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If you’ve decided that you’re right for network marketing, and that network marketing is right for you then it’s time to go out and find the best MLM company to join. Or, if you’ve already signed up with one, it’s time to make sure it’s worthy of your time and effort.

Choosing the right company is not a matter to take lightly. Due diligence will pay off. Being knowledgeable about the company you represent will help you to determine whether or not you want to join the company. Direct selling can bring you added financial security and many new friendships, but it’s important to be sure that you’re part of a legitimate opportunity.

If you are searching for a direct selling company to join, which you’ll be introducing to your friends and family, your credibility will be on the line. You want to make sure you are representing a company with credibility and with products that stand on their own in the marketplace.

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This blog post is the companion post to the video: Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes. Expert MLM Attorney, Jeff Babener, answers the question, when it comes to pyramid schemes, how do you tell the difference between one that’s legitimate and one that is not? How do compensation plans affect a company’s legality?

Jeff Babener: There’s a famous Supreme Court decision that where one of the Supreme Court judges was asked to comment on the definition of pornography. He replied that he couldn’t define it, but he knew it when he saw it.  Sometimes you need a metaphor to understand the difference between an illegal pyramid, headhunting, recruitment scheme and a legitimate MLM company.

This story is a good example of the difficulty in defining pyramid schemes. And, you may come to your own conclusion. Here is a metaphor that I use a lot to help people with the definition of pyramid schemes:

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!”

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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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The Most Trusted MLM Attorney, Jeffrey Babener, Has Compiled Over 40 MLM, Direct Selling, Network Marketing, Educational Videos


PORTLAND, Ore., Nov 8, 2011 (GlobeNewswire via COMTEX) — The Direct Selling industry, also referred to as MLM (Multilevel Marketing) and Network Marketing, has had its legal challenges, including accusations of pyramiding, but it seems to have emerged as a significant distribution channel for consumer goods and services, boasting U.S. sales exceeding $30 billion, global sales exceeding $100 billion, along with numerous global multi-billion dollar companies traded on the NYSE. Notable Attorney, Jeffrey Babener, has compiled over 40 videos that answer common questions, introduce newcomers to the industry, educate distributors, and teach executives about starting a network marketing company.

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