when you need answers on the go? MLM Legal now offers a free iTunes application.

MLMLegal.com is one of the most informative and reliable websites about network marketing on the web. MLM Legal provides educational articles answering common industry questions, such as:

–          How to start a network marketing company

–          An inside look at a MLM trial

–          Herbalife and personal use

–          How to identify a pyramid scheme

–          How to analyze compensation plans

–          And, many more.

MLM Legal offers over 70 videos where MLM expert Jeff Babener discusses network marketing for both consultants and company owners. The website offers research assistance by providing over 700 MLM company profiles, a vendor and supplier directory, and the latest industry news. MLM Legal also offers free materials to those who qualify, including a free MLM Startup Manual, an insightful DVD, and newsletters.

MLM Legal is free and open to anyone, anytime. However, what do you do when you need answers on the go? MLM Legal now offers a free iTunes application. This application offers up-to-date information on the direct selling industry, news and headlines, frequently asked questions, MLM law in 50 states, hundreds of articles, notorious MLM cases, as well as legal news and articles written by Jeff Babener.

MLMLegal on iTunes is free and will provide you with valuable information on the go. Download the free iTunes app HERE.

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Our next Starting and Running the Successful MLM Company Conference takes place October 27 and 28, 2016 in Las Vegas. Call 503-226-6600 or 800-231-2162 to register.

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