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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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FTC v. BurnLounge: 10 point mini-primer and action plan on the “personal use” issue:
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Overreach of BurnLounge Final Order creates uncertainty on “personal use” issue… FTC stated policy has been to prosecute egregious pyramid schemes as opposed to mainstream direct selling. By and large, this has been the case since the famous 1979 FTC Amway unsuccessful prosecution.
- FTC and major court pyramid decisions, including FTC v. BurnLounge, focus on front-loading, large investments, products and services that do not stand on their own in the marketplace, payment of recruitment commissions for purchases of nonconsumer items such as sales tools, unsubstantiated earnings claims and programs where the motivation for distributor product purchases is driven by intent to “buy in” and qualify for commissions in the business opportunity … and is incidental to a real desire for product or service for resale or personal use.
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The Direct Selling Industry Scores a Win
In March 2012, the direct selling industry has occasion to celebrate what a united industry, companies and distributors, can achieve if everyone pulls oars together in the same direction. The fruits of their labor are apparent in a newly-forged, positive relationship with the primary federal agency that regulates a channel distribution, alternately referred to as direct selling, network marketing and multilevel marketing. In its final FTC Business Opportunity Rule, the FTC stated its clear intention to relieve companies and distributors from what might have been very onerous conditions of recruitment that would have dramatically impaired the ability of distributors to build their businesses.
…Last week, I knocked Herbalife for claiming it does a bunch of R&D, but not disclosing the amount it spends on it.
Then, later in the week, without fanfare, the nutritional supplement company updated the R&D section of its website to show the amount it spends on R&D and other stuff… Continue Reading…
Signature Homestyles Partners with Extreme Makeover: Home Edition. Signature Homestyles plans to donate products for the show. Read the full article here.
Neways plans to launch in Korea later this month. Read the full article here.
Nu Skin executed a letter of intent to acquire LifeGen Technologies LLC, a genomics company based in Madison, Wis., for $11,662,500.executed a letter of intent to acquire LifeGen Technologies LLC, a genomics company based in Madison, Wis., for $11,662,500. Read the full article here.
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