Companies such as Nikken and Enagic offer both sales and personal development training that have made a significant difference in their distributors’ lives.

Absolutely. First, it should be noted that this industry boasts some of the best motivational and teaching trainers in the sales business. Just Google “MLM Training” and you will be led to great trainers and systems, such as Zig Ziglar and Robert Butwin. Also touch base with some of the leaders at the MLMLegal.com Starting and Running the Successful MLM Company Conference.

As to companies, the very best companies offer significant leadership and training programs. Affiliate organizations of Amway such as Britt and Yager have offered superlative training for decades. Companies such as Nikken and Enagic offer both sales and personal development training that have made a significant difference in their distributors’ lives. Training is a passion for some company CEOs such as Jeff Olson of Nerium International or Richard Brooke, Founder of Oxyfresh.

Those companies that have succeeded have been synonymous with rich training and development. From a legal standpoint, a solid training program, that involves distributors working with their downlines, also deflates accusations of “lottery” by state and federal regulatory agencies because it supports the proposition that upline leaders participate in override commissions based on supervisory activity and not merely based on chance.

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.

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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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Multi-level marketing, otherwise known as network marketing, MLM, party plan, and/or direct selling, is a business in which a sales force sells products and services through word-of-mouth marketing. The sales force (also known as consultants, representatives, distributors, etc.) is compensated not only by the sale of products and services to customers, but also for the sales made other sales people whom they recruit. As a consultant recruits other consultants, they generally earn a percentage of their recruits’ sales. These recruits are called the “downline” distributors.

Conversely, if you are recruited into a MLM company then you will have a sponsor. Your sponsor – along with other consultants in levels above you – is considered your “upline.” Your upline will receive a percentage of your sales. This will entice them to recruit more consultants.

Visit MLMLegal.com and MLMAttorney.com for much more information about the direct selling industry.

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Why Do People Join?

You might think that the main reason to join is for the money, but believe it or not, that is number four, five and number six on the list.

1. Number one on the list in the studies is that people join because they like and believe in the product;
2. Second on the list is, “I like being my own boss”;
3. Third, “I like working from home”;
4. Fourth, “The harder I work, the more I make.”

Again, earning extra income is obviously important, but it would be a mistake to ignore the “intangible” factors that pull people into the business.

Why Do People Stay?

Company owners and distributor leaders are always asking, “Why do our representatives stay with us and what can we do to support their retention?”  On a list of the top five factors, take a look at where earnings comes in… number five, and then think about what you are doing.

The top five reasons that distributors stay:

1. A favorable response to the products;
2. They relate to the leadership, management and owners of the company;
3. They relate to the leadership of the sales force, i.e., the top distributors and their sponsors;
4. They relate to the vision of the company.  If it’s about women’s empowerment or about health, they relate to it; if it is about helping households save money to create a better life, they relate to this vision;
5. And maybe you will be surprised… or not… but the fifth ranked reason that distributors stay with companies is “earnings.” Go figure.

Why do Distributors Leave?

Finally, one of the industry’s leading direct selling companies pondered the issue of the departure of its distributors. So much so, that the company conducted a series of “exit” interviews with distributors.

Again, although money is important, the answers demonstrated the glue of the company-distributor connection as relationship-driven. Almost across the board, the answer was “communication,” or lack thereof. Consultants need to feel that somebody is responding to them, that they are communicating with them. If consultants feel ignored and this is true in every realm of business, they vote with their feet and they leave.

The following factors were disclosed as leading to departure:

1. Poor Communication;
2. Inferior Support;
3. Inadequate Leadership;
4. Lack of Training.

What Can We Learn as Companies and Distributors?

Of course, the necessity of a competitive compensation opportunity goes without saying. After all, network marketing is a business opportunity. With that in mind, however, the driving force that bonds us all is quality product and attention to relationships. Actually, this should come as no surprise.

Watch the videos in which MLM Attorney Jeff Babener discusses why distributors join and stay with direct selling companies:

Why Do Distributors join MLM Companies?
Why Do Distributors stay with MLM Companies?

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Our next Starting and Running the Successful MLM Company Conference takes place October 24th & 25th, 2013 in Las Vegas. Call Charity before September 1st to receive a discount! 503-226-6600 or 800-231-2162.

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The question of “rights in the downline” is one which is clearly headed for the courts within the next few years. Many MLM companies take the position that they are the sole owners of “downlines.” Many key distributors market their “downline structures” from one MLM company to another as if downline structure was a piece of property which could be marketed at will. When the “process” of multilevel, as a form of marketing is closely examined, the better argument is probably that neither of these positions is correct.

