by Gerald P. Nehra, Attorney at Law There are numerous conclusions that one can draw from a careful examination of business volume, when looking at direct selling companies. This article will focus on two-the distinction between a single level and a multilevel direct selling company and a test for legal versus pyramid for a multilevel direct selling company.

A simple definition first: Remember the old saying that is true for almost any business venture? "Nothing can really happen until someone sells something." Well, business volume is simply the dollar amount that the "someone" pays for the "something."
In direct selling companies, business volume can be of two types. The business volume directly created by the independent contractor representative is the first type, commonly called "personal volume." The three most common forms of personal volume are:
1. Purchases for resale to customers.
2. Purchases for personal and family use.
3. Purchases of customers, found by the representative, who order directly from the company.

Please note that some plans are designed to treat the third type of business volume as personal volume, even if the customer also signs a representative application; but such a treatment does not change the nature of the business volume in this analysis. The issue is simply that the representative has found and brought to the company purchasers of the products or services. This business volume is credited to the representative who brought the customer to the company when that representative's compensation is calculated. If these three types of business volume are the only types of business volume designed into the marketing program-and for which a representative can be compensated-we have a single-level direct selling company.

Most direct selling companies, however, also have a second type of business volume. These companies want the representative to do more than just bring the company business volume as described above. The company also wants the representative to be the "new representative finder." The legal incentive to induce sponsoring is to offer compensation based upon the business volume generated by the sponsored representative and on the business volume of those they sponsor, and so on. A common name given this type of business volume is "group volume." The existence of this type of business volume, or more specifically, the availability of compensation paid on this type of business volume, is what makes a company "multilevel" in the compensation sense, even if it does not use a multilevel form of physical distribution. Thus, we have the first distinction determined with a careful look at business volume.

Whether a company is "single-level" or "multilevel" can be determined by applying the analysis of the above two paragraphs. To further clarify, note that a single-level company pays its representatives for their business volume production, while a multilevel company pays its representatives for their business volume production and optionally pays its representatives for the business volume production of the representatives they sponsor.

The next distinction, to my mind, is a make or break distinction and a legality versus pyramid test. Does the money the company make, and does the money paid to representatives, flow primarily from business volume and NOT from the mere act of sponsoring another representative? Ideally, ALL such money flow is triggered by business volume. If ANY money flows to the representative for recruiting another representative WITHOUT a business volume component, the terms "red flag" or "head-hunting fee" are used. In a legal compensation plan, the act of sponsoring alone can never trigger a commission payment. All compensation must be based on business volume, and no compensation can ever flow from the act of sponsoring alone. Even plans that are technically correct in design, but use inappropriate language to suggest the representative is paid for sponsoring, have significant risks. Such an error in design or implementation is a red flag to regulators investigating pyramids. In a legally designed plan, no one-not the company and not any representative-makes money, unless business volume is generated by products and services being purchased by consumers.

To sum up, a careful look at business volume is what distinguishes a single-level direct selling company from a multilevel direct selling company. And looking carefully at the money flow triggered by business volume, rather than just sponsoring, is a strong indication of a legally designed company.

Companies and their representatives want easy "tests" to determine "legality." Always a hot topic of discussion and attention is the question of "retailing." I suggest you "test" the products/services of the company you are considering, or the company whose program you are working, against the ideas presented here.

Pyramids and endless chains are illegal in the U.S. You cannot "pay to play." That is why no company offering you an income opportunity with multi-level compensation can charge you anything to join, or can require you to purchase products or services to join. The only exception is that a requirement to purchase an at-cost, non-commissionable sales or starter kit is permitted. Another way to say this is that you cannot be charged for the right to recruit others. Such a "charge" is prohibited as an illegal "headhunting fee."

In my view, the only legal basis a regulator can have to challenge commissions on personal consumption is to characterize the money paid for product purchases as money being paid for "headhunting" or "paying to play." Another version of the same problem is the specific requirement in many laws that the company's plan be "primarily" about moving products and services to consumers, rather than about recruiting more "participants." But that issue brings us back to the same place - if the purchases are linked to recruiting, rather than to traditional marketplace supply and demand, then the money paid for the purchases will be deemed disguised "headhunting" fees. Now we are getting to the title: Are they worth it?

Nothing I have written above is new. The traditional methods of dealing with these concerns are the "ten customer rule," "90 percent buy back protection," and the "70 percent rule," derived from the 1979 Amway decision. These protections and techniques all have their good points. Yet some regulators view them as inadequate, or subject to manipulation, going so far as requiring company verification of independent representative submissions. The following is a different (and I believe, complementary) "test," attempting to focus more on substance than form.

Does the purchaser want/need the products or services and is the purchaser willing to buy them without the added incentive of an income opportunity?

The test is this: If the surrounding facts support the position that the goods are being purchased for their value, (Ask yourself - ARE THE WORTH IT?) then the purchases are not being made "to play the game." The facts must counter the regulatory accusation that, but for the income opportunity, no one would buy the products. I also suggest that the status of the purchaser (specifically, a total outside consumer or some form of independent representative) should make no difference.

I believe sales defined in this manner (which is one approach, and not the only approach) directly address conduct that the anti-pyramid and endless chain laws seek to regulate. One way of stating the prohibited conduct is - the sale of products and services that no one will buy for their actual worth, but will only buy to participate in and further an illegal endless chain. When such circumstances surround such sales, the sales become disguised headhunting fees, specifically prohibited by the laws of most states.

Would you buy your company's products, absent the income opportunity? Would anyone? The answer needs to be "yes." If a company's sales are "primarily because the products are worth it" I believe the company can withstand legal scrutiny.

