Pyramid Scheme – MLM, Network Marketing, Direct Selling News, Videos, Articles, Legal Updates, and More.

New Video: If a Sales Kit or Startup Fee Is Several Hundred Dollars, Then Is This Considered “Frontloading”?

Charity — Mon, 18 Mar 2019 17:08:07 +0000

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.

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New Video: Understanding MLM, Network Marketing Compensation Plans

Charity — Mon, 19 Nov 2018 17:12:15 +0000

MLM Compensation Plans: Maxtrix, Stair Step, Unilevel, and More – Watch the Video!

A Conversation with Jeff Babener Video Series: Learn about the difference between the various compensation plans and how distributors are compensated with each plan. It’s called multi-level marketing since distributors are compensated at each level as they recruit more consultants. How many levels are distributors compensated at? Learn about breakaway compensation plans. Learn the difference between sponsors and recruits. Get the definition of each unique compensation plan and which plans are most common and which are less successful. How many levels deep is it most common to go, and legal, to go?

When does a compensation plan become a lottery, which is considered legal by many states? Which programs have stood the test of time, and which have gone by the wayside? Which compensation plan should you choose so that your company is legal and stands the test of time? Learn how to ask the right questions to determine a legitimate operating MLM company vs. a pyramid scheme. Watch the video.

Keep yourself educated on the legal aspects of the MLM industry. Visit MLMLegal.com. Are you starting a MLM company? Make sure you have your legal aspects covered. Contact legal MLM expert Jeff Babener for your free legal consultation today.

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Where Do You Go? Reporting an Illegal Pyramid Scheme – New Video!

Charity — Wed, 22 Aug 2018 15:24:21 +0000

Where Do You Go? Reporting an Illegal Pyramid Scheme

A Conversation with Jeff Babener Video Series: Know of an illegal pyramid scheme operating as a legitimate/legal MLM? Where do you go to report it? Are there regulatory agencies that accept reports of pyramid schemes? Trade associations, like the DSA, can help you determine if a company is legal or not. Check the Better Business Bureau. Do MLM companies have to register their company as a legal operation? Talk to other distributors in the company and in the industry. Does the company have competent legal representation? A startup without legal representation is not looking after their legal affairs. Watch the video.

For more information, visit mlmlegal.com.

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New Video – Know the Signs: Pyramid or Legal MLM Company

Charity — Wed, 11 Jul 2018 17:11:37 +0000

A Conversation with Jeff Babener Video Series: Educate yourself on the difference between a legal MLM company and a pyramid scheme. Learn the keywords, such as front-end loading. Distributors should not be required to buy thousands of dollars’ worth of product. Expect a reasonable presentation of the opportunity with no earnings hype. And have reasonable earnings expectations. No distributor should expect to make $10,000 a month. Watch the video.

To learn more about the network marketing industry, visit MLMLegal.com.

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The New FTC Direct Selling Guidance… Imperfect, But a Good Start – New Article

Charity — Mon, 29 Jan 2018 02:51:00 +0000

by Jeffrey A Babener
(First Published in World of Direct Selling)

Ring the bells that still can ring

Forget your perfect offering

There is a crack in everything

That’s how the light gets in

Leonard Cohen… Anthem

The new FTC Direct Selling Guidance arrived in January, 2018. It built on the goodwill dialogue between the FTC and the direct selling industry that was ushered in by a well-received DSA presentation of acting Chairperson Maureen Ohlhausen in November, 2017.

Was it helpful to the conversation on “personal use” and “pyramid?” Yes. Was it perfect? No. There are two major ambiguity flaws (likely inadvertent) in the Guidance that must be discussed. Are these “cracks” in this Faberge Egg? Yes, but, that’s how the light gets in.

1. Did the FTC recognize that this area should be governed by 40 years of case authority rather than FTC administrative fiat? Absolutely. Did it miss a major characteristic of this well established industry? Yes. Even in this friendly guidance, the FTC was tone deaf to the reward tracking model used by leading direct selling companies (including Amway, Mary Kay, Shaklee, Tupperware) for more than 50 years, and never questioned by the courts, that follows wholesalemovement of product with an underlying assumption that companies are capable of mandating, incentivizing and encouraging that product is accounted for: resold to ultimate users, personally used by distributors as ultimate users or returned under liberal one year buyback/refund programs. Should a successful half century model be upended…if the idea is to support an established industry, probably not.

2. The Guidance employs the term “driven by consumer demand” multiple times. The inadvertent implication is “driven by retail sales.” This semantic term is at odds with actual detailed Guidance discussion that concurs with the industry position that the pyramid test is “driven by sales to the ultimate user,” meaning that sales to distributors in reasonable amounts, for either personal use or resale, should be placed in the category of “sales to the ultimate user.” Perhaps the simple fix is a document global search and replace of “driven by consumer demand” with “driven by ultimate user demand.”

Is more FTC/Industry dialogue and adoption of H.R. 3409 (anti-pyramid bill) a good next step? For sure.