Multilevel marketing is a form of one-on-one direct selling by which companies contract with independent distributors to market products and compensate those distributors through sales commissions on sale of product produced by their sales organization, as well as offering distributors the opportunity to profit through the differential between wholesale and retail price. A downline is, in reality, a sales organization made up of independent distributors. It is not owned by key distributors, nor is it owned by an MLM company. Independent distributors are free to cancel participation at any time. In fact, those states that have adopted multilevel distribution statutes require that distributors be permitted to cancel participation at any time, for any reason upon notice to the company.

Most companies have adopted sophisticated data processing which provides detailed information on downline sales organizations. In the event a distributor leaves an organization, a company is obviously free to continue marketing through its system of independent distributors. Modern thinking MLM companies also provide availability of data processing information on the sales organization in the distributor’s downline. In fact, providing such information is tangible evidence a company may offer to regulatory authorities that its distributors are well informed as to their downline sales organizations. This indicates that the distributor plays a bona fide supervisory selling soliciting function in moving product to consumers. Many statutes now require this bona fide supervisory function as a precondition to receipt of commissions or overrides by distributors. Distributors are free to use information as to their own sales organization as they deem appropriate subject to restrictions regarding confidential information. Companies which attempt to restrict distributors after termination from working with other MLM organizations should seriously consider the federal and state antitrust implications of such restrictions. In California, for instance, noncompete agreements are unenforceable unless based on confidential information.

Companies may not arbitrarily terminate distributors without facing liability. Distributors enter into contracts with companies in reliance on the fact that they will be compensated for building sales organizations. Although many MLM companies adopt one year contracts with distributors, arbitrary or capricious termination of the distributor may clearly subject companies to contract claims as well as possible claims under various state dealer termination statutes. It should also be noted that, in recent years, many state courts have gone so far as to even award damages to “at will” employees, i.e., employees who are not under contract with the company. This line of cases, which has developed claims for “wrongful termination,” has produced sizeable awards of both compensatory and punitive damages. Such cases involving MLM companies are still in developmental stages.

For more information, visit our websites at www.mlmlegal.com and www.mlmattorney.com. Or, visit our blogs at http://mlmlegal.com/MLMBlog/ and http://mlmattorney.com/blog/.

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Parts of this article are borrowed from http://www.mlmconsultantadvice.com/babener_12.html, written by Jeff Babener in 2011.

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PART 101 — FOOD LABELING

Subpart F–Specific Requirements for Descriptive Claims That Are Neither Nutrient Content Claims nor Health Claims

For additional information on FDA Rules and Regulations, visit the following links:

What is the Relationship between MLM and the FDA? Video

The FDA and Health Claims Article

FDA Health Claims: The Final Rules Article

FDA: New Health Claim Rules:

• Introduction
• A Historic Act
• The President Speaks
• And Congress Speaks Out
• The Impact on the Network Marketing Industry
• Why and How They Work
• Abuses Lead to Legislation
• Rules You Don’t Want to Break
• The Disclosure Issue

Choosing the Right Product for Your Direct Selling Company

Distributor Training – Two Common Questions

MLM and the FDA

MLM’s History with the Government

New Video – Unauthorized Medical Claims and FDA Issues

FDA to Issue Revised NDI Guidance – Nutraceuticals World Reports

Nutritional Supplements, Health Claims and MLM

MLM Attorney – How a MLM Lawyer Can Help Your Direct Selling Business

FDA to Issue Revised NDI Guidance – Nutraceuticals World Reports

For more information, visit our websites at www.mlmlegal.com and www.mlmattorney.com. Or, visit our blogs at http://mlmlegal.com/MLMBlog/ and http://mlmattorney.com/blog/.

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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 will be here before you know it! On May 16^th and 17^th, 2013 we are hosting the MLM Conference for the 25^th year! This is now our 64^th 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? Keep an eye out for our October and February conferences as well.)

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There is no question that, over time, the MLM companies that have been the most successful in the MLM industry have involved distributors who have had a passion for the product, service and for what they are selling. A distributor shouldn’t join a direct sales company unless, number one, he or she really believes in the product. The distributor should be actively using the product. Distributors should feel a great sense of ease when explaining and sharing her product with others. Successful distributors should feel that they are doing their customers a favor when sharing the product/service rather than feel as if they are encroaching on customers’ space or friendship.

Most importantly, a distributor must be realistic about their expectations. Keep in mind that in the direct selling industry, 90 percent of those who are involved are only involved part time, working less than 20 hours per week. Very few people leave their primary jobs to join the MLM industry full time. In fact, in the direct sales business in the United States today, which is about a 30 billion dollar a year channel of distribution, there are about 13 million people involved. This translates into perhaps one in ten households involved in MLM, according to studies done by leading trade organizations. And, 90 percent of these folks are working in direct selling on a part time basis.