Many direct sales companies or their distributors choose to avoid the MLM (multilevel marketing) label, or deny they are MLM. One reason might be that most companies today no longer have a multi-level form of distribution, the kind where certain ranks of distributors buy direct from the company, and re-sell to lower ranks of distributors and to customers. The more efficient distribution model is for the company to directly fulfill orders to the end user consumer. This method is now the norm, not the exception. So it may be accurate to say that companies structured that way do not have a multilevel form of distribution. But most of these companies still have a multi-level form of compensation. My position has always been that if you have a multi-level form of compensation - the multi-level and anti-pyramid laws apply. Those laws apply even if the company literature never uses MLM language, and even if the company or its independent contractor distributors deny, verbally or in writing, that the company or its distributors engage in multilevel marketing. So where is the line? Here is my position, for what it is worth:

IF the independent contractor income opportunity is limited to the potential to RECEIVE income from the company, ONLY by your purchases (for your personal and family consumption and/or for resale) AND by the purchases of persons you DIRECTLY INTRODUCE to the company (no matter what these purchasers are called) - the company has offered a single-level income opportunity to independent contractors, and is NOT multi-level. The income opportunity offered by the company becomes multi-level when the potential to receive income GOES BEYOND what I have just written above. So, if the compensation plan rewards you when the people that you introduce, introduce more people who buy products - we have a multi-level form of compensation. At this point you are being rewarded for MORE THAN the business volume YOU personally generate - and are additionally being rewarded for business volume being generated by persons a level away from you - thus - multi-level.

The same line of demarcation, using different words, follows: "Income opportunity," of course, means the opportunity to receive income. In the single level model, you (singly) control that flow of income to you. You do so by placing the orders for business volume yourself, and by being the "consumer finder" of consumers placing orders. The flow of money below you in the hierarchy (assuming the company places the consumers in a hierarchy, as some companies do) is only TOWARDS the company in the form of payment for products (or services.) If there is, or can be, a flow of money FROM the company to persons below you in the hierarchy, then those persons are independent contractors, instead of, or in addition to, being consumers. Since you were empowered to recruit, sponsor, or refer those people, and since the compensation plan, in addition to rewarding those people below you for their business volume, most likely also rewards you a percentage - we have a "multilevel" form of compensation.

A third take at it: When the only way you, as an independent contractor, can make money with the company is by generating business volume (yourself) you are participating in a single level income opportunity. If however, you are given two ways to make money - generate business volume - and optionally - find, (sponsor, recruit, refer) other independent contractors who generate business volume - you are participating in a multilevel income opportunity. The key is that the independent contractors are empowered to find, and rewarded for finding, additional independent contractors. That is the very definition (legal definition) of "multilevel." A footnote type comment is necessary here. The "rewarded for" above, can only be an indirect reward based on the business volume of the second independent contractor. It can never be an immediate reward for just finding the person. Such an immediate reward is referred to as a "head hunting fee" and is pyramidal and illegal.

So where in the law is "multilevel" defined? Actually a definition appears in very few places, which will be discussed below. Before doing so, let me state that prohibitions against paying a participant to bring you another participant, and paying a company for the right to bring in more participants, exist in over 40 of the 50 states, without any mention of "multilevel."

I am not aware of "multilevel" being mentioned or defined in any Federal statute. Five states and Puerto Rico do mention and attempt to define "multilevel." Let's take a look: Three situations are identical and easy to deal with. In the laws of Georgia, Massachusetts and Wyoming, the "multilevel" definitions include the operative words "participants may recruit other participants." Clearly the flow of products directly to end users, or through "levels" does not matter. What matters is the right to sponsor. Puerto Rico gets to the same place with different language - "to dealers who serve as intermediaries to enlist other dealers." With four of the six jurisdictions quite clear, we look at Montana. The statute is poorly drafted, but does contain language about both the levels of distribution of products, and about recruiting:

(3) (a) "Multilevel distribution company" means a person that:
(i) sells, distributes, or supplies goods or services through independent agents, contractors, or distributors at different levels of distribution;
(ii) may recruit other participants in the company; and
(iii) is eligible for commissions, cross-commissions, override commissions, bonuses, refunds, dividends, or other consideration that is or may be paid as a result of the sale of goods or services or the recruitment of or the performance or actions of other participants.

You may draw your own conclusion. I conclude that a right to recruit makes you multilevel by this Montana definition. And finally we get to Maryland. The Maryland statute makes no mention of the right to sponsor or recruit more participants. At last, a basis for saying "We are not MLM" even if it is only in one state. The definition is below:

In this subtitle, "multilevel distribution company" means a person who, for consideration, distributes goods or services through independent agents, contractors, or distributors at different levels of distribution with rates of pricing or discounting that differ from 1 level to another.

My conclusion - Most should take "We are not MLM" out of their vocabulary, if the company, or the program they are working - offers two ways to make money - bring in business volume - and find others who will do the same, and receive an additional reward on their efforts. Two exceptions - if you only operate in Maryland and do not distribute through levels - or - if you truly are "single-level," meaning NO compensation based on the business volume of independent contractors you introduce.

The first version of this article was written over ten years ago, as I was starting my private practice devoted to direct selling issues. That version has been posted on many websites, including my own, and cited and referred to often. It is time for an update and to be more specific about the roles of the persons involved with a network marketing company. For the purposes of this “TEST,” the only two words I will use to describe persons associated with a network marketing company are “participant” and “customer,” with strict definitions.

A “customer” is an end user consumer of the products or services of the company, and in this strict definition, DOES NOT have any opportunity to MAKE MONEY with the company through any later action or conduct.

