Pages
Stay In Touch
More
© 2011 MLMAttorney.com - Sponsored by Jeffrey Babener
This blog post is the companion post to the video: How to Tell if a Company is a Pyramid or a Legitimate MLM.
You may have been recruited for a network marketing opportunity or you are a recruiter. Inevitably, this question will come up, is the company a pyramid scheme or a legitimate business opportunity?
MLM Pyramid Schemes – Everything You Need to Know All in One Place
Although this is a complex legal area, let me share a simple metaphor that draws a clear line in the sand.
The metaphor is about a gentlemen, will call him Party #1, and he sells a case of canned tuna fish to Party #2 for $10. And, Party #2 sells it to Party #3 for $20, and Party #3 sells the case of canned tuna fish until it gets to Party #10, who buys the case of canned tuna for $500. And, Party #10 opens up the case of tuna fish and it’s rancid. It’s inedible.
He goes back to Party #9 and complains, “I bought this case of tuna for $500 and it’s rancid.” Party #9 tells him to take it to Party #8, and Party #8 tells him to take it to Party #7, and so on until Party #10 goes all the way back to Party #1 and says, “You’re the one who started all of this! I have a problem!”
Continue reading »
Interviewer: Jeff, let me ask you this question, what’s the difference between a legitimate direct sales opportunity and a pyramid scheme?
Jeff Babener: If you’re selling a product or service and it stands on its own in the marketplace and people would buy it because they want it, then you have a real, legitimate direct selling company. If on the other hand, the quality of the product is low, the price is high, then it merely becomes an excuse for people to buy the product because they want to qualify for the program in order to recruit others, make money, and earn commissions.
Continue reading »
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:
- 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.
Continue reading »
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.
Continue reading »
Have you ever wondered if their is a recipe that successful MLM, direct selling, network marketing, and party plan companies have that make them a success? Expert MLM Attorney Jeff Babener knows the recipe for success for executives in network marketing. He shares a few in his new video: Factors that Make an MLM Company Successful.
More new videos are available directly on the MLMLegal.com homepage. Experienced MLM Attorney Babener offers many tips to emerging and startup companies on his website. The article “MLM Consulting: How to Build a Successful Direct Selling Company” and the FREE MLM Startup Manual offer additional information on achieving success in the competitive world of network marketing.
Continue reading »
The Securities and Exchange Commission (SEC) shut down ZeekRewards.com for conducting Ponzi scheme activity. News outlets are reporting that ZeekRewards raised over 600 million dollars from over one million customers. Here are some links to the news reports:
SEC Shuts Down ZeekRewards as Scam – Wall Street Journal
U.S. SEC says shuts ZeekRewards.com $600 million Ponzi scheme – Reuters
Investors in Lexington Ponzi scheme confused, upset – Fox8
Read the official SEC Complaint [PDF]. Or, read the official SEC Complaint online (i.e. text only).
Be sure to visit the blog at MLMLegal.com to read MLM Attorney Jeffrey Babener’s article, And the Leaves that are Green Turn to Brown – MLM Penny Auctions, of ZeekRewards’ recent allegations and to learn more about illegitimate direct selling companies.
You may also be interested in reading the following articles which help to identify pyramid schemes vs. legitimate MLM companies:
Is it a Pyramid or Legitimate MLM?
Identifying Illegal Pyramid Schemes
Tired of reading? Attorney Jeff Babener will explain pyramid schemes to you on video:
What is the difference between MLM and direct selling? There is also network marketing… The World Federation of Direct Selling Associations (WFDSA) explains how you can tell the difference between a network marketing company and an MLM company, as well as, how to tell whether or not the company is legal.
Continue reading »
Giant corporations have marketed some of their own products and services through network marketing. For many corporations who observed some of the earlier successes of this alternative channel of distribution, a number of conclusions were reached.
1. It was a great way to introduce brand new products.
2. It seemed to work well for products that needed demonstration or testimonial.
3. It was a great way to reward the consumer for sharing excitement about products.
4. This method could result in rapid penetration of the market.
5. In that commissions were only paid on the movement of product, and massive and costly advertising campaigns could be avoided, it seemed efficient and economical.
6. In recent years, corporations expanded offerings far beyond home and personal care products to offer consumer services such as telecommunications, prepaid legal representation, financial products and consumer member benefits packages that offer customers significant savings across the board.
Continue reading »
As we talk with companies, we’re often asked “Is there a level playing field for all types of compensation plans?” Whether they are binary, matrix or Australia 2-Up, and for products, whether they are the sale of financial services, educational products, health products and vitamins, the answer is “The same legal principals apply no matter what your compensation plan is and no matter what your product is.”
The basic legal principal and the question I’ll always ask 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 consumers that use it, you are probably on the legitimate side. If it’s a program in which you are merely moving money or you are selling over-priced products to distributors who are buying only to qualify, then you probably have a pyramid scheme.
Continue reading »
The jury is in on this point. One only needs to look at Wall Street’s investments and acquisitions of MLM companies in recent years. It was Warren Buffet’s Berkshire Hathaway that invested hundreds of millions of dollars in acquiring Pampered Chef.
Wall Street made the owner of Excel Communication a mega millionaire when Excel’s Book of Business was purchased and the company made was public.
Continue reading »
Connect with MLMLegal.com!