|
Home
Online Security
What
EVERYONE should know
List
of firewalls and features
What is a
pyramid scheme /
pyramid scam?
FTC definition of pyramid schemes
Canadian Laws on
pyramid schemes
MLM or pyramid,
how to tell the difference?
Choosing a MLM business that is right for
you
MLM Checklist -
what to look for and questions to ask -
by Jeffrey A. Babener, lawyer
Failure or Success?
Any questions? Visit MLM
Legal
|
|
Multi-Level Marketing - MLM
FTC Definition: Multilevel Marketing, or MLM, is a system for selling
goods or services through a network of distributors.
The typical Multilevel Marketing program works through recruitment. You
are invited to become a distributor, sometimes through another distributor
of the Multilevel Marketing company's products and sometimes through a
generally advertised meeting.
If you choose to become a distributor with the Multilevel Marketing
company, you'll earn money both through the sales of the MLM's products and
through recruiting other distributors, by receiving a portion of the income
these distributors generate.
The distributors that you sign up with your Multilevel Marketing plan are
called your downline. The distributor that originally recruited you is
called your upline. Often he or she will give you some help getting started,
including training.
Multilevel Marketing plans are legal in Canada, as long as they do not
contravene the Competition Act. However, if you are considering
becoming part of an MLM company, you need to investigate the opportunity
thoroughly, just as you would with any other proposed business venture.
Not all Multilevel Marketing plans are created equal, and some may not be
MLM at all, but pyramid schemes, which are illegal.
If you're thinking about joining what appears to be a legitimate
multilevel marketing plan, take time to learn about the plan.
- What's the company's track record?
- What products does it sell?
- Does it sell products to the public-at-large?
- Does it have the evidence to back up the claims it makes about its
product?
- Is the product competitively priced?
- Is it likely to appeal to a large customer base?
- How much is the investment to join the plan?
- Is there a minimum monthly sales commitment to earn a
commission?
- Will you be required to recruit new distributors to earn your
commission?
Be skeptical if a distributor tells you that for the price of a
"start-up kit" of inventory and sales literature - and sometimes a
commitment to sell a specific amount of the product or service each month -
you'll be on the road to riches. Often consumers spend a lot of money to
"build their business" by participating in training programs,
buying sales leads or purchasing the products themselves. Too often, these
purchases are all they ever see for their investments.
YOUR Legal Responsibilities
If you decide to become a distributor, you are
legally responsible for the claims you make about the company,
its product and the business opportunities it offers. That applies even if
you're repeating claims you read in a company brochure or advertising flyer.
The Federal Trade Commission advises you to verify the research behind any
claims about a product's performance before repeating those claims to a
potential customer.
In addition, if you solicit new distributors, you
are responsible for the claims you make about a distributor's earnings
potential. Be sure to represent the opportunity honestly and
avoid making unrealistic promises. If those promises fall through, remember
that you could be held liable.
Evaluating a Plan
The FTC suggests that you use common sense when evaluating a
multilevel marketing opportunity and consider these tips as you make your
decision:
- Avoid any plan that includes commissions for recruiting additional
distributors. It may be an illegal pyramid.
- Beware of plans that ask new distributors to purchase expensive
products and marketing materials. These plans may be pyramids in
disguise.
- Be cautious of plans that claim you will make money through continued
growth of your downline, that is, the number of distributors you
recruit.
- Beware of plans that claim to sell miracle products or promise
enormous earnings. Ask the promoter to substantiate claims.
- Beware of shills - "decoy" references paid by a plan's
promoter to lie about their earnings through the plan.
- Don't pay or sign any contracts in an "opportunity meeting"
or any other pressure-filled situation. Insist on taking your time to
think over your decision. Talk it over with a family member, friend,
accountant or lawyer.
- Do your homework! Check with your local Better Business Bureau and
state Attorney General about any plan you're considering - especially
when the claims about the product or your potential earnings seem too
good to be true.
- Remember that no matter how good a product and how solid a
multilevel marketing plan may be, you'll need to invest sweat equity as
well as dollars for your investment to pay off.
MLM Resource Sites
MLM.com
Forum If
you're looking for information on a specific company or just general
curiosity, MLM.com forum can be very helpful. There are several people
there who only work their MLM business and are quite successful. They
can give you advice and provide valuable input before you spend your money. MLMForums.com Not
as familiar with members from this forum but also a good source of
reference. MLMLegal.com MLM
Legal provides a lot of free information on MLM in general.
|
|
|