A “participant” has the opportunity to MAKE MONEY by generating business volume and has the right to introduce other “participants.” Giving the participant the right to introduce other participants distinguishes a single-level income opportunity from a multi-level income opportunity.

“Sponsoring” is the act of introducing another “participant,” and the word is not used to mean finding a customer.

Is there a simple, easy to apply test one can give to an income opportunity that addresses the pyramid law risk without all the pyramid law legal terminology? There is. What follows addresses that need. It is the single-level test for the multi-level income opportunity. It goes like this: Can a participant make some money SINGLE-LEVEL, that is, without introducing or sponsoring another participant? Note the specific use of the word "can," not the word "would." It is usually a given that the participant is urged to sponsor and that the income opportunity presenter will say or imply that the "real money" is in building a group. But that is usually O.K., SO LONG AS participants who choose not to sponsor at all CAN STILL MAKE MONEY.

Note also the use of the word "MAKE." It's "MAKE MONEY," not "SPEND MONEY," meaning paying income taxes if the gross income exceeds expenses associated with producing the income. Buying for personal use at distributor prices, rather than customer prices, while a savings, does not generate INCOME upon which one is required to pay taxes. Buying for personal use by itself is not an income opportunity. If the proposed income opportunity consists ONLY of buying for personal use and sponsoring more participants, with no provision for sales to customers, the design is flawed.

This simple test needs to be applied to two aspects of an income opportunity. The first aspect is the design. What do the company documents say about how one makes money? How does the compensation plan work? Not all of the fine details of every commission, bonus, or reward need to be understood; but simply, can the participant make SOME money without sponsoring? Remember, one does not MAKE money when one just buys products or services for personal use. The application of this test should in no way imply that there is anything wrong or illegal about the personal consumption of the products and services by the participant. It is just that that activity alone cannot be the sole basis for an income opportunity.

The second aspect of the application of the test is the plan implementation. Some plans are designed correctly, but are flawed in the implementation. Can a participant make money—even without sponsoring—as the plan is being taught and implemented by the prospective sponsor and others closely associated with him or her? If there is no acknowledgment or support for the non-sponsoring participant in the income opportunity, something is wrong—maybe not in the design, but surely in the implementation. Reputable and legally designed and implemented multi-level income opportunities provide a money making opportunity SINGLE LEVEL to participants who choose not to sponsor. Of course, if one sponsors others, then ADDITIONAL money making opportunities exist when those sponsored participants generate business volume.

Apply this test to multi-level income opportunities. Look at the plan design, and look at the way the plan is being implemented by the prospective sponsor and associates. If the ONLY WAY to make money is by sponsoring, STAY AWAY—the plan is fatally flawed.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

What follows is from the legal perspective of an attorney who has had to defend MLM companies from regulatory scrutiny and attack. The creative genius of entrepreneurs is not discussed or highlighted in the following analysis. The marketing view is missing. The hype and the fluff and the attention-grabbing bells and whistles are left to be discussed by authors writing from a marketing perspective. When all extraneous twists and turns are scraped away, what is legally left needs to look something like this, or the MLM operation will not be allowed to continue long-term in the United States or Canada.

A.The company brings a product or service to the marketplace that:
 1.is retailable
 2.is being retailed, and
 3.does not include a right to bring more participants to the company. A service that contains the right to bring customers to the company, like a shopping mall, can qualify, but not if it also contains the right to bring more income opportunity seekers (legally, “participants”) to the company. Multilevel income opportunities CANNOT be sold in the United States or Canada.

B.The product or service reaches the end user through efforts of direct sales representatives (independent contractors), rather than through traditional retail establishments or other channel of distribution choices like mail order or telemarketing. This channel definition is driven, not by any e-commerce techniques, but rather by the payment of money to an independent contractor for producing a result. Another characteristic of this channel is a lack of employees (involved in selling) to whom W-2s are issued and the presence of independent contractors to whom 1099s are issued.

C.The company’s compensation plan
 1.is designed to reward representatives for the sales of the product or service they are involved in, and
 2.includes an incentive and reward for the representative to be the “new representative finder” (legally, another “participant”) in the form of payment to a representative who introduces an additionalrepresentative to the company, BASED ON the sales volume of the second representative.

It is the presence of the design plan feature described in C2 above that subjects a single-level direct selling company to multilevel laws and regulations, whether or not the company chooses to use the term “multilevel” in its literature. Not all companies or distributors agree with this definition. I respect differing views. At the time of this writing, I am unaware of any regulatory agency in the United States or Canada who defines an MLM company substantially differently fromwhat I have just stated. It is the compensation feature described in C2 above that brings the company under the microscope of regulatory scrutiny. A “participant” in the legal sense has the right to introduce another “participant.” If your rights stop at finding, introducing, locating, or selling to “customers,” you are not a “participant” in the legal sense, rather you are operating in the C1 portion of this analysis. Whether or not there are “participants” is very critical. The fact that you may receive a 1099 on the rewards of your efforts does not make you a “participant,” unless you also have the right to introduce others who also have the same 1099 potential. No amount of e-commerce manipulation or affiliate program wording can change this. Only legislatures can change laws, and they are notoriously slow to act.

Personal consumption by representatives is much discussed. A lot of it is good for the company’s bottom line, but too much of it is bad. How much is too much? One hundred percent personal consumption creates a presumption in the law and in the analysis of the business by regulators (in my view) that the only persons willing to buy the product/service are income opportunity seekers, and the amounts being paid are no more than disguised headhunting fees. Such payments are pyramidal and illegal.