When MLM companies seek out distributors to sell their products and services, in reality, they are competing for each individual’s time. People have other distractions that occupy their lives and time. Life changes occur. They get a salary raise. They start coaching little league. They move. Distributors tend to flow in and out of the direct selling business, not necessarily because they don’t like the product or the business, but because it is a part time endeavor.

The most important thing distributors should remember when they go out and speak to other people about the company and opportunity is that they should remain positive about the product and the opportunity.

However, even more importantly, distributors should be realistic about what they are communicating. Be realistic about the claims being made about the product and the opportunity. This only makes common sense. In fact, common sense is a prevailing factor in this type of business.

Above all, distributors should be positive, realistic and exude common sense. If you are successful in these areas then you’ll likely be very successful in your direct selling business.

For more information, visit our websites at www.mlmlegal.com and www.mlmattorney.com. Or, visit our blogs at http://mlmlegal.com/MLMBlog/ and http://mlmattorney.com/blog/.

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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 will be here before you know it! On May 16^th and 17^th, 2013 we are hosting the MLM Conference for the 25^th year! This is now our 64^th 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? Keep an eye out for our October and February conferences as well.)

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Is the industry that we’re in, the direct selling, MLM, network marketing industry, for real? And secondly, the question always asked of the distributor, is your company for real? And after all these years I don’t think many distributors hear these questions as often.

Allow me (Attorney Jeff Babener) to answer the first question from my perspective, as an industry professional, from someone who works behind the scenes.

First of all, Keep in mind we have nearly 16 million people in the United States selling consumer products and services in the range of $30 billion and more than 90 million people around the world doing this with sales exceeding $150 billion. This activity penetrates the fabric of our society. Earlier statistics, presented by the Direct Selling Association, have indicated that, perhaps, one in ten households have somebody who is doing this part-time. We used to get bad press but now we seem to be seeing an improvement.

In the US today, we recruit about 55,000 people per week and recruit about 150,000 people worldwide per week. Over the next ten years, statistics from the Direct Selling Association predict that we’ll recruit about 200 million people around the world. Times have changed. And, the MLM environment has changed. Distributors who may have faced objections to network marketing in the past, even if they were doing well, are probably not facing them anymore. MLM representatives should be very well received around the world. All of the statistics say that the success of distributors is based on relationships and in the company’s beliefs. There is a study done by the Direct Selling Association that asks why people join MLM companies. The first reason is that distributors like and believe in the product. The second reason is that they like being their own boss. The third reason is that they like working at home. The fourth reason is that they like the idea of the harder they work, the more they make. The fifth reason is that they enjoy selling.

And, selling is a tough one. However, there were a couple other studies that were done asking why people stay and why they leave direct selling companies. It was very interesting. Most people stay with direct selling companies because they enjoy the product.

And so, many of the people that distributors signed on have continued to be retail customers of MLM companies for over 20 years. They probably haven’t worked the opportunity forever, which is consistent with the DSA’s study that described the number one reason why people stay with MLM companies is because they have a favorable response to the product.

The second reason people stay with the company is because they have a favorable response to the leadership of the company. Thirdly, distributors have a favorable response to the leadership of the sales force (upline distributors). The fourth reason is that distributors have a favorable response to the vision of the company. In many cases the distributors will respond favorably to the wonderful philanthropic company vision, which is usually much larger than just the business.

These values, and many others, make successful MLM, direct selling, network marketing, party plan companies.

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

Or, visit this link for more information:

Earnings Claims and Consumer Protection Laws Video

Is it Proper to pay Commissions on Sales Tools and Training? Video

MLM/Direct Selling/Network Marketing: Billions of Participants Make for a Veritable Industry

The Hallmarks of Legitimate Direct Selling/Network Marketing Companies

Where can I find a legitimate direct selling company to join?

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

Think you have a unique, never-before-seen product? Think again.

Make sure the company training program supports long distance growth

Training and Managing Your People: Introduction

Ten Common Distributor Mistakes (and how to overcome them)

Restrictions on Distributors: MLM Cross-Sponsoring Rules and Selling Sales Tools

Distributor Behavior: Networking and Time Management

Long Distance Sponsoring: Focus on areas where other successful distributors are located

Network Marketing and the Law: Refunds for MLM Distributors

MLM Company Profiles

Starting and Running the Successful MLM Company Conference – May 16th & 17th, 2013

An Introduction to Direct Selling and The Basics of MLM

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

Why do companies restrict the type of advertising carried on by their distributors?

Paying Commissions on Sales Tools, Sales Kits, and Training Materials……No!

How to Tell if a Direct Selling Company is a Pyramid or a Legitimate MLM

MLM Pyramid Schemes – Everything You Need to Know All in One Place

Debunking the MLM, Direct Selling, Network Marketing Industry Myths

Distributor Training – Two Common Questions

If I’m an independent contractor, why are there rules regarding my conduct?

