MLM distributors often ask for a simple explanation of whether a network marketing company and its products are “for real”.  Here is a simple test. Take the product and opportunity to your next door neighbor. Explain both of them to your neighbor. If you feel good about what you are doing; if you feel you are doing your neighbor a favor; if you can look your neighbor in the eyes as you explain the product and opportunity, then, congratulations, it is real. On the other hand, if you find yourself looking down at your shoes while you explain the value of the product and opportunity, it is time to look for another MLM company.

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No matter how you peel back the layers of the onion in determining whether you are selling a “good product,” the bottom line is that it must have inherent value to the potential buyer or recruit. It must stand on its own in the marketplace and it must be fairly priced. Take a look at MLM companies that have come and gone and you will see products that are merely an excuse for “moving money.”

Individuals do not buy the products because they want them, but rather because they are “buying into the deal” to qualify. The recent BurnLounge case is an example, where the court held that distributors bought the offerings to qualify in the business opportunity, not necessarily because they wanted the product. And even good products create pyramid schemes if they are overpriced. A one dollar “pen” may be a good product, but when sold for $10, the only purchasers will be distributors, who are then buying into a pyramid scheme.

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With all the legal issues occurring lately, and in particular with discussion of the BurnLounge case, people are asking about the importance of personal use by MLM distributors. Although it may be true that the MLM industry and regulators have not yet settled on the role of personal use as a proper attribute in determining a pyramid vs. a legal MLM company, there is no question, from a marketing standpoint, that network marketing distributors will find it difficult to recommend products and services to friends if they don’t use the products and services themselves.

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This is no surprise. MLM does the best where people are friendly and where they frequently interact. Historically, MLM has done well in the west of the United States, from California to Oregon, to Utah, to Idaho. Moving east, MLM does well in Arizona and into Texas, up into the Bible Belt, and from Florida up to the Carolina’s. Geographic areas where there is less every day interaction, such as deep urban areas, can pose problems with prospecting unless people frequently connect in defined ethnic, social or religious groups.

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Source: Jeffrey Babener
Date: April 16, 2012 09:06 ET

MLMLegal.com Announces the Completion and Launch of the MLM Legal Cases Project

Over 250 Federal and State Cases Related to the Direct Selling Industry are Free to View and Live at MLMLegal.com

PORTLAND, Ore., April 16, 2012 (GLOBE NEWSWIRE) — Over 250 legal cases are available at www.mlmlegal.com. The legal cases are organized under their appropriate state or federal category. You can also find cases by searching under state and federal agencies or various categories. Each case has been painstakingly summarized; giving you a case synopsis, the legal issue involved, the court ruling, and its relevance to the MLM/Direct Sales/Direct Selling/Network Marketing/Party Plan/Multilevel Marketing industries.

To access the Legal Cases Project visit: http://www.mlmlegal.com/legal-cases/index.php.

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Via the New York Times:

In announcing its $10 billion unsolicited bid for Avon Products Inc., Coty acknowledged that it had sent three letters to the cosmetics giant last month seeking to begin talks about a deal….

Read Full Article here.

Visit MLMLegal’s Headlines Page for Complete Direct Selling News.

108th CONGRESS
1st Session

H. R. 1220

To prohibit pyramid promotional schemes, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

March 12, 2003

Mr. BARTON of Texas (for himself, Mr. HALL, Mr. FROST, Mrs. MYRICK, Mr. ENGLISH, Ms. PRYCE of Ohio, Mr. SESSIONS, Mr. TIBERI, and Mr. EHLERS) introduced the following bill; which was referred to the Committee on Energy and Commerce

A BILL

To prohibit pyramid promotional schemes, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Anti-Pyramid Promotional Scheme Act of 2003′.

SEC. 2. FINDINGS.

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All of which prompts the suggested action of the above mini-primer:

  1. In 2003, the industry introduced proposed federal clarification legislation, HR 1220 to recognize personal use and remove the disconnect and uncertainty; the industry, specifically the DSA, should again initiate such proposed federal legislation.
  2. In the alternative, the FTC and DSA, with permission of the BurnLounge defendants, should seek to amend the BurnLounge Final Order to recognize that “sales to the ultimate consumer” include distributor purchases in reasonable amounts for personal use.

And a great place to start would be the crafted language from the 1986 Herbalife case:

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The Non-Recognition of Personal Use is a Disconnect from the BurnLounge Court Opinion and from FTC Positions on the Subject… It Creates an Unnecessary Cloud on the Business Model and Operation of Many Major Direct Selling Companies …

BurnLounge Opinion vs. Final Order Disconnect on Personal Use

By and large, the Court’s statement of opinion accepted the FTC position that BurnLounge was a pyramid. However, there was a disconnect between the opinion and the “personal use” language in the Final Order. In fact, the thrust of the opinion was not based on criticism of the sort of “personal use” by distributors so common in many leading direct selling companies. Instead, the thrust of the opinion was that the motivation for distributor purchases of “packages” was incidental to creating a market for company product or services; rather the true purpose for purchases was to buy into qualification for commissions in the opportunity … a classic allegation in pyramid schemes.

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