“What percentage of sales to non-representatives do I need to be legal?” You do not want to ask the question, and you do not want it answered for you by government agencies. There are companies with very high percentages of “personal consumption” by their representatives that pose no risk of abuses, such as deceptive recruiting, inventory loading, or the “running out of people” pyramid risk. Also, an argument can be made that people who become representatives solely to buy products or services at wholesale, rather than retail, and who do not also buy for resale and do not sponsor, are customers, rather than income opportunity seekers. For the purpose of defending high amounts of personal consumption, an argument can be made that one does not become a “participant” in the legal sense until one introduces another participant, since only then can rewards flow based on the second participant’s sales volume. If all of the elements of the analysis above are present, the percentage of personal consumption by representatives should not matter. If the question is even raised, it usually means A1, A2, or C1 is missing or flawed. But I will not duck the question. My answer is this: Twenty percent of total sales to non-representatives should be sufficient to rebut any presumption. Of course, other pyramid tests would still apply. One reason I say this is because companies with very high personal consumption percentages have been going strong for ten years or more and pose no pyramid risk.

A1, A2, or C1 in the above analysis cannot be missing or flawed. C2 alone, without A1, A2, and C1, is deemed an endless chain and an illegal pyramid. If in the design or in the implementation of an MLM program all that is visible—all that the regulators see, all that is really happening—is income opportunity seekers who find more income opportunity seekers who find more income opportunity seekers, etc. (legally, “participants”), the regulatory end is near, sooner or later. The regulators, with or without specifically drafted laws, state their position simply—you run out of people.

So, since retailing is so essential, let’s examine it in more detail. What does “retailable” mean? It simply means “Will people buy my product or service?” The question appears almost too simple, so we need to be more specific about “people.” The “people” need to be people in a “customer” sense, rather than in an “income opportunity seeker” sense. There are hundreds of reasons why people will not buy products or services: They already have one; the cost is too high; they have no need or desire to own one; what is being sold is of poor quality; etc. The test here does not need to find a specific reason. If no one but income opportunity seekers buys the product or service, the presumption is raised that the product or service is not retailable, and A1 in the analysis is flawed. Look at traditional companies by comparison. If no one buys what they offer for sale, they are out of business. If the MLM company continues in business anyway, regulators presume the company is selling the right to sponsor yet more people. Federal and state laws prohibit selling the right to sponsor.

Once the retailability of the product or service is questioned, the risk of the MLM element of the compensation plan (C2 above) being attacked as illegal greatly increases. An argument can be made that people who become representatives solely to buy products or services at wholesale, rather than retail, and who do not also buy for resale and do not sponsor or refer, are customers, rather than income opportunity seekers.

Examining A2 in more detail, it differs from A1 primarily in the focus placed on retailing by both the company and its distributors. If the product or service is not retailable, we do not even get this far. If the product or service is retailable, but little corporate or field focus is placed on retailing, A2 is flawed, possibly not in the design, but surely in the implementation. Some things to look for: Does information exist in paper or electronic form specifically designed to assist the retailing effort? Does training exist to assist the field in its retailing efforts? Is retailing discussed in opportunity meetings or on web pages if the company is primarily e-commerce driven? Once the lack of actual retailing activity is identified, the risk of C2 being deemed illegal greatly increases.

C1 and C2 are separated on purpose. It is a critical separation for legal positioning. The existence of a viable income opportunity, without the necessity of recruiting more income opportunity seekers, is absolutely essential. Simply stated, one test for the legality of a multilevel income opportunity is a single-level analysis. Can money be made by the income opportunity seeker without sponsoring? The form of the single-level income opportunity is not as important as the substance. Traditionally, the representative’s first way to make money is to keep the difference between what he/she pays for the product and what is received for the product when he/she resells it. This “two passages of title” method of distribution has been replaced to a great extent by the representative being a “customer finder” and the company performing direct fulfillment. The e-commerce revolution may totally obsolete the “two passages of title” method of distribution. Some companies add to the first profit opportunity an additional profit opportunity in the form of bonuses, rebates, or commissions. The key to the C1 analysis is that sponsoring of another “participant” must be optional. There must be a place in the compensation plan for the non-sponsoring income opportunity seeker. If the ONLY way an income opportunity seeker can make money is to bring to the company more income opportunity seekers, the plan is fatally flawed. It is an endless chain. The argument that it “really is not” an endless chain, when you carefully examine the design and read all the fine print, will not hold up if the field force presents it only as a sponsoring opportunity. The fine print does not save the day. How a plan is implemented carries much more weight than how a plan is designed.

Some specific points need to be made about C2. No reward can be paid to the first representative for the act of introducing the second representative to the company. Such payments or rewards are called “headhunting fees” and are barred by law. No charge or required product purchase can be imposed on the second representative by the company or the sponsor as an entry fee. (A required purchase of an at-cost, non-commissionable sales or starter kit is permitted.) Simply put, neither the company nor the sponsor can profit from the sole act of recruiting. Profit to the company and profit to the representatives must come from the sale of products and services to customers, and only from the sale of products and services to customers.

If, from the start, all of the points made above are addressed in the initial design and are monitored in the implementation, regulatory scrutiny is unlikely. When inadequate or no attention has been paid to A1, A2, and C1, the states with proactive consumer protection agencies are likely to start an investigation rather quickly. I advocate correct initial design and company-monitored, correct implementation. However, some companies getting off on the wrong foot can recover.

Fixing a flawed plan can be as easy as changing language in corporate literature, or as difficult as rolling out totally new and substantially restructured products, services, and methods of compensation, accompanied by massive nationwide retraining. Some companies have made these transitions, and others have died in the process. When the alternative is a cease and desist order in a key state, with more states to follow, hard choices must be made. The bottom line will be affected. Fickle representatives will jump ship. Some representatives seek out and work flawed plans for the quick monetary gain and are prepared to move on to the next one at a moment’s notice.

