In early December, 2013, the Direct Selling Association released five new direct selling companies that gained membership into the Association. The new members include:

We are often asked a question about the past and the future of direct selling, network marketing and the FDA. It’s a good question because so many major players in our industry, ranging from Herbalife to Nikken, to Melaleuca to Amway, are driven by health products and dietary supplements. The direction of the industry has generally been a very good one. Until the mid-1990s, companies were very concerned about what health claims they could make about products. It came to a head in 1994 when the FDA’s strictness regarding claims became so difficult that Congress almost unanimously passed a bill called “The Dietary Supplement Health Education Act (DSHEA)” of 1994, which recognized the importance of providing health information to the consumer so

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People often ask about MLM/direct selling’s history with the government. It’s a long history. At times it’s been bad, and then it has been good. Then it has been bad. Then good. It’s been somewhat reciprocal. Multilevel marketing, and the industry, basically began in the 1950s with Mary Kay, Shaklee and Amway. Imposters came along in the 1960s, operating pyramid schemes, namely the Dare To Be Great program in which people were recruited to get people to seminars where they would pay large sums of money. In turn those people would recruit others and get them to pay money. This caused the Federal Trade Commission (FTC) to take a look at our industry.

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The importance of philanthropy to a MLM company should not be underestimated. Distributors need to gain empowerment through the company’s mission and vision. Distributors need to believe in something greater than themselves, which is why it is so common for direct selling companies to sell herbal or nutritional products, as well as to support philanthropic causes. Companies that support philanthropic causes give customers and distributors meaning, a sense of feeling good and drive to achieve success. A sense of purpose helps distributors, and the company-at-large, to achieve success in the competitive world of network marketing.

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Some clear criteria for legitimate direct selling/network marketing companies have long been recognized.

In determining whether a program is a legitimate direct selling/network marketing opportunity, the would-be participant should consider several important points:

  1. Goods or Service. Legitimate companies offer high-quality goods or services and guarantee consumer satisfaction. Goods and services must have a “real” demand in the marketplace, or an anticipated “real” demand if the good or service is just being introduced. Goods and services must have their own intrinsic value, such that distributors who purchase them would do so even if they were not involved in a network marketing business opportunity.

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It is true that, from time to time, because of the structure of network marketing plans, there has been confusion in the marketplace as to legitimate businesses versus illegal pyramid, headhunting, recruitment schemes.

The basic thrust of existing regulations is that direct selling/network marketing companies must be bona fide sales organizations which market bona fide products to consumers.

Pyramid Schemes:  Bad News…

Some pyramid activities which are prohibited or restricted include:

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As we talk with companies we’re often asked, “Is there a level playing field for all types of compensation plans?” The answer is always, “The same legal principles apply no matter what your compensation plan is, and no matter what your product is,” regardless of whether they are binary, matrix or the Australian 2-Up, and regardless of whether your products are financial services, educational products, health products, or vitamins. The basic legal principal question always asked is, “What is it that people are paying?” and “Why are they paying it?” If you are selling a quality product at a fair price to the consumer, and the product “gets used”,  then you are probably on the legitimate side. If it’s a program in which you are merely moving money or you are selling overpriced products to distributors who are buying only to qualify, then you probably have a pyramid scheme.

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WHAT?

The next Starting and Running the Successful MLM Company Conference is quickly approaching! On February 21st and 22nd, 2013 we are hosting the MLM Conference for the 25th 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.

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People have always asked the question, “Is this industry for real?” “Is MLM a real option for individuals out there?” Keep in mind we have about 15-16 million people in the United States, and more than 60 million people around the world involved in MLM.  Statistics have indicated that perhaps one in ten households have somebody who is doing multi-level marketing part-time.  Again, 90 percent of the people who are in network marketing are looking for auxiliary income.  This isn’t the industry to be looking for a full-time job, although many people have been successful in that way.  What we noticed recently is a change in the industry.

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