Unsubstantiated claims typically involve earnings hypotheticals, earnings potentials, earnings testimonials, outright statements of earnings, lifestyle enhancement claims, etc.

Unsubstantiated claims typically involve earnings hypotheticals, earnings potentials, earnings testimonials, outright statements of earnings, lifestyle enhancement claims, etc.

Both the federal government and states, through combinations of legislation, rules and case law prohibit unsubstantiated earnings claims in the offering of a MLM opportunity. Such claims typically involve earnings hypotheticals, earnings potentials, earnings testimonials, outright statements of earnings, lifestyle enhancement claims, etc. If a direct selling company or its distributors offer such earnings claims, they are obliged to provide an average earnings disclosure that outlines average earnings of distributors at various levels of the opportunity program. In following through on regulatory mandates, all leading companies issue guidelines on presentation on earnings claims, and typically prohibit any “unauthorized earnings claims” that go beyond stated policy guidelines.

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The issue of levels has not been the focus of the Federal Trade Commission (FTC) or state attorneys general in the enforcement of pyramid laws.

The issue of levels has not been the focus of the Federal Trade Commission (FTC) or state attorneys general in the enforcement of pyramid laws.

The issue of depth of levels seemed to be a major focus prior to the internet and other non-postal (mail) means of communication. In the late 1980’s the United States Postal Service (USPS) examined numbers of levels to make a determination of whether or not, in its opinion, the depth of levels created a “lottery” element under U.S. Postal lottery laws that forbid payment based on chance. Various cases and consents sorted out a safe harbor (at least from the U.S. Postal Office standpoint) for at least four levels (not necessarily agreed to by the direct selling industry). Separately, the Postal Service looked for evidence of “supervisory requirements.” Most companies adopted specific supervisory requirements of sponsors to demonstrate some managerial activity by distributors. For the past 25 years, little recruitment activity is conducted by U.S. mail and it has been a long time since the U.S. Postal Service has expressed a serious interest in this subject. The issue of levels has not been the focus of the Federal Trade Commission (FTC) or state attorneys general in the enforcement of pyramid laws. Instead, the focus for the last two decades has been on the whether or not product/service

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Although the terms sponsoring and recruiting are often used interchangeably, they actually have two different meanings.

Although the terms sponsoring and recruiting are often used interchangeably, they actually have two different meanings.

Although the terms sponsoring and recruiting are often used interchangeably, they actually have two different meanings. Recruiting is the act of searching and soliciting new distributors for the downline sales organization of an existing distributor. Of course, the activity carries important consultant responsibilities, such as compliance with company and statutory guidelines on earnings representations, product representations, and accurate representations of the company’s business opportunity.

Once a recruit has agreed to join the company, a recruiting distributor becomes a Sponsor. Almost all company policies set forth very specific duties and responsibilities of a Sponsor, including supervision, training and communicating with their downline sales organization. In addition, all companies have specific rules on cross-sponsoring and keeping respectful relationships with other sponsors and distributors.

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