Patching up C1 and C2 is inadequate, without a corporate resolve to address A1 and A2. It starts with the company’s product or service. Long before MLM, around the turn of the century, someone said, “Build a better mousetrap, and the world will beat a path to your door.” The “making legitimate,” or “legalizing,” of an MLM plan under regulatory scrutiny can only be accomplished by going to the core. The core is the product or service being brought to the general public marketplace by the company, and, of course, how it is brought to the marketplace. The core is not the bells and whistles of the compensation plan.

If a flawed MLM plan is under attack, it must be taken most seriously. State and federal regulators are too savvy to accept wordsmithing patches without substantive changes to the way business is done. Often, distributor “leaders” want the simple formula of “get two who get two, et cetera, and cash those commission checks.” If, in the analysis above, A1, A2, and C1 are flawed, either in the design or the implementation, significant changes to the way business is done must be made. If few or no one will buy the company’s products or services, except to play the game, then the MLM plan will be attacked as an endless chain money game. The state or federal agencies will eventually hound the company out of business. What is often required to close or settle an investigation is a corporate marketing shift to a retailing focus, followed by field retraining. Corporate monitoring and verification that the changes are being implemented in the field are often required.

Since retailing is the legal answer to MLM longevity, finding the right products or services is critically important. But I am digressing from the legal perspective. To wrap up, I have looked for other paths through the jungle of laws and regulations regarding MLM. E-commerce increases the many variations of selling, but does not bring with it exemptions from anti-pyramid statutes. If another path exists that does not include or require these legal ABCs, I have not found it.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

The words sound exciting. The generally accepted meanings imply commerce and "making money", or as least having the realistic hope of making money. I purposely did not use the word "chance" in the last sentence, because "chance" implies luck, like buying a lottery ticket. Also, the two words, "business" and "opportunity," when used together, have a generally accepted meaning of the opposite of a JOB. Jobs have places to report to, set hours, a regular pay check, sick days, (sometimes) and other benefits (sometimes.) Business opportunities usually have none of these things.

People with jobs receive wages or salaries, with the employer withholding taxes as required by law. At the end of the year, what was paid to you and what was sent to taxing authorities on your behalf is reported on a W-2 Form. Business Opportunities are most often structured as independent contractor relationships. Payments to you, without taxes withheld, and sometimes sales to you (over certain amounts) are reported to you and to taxing authorities at the end of the year on Form 1099.

What is written above is generally true, whether the business opportunity does or does not have a multi-level element in the way compensation is paid. A critical factor, and the point of this article, is that Business Opportunities (Capital B, Capital O, on purpose) are strictly regulated in 22 states. But at the same time, virtually all of the traditional MLM income opportunities currently available, are NOT Business Opportunities in this sense.

WHY NOT? All 22 states have a threshold dollar amount, BELOW WHICH their laws are not applicable. The threshold dollar amount varies between $200 and $500 and in its most common application, applies to the required purchases to participate in the opportunity. Now you know one of the reasons why the cost to get into an income opportunity is often zero, or a modest amount. The Direct Selling Association, through its own staff, and through the efforts of the Government Affairs staff of its member companies, monitors pending legislation in this and other areas affecting the industry. The "threshold exemption" in any proposed legislation is lobbied for, and the results benefit the entire industry. Direct selling companies at least one year old are urged to consider joining the DSA to support this and other worthy efforts benefiting the entire direct selling industry.

It has been my experience that 99% of the multi-level, direct selling industry positions their "income opportunity" offer to prospects below the thresholds of the "Business Opportunity" Statutes. If you are required to pay more than $200 to participate in the income opportunity, the Business Opportunity threshold has been exceeded in some states.

I have begun using the words "income opportunity" rather than "business opportunity" when describing a way to make money offered at a cost below the thresholds of the 22 states that have Business Opportunity Statutes. It is a small thing perhaps, but since so many states have defined what a Business Opportunity is to them, and I do not want to be caught by their definition, I will also avoid using their operative words where possible.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

Ponzi schemes are pyramidal in nature, but are they the same thing as a pyramid scheme? No, they are not, and here is why.

Ponzi schemes are investment frauds that share some characteristics of pyramid schemes but also have some different dynamics. A requirement of a Ponzi scheme is the promotion of what starts out to be, or appears to be, a real investment opportunity. It often involves the development of a valuable resource such as oil, gas, minerals or real estate. And what is being promoted often actually exists. The promoter does own a mine, or does own investment property. Where the resource actually exists, the promoter has grossly overvalued its worth. Other times, the asset or resource which is the basis for the investment opportunity is totally a figment of the promoter's imagination. In either scenario, the promoter convinces investors that the asset can be further developed with more capital, and the promoter will share the profits with the investors.

Early on, substantial dividends are paid out to the investors. The representation is that these dividends are "profits" coming from the successful development of the investment assets. What is actually happening is that the promoter is merely returning a portion of the investors money to them. These early and substantial dividends produce two results. The early investors increase their share of the operation, and additional investors are attracted to the scheme. The process of paying dividends continues and more investors come forward until the fraud is uncovered or the promoter absconds with the investment proceeds.

Not all Ponzi schemes start out as frauds. Sometimes a promoter in good faith really believes the asset will prove profitable. Investment money comes in, but the returns are disappointing. To avoid loss of investor confidence lies are circulated and dividends paid. More money comes in and the possibility of millions of dollars of losses occurs but for the truth being told early.

The traditional method of dealing with Ponzi schemes in the U.S. is under the Securities Laws, including the Securities Acts of 1933, the Federal Securities Exchange Act of 1934, and state securities laws, (sometimes referred to as Blue Sky Laws). They are not pyramids however, and the pyramid laws we routinely associate with the regulation of multi-level marketing companies do not apply. There are several distinctions between Ponzi schemes and pyramid selling schemes.

