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Multi-Level Marketing Issues - Pyramid And Endless Chain Questions
Author : Jim C Green
In this article, we take a look at claims made by several MLM industry "experts" who believe that most MLM/network marketing companies operate as endless chain or pyramid schemes. We wanted to look into this and see what is behind it. If true, does apply "carte blanche" to the MLM/network marketing industry or just some companies in particular?
In one notable example, Robert Fitzpatrick, author of "False Profits" has lately accused various companies of operating based on the "endless chain" recruiting vs. product sales mode, including Pre-Paid Legal, USANA, ACN and Herbalife. MlmWatchdog.com points out that Fitzpatrick works closely with Barry Minkow's Fraud Discovery Institute, which has a track record of short selling companies under their "investigations." So, is this just a case of stock manipulation, or is it bonafide investigative work? MlmWatchdog.com also reports that Minkow is a convicted felon who has served jail time for former fraudulent activities.
What does the law indicate? State law seems to govern activities in this area, although the FTC and SEC have had significant involvement. In primary decisions, there have been a range of abuses targeted as possibly illegal:
1. Products which have no "real world" marketplace
2. Products which are sold at inflated prices
3. Mandatory purchases of company product
4. Plans which cause distributors to load inventory
5. Large cash investment requirements
6. Plans in which products are totally or substantially used by distributors
7. Plans where fees are paid to distributors for recruiting
8. Plans in which distributor payments are not based on retail product sales
9. Plans which contain elements of a lottery; rewarding based on probability
State laws address differing points, including, most importantly, whether or not personal use by distributors constitutes "retail sales." Three states view personal distributor use as legitimate "retail sales:" Oklahoma, Texas and Louisiana.
When evaluating the bottom line whether a particular company meets legitimacy tests may be a simple question: If there were not an income opportunity attached, would the typical person honestly buy the product anyway? Keep in mind that your answer may be "colored" by a common tendency to "justify" an emotional buying decision. If the answer is "yes," you've found a good company.
Author's Resource Box
Jim Green is an attraction marketing and network marketing expert with over 10 years in the industry. His attraction marketing system uses both internet and offline recruiting techniques to assist any marketer in consistently generating MLM leads.
Article Source:
Articlebliss
Tags: network marketing, mlm, pyramid, endless chain
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Submitted : 2010-08-31 Word Count : 449 Popularity: 97 Times Viewed: 19
