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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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Although the many varieties of compensation plans (stairstep, unilevel, breakaway, matrix, binary, etc.) address issues of training and management in different ways, the following represents a brief summary of key elements which all types of plans, companies, and distributors should attempt to achieve in their training, management, and support programs in order for those programs to be taken seriously from a legal point of view:
- Enhance distributor self-image
- Enhance the image of the network marketing industry as a whole
- Educate distributors about the industry
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SourceNet Creative & MLMLegal.com
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The “Direct Selling, Network Marketing, MLM” DVD
Topics Include:
Prospective distributors often ask how they can find out if a MLM, network marketing, or direct selling company is legal or if it’s a pyramid scheme. There are a number of ways to research the company yourself; to be sure of its legality before joining. Here are some ways which you can investigate an MLM company:
1) Check to see if it is a member of any industry associations, like the DSA or DSWA.
2) Call your state’s attorney general’s office or consumer protection division. Most states regulate direct selling companies through these agencies.
3) Check with the Better Business Bureau.
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