The pyramid scheme involves a person making an investment for the right to receive compensation for finding and introducing other participants into the scheme. There is a clear understanding among the participants that the success of the opportunity is dependent upon attracting additional participants.. This is different from the expectations of the Ponzi scheme participant who believes the investment is dependent upon the successful development of a productive asset such as a mine or real estate complex. Pyramids must fail because, by their nature, they depend upon endless exponential growth to succeed. Ponzi schemes must fail because the underlying asset upon which the investment was based either never existed, or was grossly overvalued. Pyramid schemes require active participants who bring in more participants. Ponzi schemes can flourish even with passive investors without any responsibility to promote the opportunity. Pyramid scheme participants "go for the gold" by attracting others to the scheme. Ponzi scheme participants "go for the gold" by increasing their investment and hopefully their share of the profits from the successful development of the productive asset.

The author is indebted to John Brown, Senior Manager of Government Affairs at Amway, for developing these distinctions and articulating them clearly and often.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

In a recent article, I wrote, "I have had regulators from seven key states say to me personally or to an audience I was in, the equivalent of, "We look past the paper to what is really going on in our state."" I have also said on more than one occasion that the single most regulated act in MLM is the offer of the income opportunity to a prospect. Well, the Federal Trade Commission made both of those points for me recently in the Jewelway case. A legally designed program (the paper) only gets you half way home, if that far, as bad sponsoring conduct is not saved by the paper.

Federal investigators went to Jewelway opportunity meetings and did not like what they saw and heard. Note that I did not say that they did not like what was written in the Jewelway literature. They clearly were "looking past the paper." I will leave for another article an analysis of whether the Government response was appropriate for the circumstances. (It wasn't.) My purpose here is to make the point again that companies and distributors must PROPERLY IMPLEMENT a legally designed program.

There can be no required product purchase to become a representative of a company with an MLM compensation plan. The cost to get in must be "zero" or at most an at-cost, non-commissionable charge for a starter kit. The paper was O.K. The Jewelway representative had people believing they had to buy product to get in.

There must be retail sales to make money as a representative of a company with an MLM compensation plan. The paper was O.K. The Jewelway representative had people believing they could make money just through personal consumption.

There can be no earnings representations made to prospects by representatives of a company with an MLM compensation plan. The paper was O.K. The Jewelway representative made specific income representations.

What can companies and representatives do? The companies must monitor sponsoring conduct to ensure it is "by the book." Personal visits, required tapings, certification, refreshers and the are all possible ways to keep their finger on the pulse of what is happening in the field. Representatives must first and foremost realize the importance of studying the corporate literature and avail themselves to corporate training on how to sponsor. Entrepreneurs are by nature creative, but during an opportunity meeting is not the time. Presenting an income opportunity is high risk. The company must design the technique properly and the representative must implement the technique properly.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

With so much business being done with faxes and electronic mail, the signed contract seems to be going the way of the 8 track player. What about the law that you need my signature to hold me liable? Well, not always.

First, let’s get the c.y.a. out of the way. I recommend that ALL contracts be dated, witnessed and signed by both (all) parties, preferably in blue ink so it is more obviously an original signature and not a copy.

Now we talk practicalities. Oral contracts are legal. The issue is not usually legality, but enforceability. Let’s examine the lack of a signed contract from two perspectives, that of the company and that of the distributor.

The company wants distributors who order their products and services and bring them more distributors. Nothing in the signed or unsigned distributor contract makes the distributor do those things. They are a volunteer army, who can do nothing if they choose (and often do.) The significant document is the product or service ORDER. Numerous orders create a course of dealings of the parties bringing payments or obligations to pay to the company. These documents, much more than the distributor contract, are important in the sense that they are convertible to cash that goes to the bottom line.

The distributor contract often even contains a clause making it cancelable at any time by the distributor by giving written notice to the company. If you were a bank lending officer, which would be more impressive, lots of orders, or lots of cancelable at any time distributor contracts?

When everything is fine, the lack of a signature means little. It’s when discipline up to and possibly including termination is needed that companies check the files to find the signed distributor application. It is evidence that these rules were in effect (right here on the document you signed) and you broke that one. Companies who do paper-less sign up have many choices after the fact (and before any trouble arises) to obtain a signed document for the files. They should check with their marketing and/or legal consultants to see what works best in their system.

The distributor has different issues that may be tied to signatures. Most distributor applications have a place for the distributor to sign, but not a place for the company to sign. If the distributor contract is viewed as an offer it needs to be accepted. Most often, something other than the return of a signed contract is the acceptance. Sending a welcoming letter or package, issuing an identification card, or merely starting to accept orders closes the loop. Again, when all is going well, flaws in the formal process mean little. It’s when an expected bonus check does not arrive, or a disciplinary action is taken by the company, that the distributor starts reading the fine print, (or tries to find the fine print.) If a distributor seeks to hold the company to a particular clause (such as arbitration, or written notice of changes in the compensation plan) it is always better if completed paperwork is available. Keeping in a file all correspondence and documents from the company is a very good idea. Of particular importance is paperwork used in the annual renewal of the distributorship. Distributors are urged to save their canceled checks used to pay the renewal fee. Also, if the company communicates with the distributor by e-mail, send it to the printer before deleting it and save it in your paper file for a rainy day.

Bottom-line, paper-less sign ups work. Getting signed copies into the files latter is recommended for the protection of all parties.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

The title begs two questions we must address first. What is a two-tier affiliate program? And - How does it differ from a one-tier program? And, of course, what is MLM? Let us start the definition process.