Who Owns the MLM Distributorship in the Case of a Divorce?

What Differentiates a Legitimate Direct Selling/Network Marketing Company from an Illegal Pyramid Scheme?

The Hallmarks of Legitimate Direct Selling/Network Marketing Companies

Is There a Level Playing Field for all Compensation Plans?

Is MLM For Real?

What are Your Reasons for Joining a Direct Selling Opportunity?

U.S. Direct Seller Statistics in the Last Five Years

The Direct Selling Association Presents 2011 MLM Industry Facts

The Attraction of Network Marketing

The Educated Networker: Trademarks and Network Marketing

If My MLM Business isn’t Working What Should I do?

Am I Taking a Risk by Joining an MLM Company?

Are the Claims that Corporate America has Discovered MLM “Real” or “Off the Wall?”

Should I Trust The “MLM Gossip Websites?”

Nutritional Supplements, Health Claims and MLM

Is Your Product Real? The Shoe Test…

Personal Use by Distributors… Your Questions Answered

In What States does MLM do the Best?

All About MLM Earnings and Compensation

General Tips in Networking and Time Management

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 will be here before you know it! On May 16^th and 17^th, 2013 we are hosting the MLM Conference for the 25^th year! This is now our 64^th 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? Keep an eye out for our October and February conferences as well.)

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

Interview with Expert Attorney – Are Earnings Calculators Legal?

Interviewer: Jeff, talk to us about earnings calculators because there are a lot of consultants out in the field who want to know is if there is an appropriate way to demonstrate earnings with a calculator.

Jeff Babener: Kris, we’ve had some problems in the direct selling industry in the past, particularly with the Federal Trade Commission and Attorneys General regarding earnings claims. Problems have risen when companies come up with assumptions and make claims about earnings potential.

Let’s assume you’re going to find five people, and they are going to do so much volume, and they’re going to find five people, who are also going to do so much volume… The claim is then made; if you recruit so many, and make so much in volume, then you’ll be making $10,000 a month. Now, that has been a problem in the absence of some disclosures of average earnings of distributors, average number of active distributors, what people can expect to make, etc.

But earnings claims are a different issue than earnings calculators. The issue that arises with earnings calculators is really an extension of what we used to see when potential distributors would go to a meeting and companies would say to them, “We want to show you how our compensation plan works, how it pays differently at different levels. We aren’t going to tell you what our hypothetical expectations are of what you can do, rather we are going to give you a piece of paper that shows how many people you think you could sponsor at this level, how many at this level, and so on. How many people do you think you can sponsor? What do you think their volume or production could be?” You make the assumptions and then you have a piece of paper and a chalkboard that shows you that that allows you to multiply and guess what you would make. You’re to make the calculations.

Today’s modern earnings calculator is doing nothing other than doing the calculation for you based on your expectations. Obviously there are some underlying assumptions, not of your productivity, or of your sponsoring ability, but of very basic things, for instance that a particular product sells for so many dollars. Those are basic assumptions which are incontrovertible. The earnings calculator then asks you, “What do you think you can do by way of production, by way of recruitment, what do you think your sales organization can do?” and then it helps you. It merely calculates what you would earn based on your assumptions.

Interviewer: So, if I were sitting at a seminar or sitting down with someone one-on-one, the important thing for me to know is that I’m not throwing hypothetical’s out there for them. I am saying that you have to answer these questions so that this device can help put out the results based on your situation and I’m not going to do any “winking,” leading you along, or encouraging you to put certain numbers in to boost your results. It’s got to be 100 percent about the person I’m talking to and what their goals are. And, that would be the appropriate way of using that tool?

Jeff Babener: That would be the credible way. Now someday, with every company, as they progress, they develop a large mass of statistics which indicates how people do, what percentage of people who join the company are active in making money, what is the average earnings are of people in the business. If the company would like to indicate: here’s how you might earn 5k in one month, the company has statistics to disclose what percentage of people actually earn that amount. But at an early point in time, it is difficult for companies to do that, so the earnings calculator is really the way to go. Someday, the company, having made these disclosures, will be able to actually present its own hypothetical’s.

For more information on earnings calculators, visit the following links:

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

6 New Videos: Q&A Interview with Expert MLM Attorney, Jeffrey Babener

New Video: Earnings Claims and Consumer Protection Laws

Major Corporations have Adopted Network Marketing

The Difference Between MLM Earnings Calculators and Earnings Claims – Video

Distributor Training – Two Common Questions

The Hallmarks of Legitimate Direct Selling/Network Marketing Companies

What Differentiates a Legitimate Direct Selling/Network Marketing Company from an Illegal Pyramid Scheme?

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

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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. Ask Charity how to get a discount! (Can’t make this event? Keep an eye out for our May and October conferences as well.)

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