How we arrived at this dialogue…

The direct selling industry search for certainty in proposed H.R. 3409 has some real basis in the vacillating positions of the FTC. After the initial success of a MLM structure, by Amway, Mary Kay and Shaklee, in the 1950’s and 1960’s, the appearance of a true pyramid in Koscot and Dare to be Great, prompted the FTC to challenge the entire MLM concept, and specifically Amway, as being a pyramid. In 1979, an FTC administrative law judge rebuked the FTC, holding that Amway was a legitimate business opportunity, principally because it adopted what has come to be known, in all subsequent cases, as the Amway Safeguards:

Read the full article at MLMLegal.com.

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The Thorny Issues of “Personal Use” in Direct Selling

Charity — Sat, 03 Jun 2017 21:15:38 +0000

There exists tension between the direct sales industry and industry regulators as to the role of “personal use” of products and services by distributors of MLM companies. The broad and ambiguous language in pyramid legislation has contributed to the problem. Pyramid statutes have always prohibited the payment of commissions in a multilevel program unless based upon the “sale of goods or services.” To whom must those goods or services be sold in order to avoid being a pyramid? The distributor, the end-consumer, or both?

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.

PRWeb (PR) – MLMLegal.com Presents the E-Newsletter: MLM News Global – April 15, 2016

Charity — Tue, 19 Apr 2016 21:49:45 +0000

Welcome to the Newsletter: MLM News Global, an industry e-newsletter originating from one of the most trusted and respected direct selling websites, MLMLegal.com.

Portland, Oregon (PRWEB)April 15, 2016

MLM News Global newsletter offers recent news, videos, company profiles, and timely articles. The e-newsletter contains the top news stories from the network marketing industry, the most recent MLM scam alerts, timely articles on the direct selling industry, and so much more. Keep up-to-date on top MLM news headlines or to hear about the latest MLM scam alerts and pyramid scheme accusations. The timely headline reporting will keep subscribers up-to-date on stories that affect everyone in the network marketing industry. In addition, important press releases, directly from MLM/network marketing/direct selling, party plan companies, keep subscribers current on trends and direct selling company developments.

Subscribe and look forward to exclusive videos that laser-focus on industry-educational topics, such as distributor education, industry Q&A, direct selling executive interviews, MLM startup, and pyramid schemes.

The MLM News Global newsletter features industry-related articles in every issue, featuring MLMLegal.com’s perspective on FTC rulings, Burnlounge, Herbalife, Vemma cases, and more.

MLM News Global also highlights featured articles, from industry experts, on MLM industry-related topics, such as pyramid schemes, compensation plans, recruiting, lead generation, consulting, legal analysis, software, and more.

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

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Conference Information: 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 our website 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 http://www.mlmlegal.com.
About Attorney Jeffrey Babener: Conference Host and Chairman, Editor of http://www.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 has 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.

Learn how to receive two COMPLIMENTARY tickets to attend the next Starting and Running the Successful MLM Company Conference by visiting the MLMAttorney.com.

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New Newsletter – August 18, 2015 – Headline News, Video of the Week, Articles, Scam Alerts – Sign up Today!

Charity — Tue, 18 Aug 2015 20:18:35 +0000

The MLM News Global E-Newsletter offers top MLM news, recent scams, videos, company profiles, and timely articles delivered to your inbox on a bi-monthly basis.

The MLM News Global E-Newsletter offers top MLM news, recent scams, videos, company profiles, and timely articles delivered to your inbox on a bi-monthly basis. The e-newsletter contains top news stories in the network marketing industry, the most recent MLM scam alerts, timely articles on the direct selling industry, and so much more. Make sure that you’re not the last to know about top MLM news stories, or to hear about the latest MLM scam reports. Our timely headline reporting will keep you up-to-date on stories that affect everyone in the network marketing industry. In addition, important press releases, directly from MLM/network marketing/direct selling, party plan companies, will keep you current on trends and direct selling company developments in the industry.

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

Charity — Thu, 23 Jul 2015 16:45:46 +0000

This is a question that might take one thousand pages to answer. You will find endless articles and videos at www.mlmlegal.com and www.mlmattorney.com on differentiating a legitimate direct selling company from a pyramid scheme.

Key features of a legitimate compensation plan include a program which offers quality product/service at a reasonable price, which is purchased by ultimate users (of end-consumers), who use the product/service and who purchased it because they want it. The product stands on its own in the marketplace as opposed to purchases or payments that where the predominant intent is merely to buy into the program. Pyramids are characterized by bogus products (think wishes and prayers), high investment from consultants to buy-in to the company, inflated pricing, inventory loading and where the primary intent of the compensation plan is to cause individuals to pay money for the right to qualify for the program, causing others to do the same and so on.

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Finding an Expert MLM Attorney and Determining if a Network Marketing Company is Legal

Charity — Tue, 14 Jul 2015 17:32:54 +0000

If you’re considering becoming a part of a startup network marketing company, learn how to recognize some red flags

There are ways to make sure that a direct selling company operates as a legal and ethical business. Firstly, contact the industry association websites, such as the Direct Selling Association (DSA), to see if the company is a member and if they abide by the DSA’s Code of Ethics.

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

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

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