Affiliate programs are a product of e-commerce. An on-line seller offers a commission to another for referring a customer to an on-line site. An offer to a person to compensate them in some fashion for bringing in business, WITHOUT any additional incentive to locate (find, recommend, recruit, sponsor) more business finders, is a one-tier program, (at least for the purposes of this article.) I have personally had two, two-tier programs explained to me in excruciating detail. What I write next is based on that experience, and not on any universal examination of all the programs that are titled "two-tier." When a program contains TWO sources of income, namely compensation for bringing in business, AND compensation when you locate (find, recommend, recruit, sponsor) more business finders, WHO THEN BRING IN BUSINESS, it is a "two-tier" program.

The "program" involves selling something, and paying commissions for sales. Look at the money flow, and the REASON for the money flow:

Someone buys something. Money flows from the buyer TO the program. This is a customer sale.

The program pays a commission to the "customer finder." Money flows AWAY from the program TO an income opportunity seeker, to reward the person for bringing business volume to the program. This money flow evidences the existence of a single-level income opportunity. (To use affiliate program words, "one-tier") Note that there exists NO incentive for the income opportunity seeker to find more "income opportunity seekers," only to find customers.

If, in addition to the above, the program pays a commission to an income opportunity seeker, BASED UPON the business volume of another income opportunity seeker introduced by the first income opportunity seeker, a two fold incentive exists. The income opportunity seeker has a financial incentive to get customers for the program, AND a financial incentive to find more income opportunity seekers. In this second case, the second type of money flows AWAY from the program TO an income opportunity seeker, BUT to reward the person for business volume not directly generated, but generated by the income opportunity seeker "found" by the first one. This second type of money flow evidences the existence of a "two-tier" program.

There are two other characteristics to the money flow away from the program (both one-tier and two-tier) that should be noted. It is gross income, taxable to the recipient, to the extent income exceeds allowable business deductions, and it is reportable by the payer under the 1099 rules to the extent it exceeds $600 in a year to an individual recipient.

"Is a two-tier affiliate program MLM?" - takes us to an attempt to define MLM. The Direct Selling Association defines MLM (my paraphrasing) as a form of compensation that creates the incentive and reward for income opportunity seekers to "sell" to consumers, AND find more "sellers." Clearly two-tier programs fit the definition. This is not LAW, and not even all DSA member companies accept this definition. There is MUCH law affecting direct sellers, but LITTLE law specifically defining MLM. Only five states and Puerto Rico attempt a definition. It follows:

"Any person, firm, corporation, or other business entity which sells, distributes, or supplies for valuable consideration, goods, or services through independent agents, contractors, or distributors, at different levels wherein participants in the marketing program may recruit other participants, and wherein commissions, cross-commissions, bonuses, refunds, discounts, dividends, or other considerations in the program are or may be paid as a result of the sale of such goods and services or the recruitment, actions, or performances of additional participants."

Although there is an argument that the first part of the definition excludes from MLM direct fulfillment (not different level) distribution systems, the rest of the definition talks to recruiting and compensation that would include two-tier affiliate programs. The way out of the dilemma is judicial interpretation. Unfortunately there is none. The real practical answer is - it does not matter. All the laws affecting direct sellers apply to everyone, whether or not this or any definition is met. The summarized laws of Prohibited Activity in the first four states in an alphabetical list will show what we are up against:

ALABAMA - Prohibited Activity
… any plan … wherein a person for consideration … acquires the opportunity to receive a pecuniary benefit, which is based primarily upon the inducement of additional persons … to participate in the same plan … and is not primarily contingent on the volume … of goods, services or other property sold or distributed. "Consideration" Exclusion …sales demonstration equipment and materials furnished on a nonprofit basis … less than $100

ALASKA - Prohibited Activity
… a sales devise whereby a person, upon condition that he make an investment, is granted a … right to … recruit … additional persons "Investment" Exclusion … sales demonstration equipment and materials furnished at cost

ARIZONA - Prohibited Activity
… any plan … by which a participant gives consideration for the opportunity to receive compensation … derived primarily from any person's introduction of other persons into participation in the plan … rather than from the sales of goods … by the participant … introduced into the plan …
"Consideration" Exclusion … goods or services furnished at cost …

ARKANSAS - Prohibited Activity
… any scheme whereby a participant pays valuable consideration for the chance to receive compensation primarily from introducing one or more additional persons into participation in the scheme …
"Consideration" Exclusion … payments based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.

No one can charge for, or require a product purchase for, entry into an income opportunity that includes the right to recruit other income opportunity seekers. This statement is based on LAWS of a vast majority of states (samples above) and is NOT dependent on any MLM definition. What does it all mean? Well, if you offer, or participate in, a one-tier affiliate program, think vacuum cleaner or encyclopedia company representatives of years ago. The laws applying to those types of arrangements will apply to your arrangement. Pyramiding and endless chain concerns are generally not present. A quality general practice law firm should have the answers to virtually all questions that may come up. But if you offer, or participate in a two-tier affiliate program, a line has been crossed. The unique skills of an MLM Legal Specialist, either in-house, or from one of the approximately ten such specialty firms in the United States, are highly recommended. Two-tier affiliate programs, while not structured in a traditional MLM way, must be as carefully structured as a full featured stair-step breakaway or uni-level to which they are closely related (in a legal sense.)

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

Have you ever spoken words to the effect (or heard others say) that direct selling (in many instances called network marketing or multi-level marketing) is primarily about recruiting? Speaking or even thinking that way sends shudders through the very being of lawyers who provide legal services to direct selling companies. Let me explain why. The word "primarily" is not very precise. My definition, for the purposes of this article, is "more than half."

"Primarily" is not a word one would expect to find in legislation, for the very reason that it lacks precision. Laws in this country are, for the most part, very precise, for the benefit of the persons and corporations affected by them, and for the benefit of judges who enforce the laws. This is not the case with a group of laws affecting direct sellers. Sixteen states use the word "primarily" in laws prohibiting certain conduct of direct sellers who have a multi-level form of compensation. Here is the (abstracted) language from those statutes:

Alabama
Prohibited Activity: …any plan…wherein a person for consideration…acquires the opportunity to receive a pecuniary benefit, which is based primarily upon the inducement of additional persons…to participate in the same plan…and is not primarily contingent on the volume … of goods, services or other property sold or distributed. "Consideration" Exclusion: …sales demonstration equipment and materials furnished on a nonprofit basis…less than $100

Arkansas
Prohibited Activity: …any scheme whereby a participant pays valuable consideration for the chance to receive compensation primarily from introducing one or more additional persons into participation in the scheme… "Compensation,"…does not mean or include payments based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.
"Consideration" Exclusion: …payments based upon sales made to persons who are not participants in the scheme and who are not purchasing in order to participate in the scheme.

Florida
Prohibited Activity: …any sales or marketing plan…whereby a person pays…in excess of $100 and acquires the opportunity to receive a benefit…not primarily contingent on…goods (or) services sold in bona fide sales to consumers, and which is related to the inducement of additional persons…to participate in the same sales or marketing plan…
"Consideration" Exclusion: …goods or services furnished at cost for use in making sales…

Idaho
Prohibited Activity: …any plan…whereby a person gives consideration for the opportunity to receive consideration to be derived primarily from any person's introduction of other persons into…the plan…rather than from the sale of goods, services, or other intangible property by the person or other ersons introduced into the plan…
"Consideration" Exclusion: …not for profit sale of sales demonstration equipment and materials

Illinois
Prohibited Activity: …any plan…whereby a person, in exchange for money…acquires the opportunity to receive a benefit…which is primarily based upon the inducement of additional persons…to participate in the same plan…and is not primarily contingent on the volume or quantity of goods, services or other property sold or distributed.
"Consideration" Exclusion: …sales demonstration equipment and materials furnished on a nonprofit basis…

Louisiana
Prohibited Activity: …any plan…by which a participant gives consideration for the opportunity to receive compensation which is derived primarily from the person's introduction of other persons into a plan…rather than from the sale of goods, services, or intangible property by the participant or other persons introduced into the plan…
"Compensation" Exclusion: Payment to participants based upon sales of products purchased for actual use or consumption, including products used or consumed by participants in the plan.
"Consideration" Exclusions: …products furnished at cost to be used in making sales…Purchase of products where the seller offers to repurchase the participant's products under reasonable commercial terms.

Maryland

Prohibited Activity: …any plan…by which a participant gives consideration for the opportunity to receive compensation to be derived primarily from any person's introduction of other persons into participation in the plan or operation rather than from the sale of goods, services, or other intangible property by the participant or other persons introduced into the plan or operation.
"Consideration" Exclusion: …goods or services furnished at cost for use in making sales to persons who are not participants in the scheme…

Massachusetts
Prohibited Activity: …any multi-level marketing program wherein the financial gains to the participants are primarily dependent upon continued, successive recruitment of other participants and where retail sales are not required as a condition precedent to realization of such gains…

Missouri
Prohibited Activity: …any plan…whereby a person for a consideration acquires the opportunity to receive a pecuniary benefit, which is not primarily contingent on the volume or quantity of goods, services or other property sold…for purposes of resale to consumers, and is based upon the inducement of additional persons…to participate in the same plan…

New Mexico
Prohibited Activity: …any…plan…by which a participant gives consideration for the opportunity to receive compensation which is derived primarily from any person's introduction of other persons into participation in the plan or operation rather than from the sale of goods, services or intangible property by the participant or other persons introduced into the plan or operation.
"Consideration" Exclusion: …goods or services furnished at cost to be used in making sales…

North Dakota
Prohibited Activity: …any plan…by which a participant gives consideration for the opportunity to receive compensation which is derived primarily from any person's introduction of other persons into participation in the plan …rather than from the sale of goods, services or intangible property by the participant introduced into the plan…
"Consideration" Exclusion: …goods or services furnished at cost for use in making sales…

Oklahoma
Prohibited Activity: …any plan…by which a participant gives consideration for the opportunity to receive compensation which is derived primarily from the person's introduction of other persons into the plan…rather than from the sale of goods, services or intangible property by the participant…introduced into the plan…
"Consideration" Exclusion: …products furnished at cost to be used in making sales…

Puerto Rico
Prohibited Activity: …any marketing program in which the benefits of the participants depend primarily on the continuous and successive enlistment of other participants and where the distribution and/or sale of properties or services is not required as a prerequisite to obtain said services.

Tennessee
Prohibited Activity: …any…plan…wherein a person for a consideration acquires the opportunity to receive a pecuniary benefit, which is not primarily contingent on…goods, services or other property sold…to consumers, and is based on the inducement of additional persons…to participate in the same plan…

Texas
Prohibited Activity: …a plan…by which a person gives consideration for the opportunity to receive compensation that is derived primarily from a person's introduction of other persons to participate in the plan…rather than from the sale of a product by a person introduced into the plan…
"Compensation" Exclusion: …sale of a product to a person…for actual use…
"Consideration" Exclusion: …product furnished at cost to be used in making a sale…

Utah
Prohibited Activity: … any … plan … under which a person gives consideration in exchange for compensation … which is derived primarily from the introduction of other persons into … the plan rather than from the sale of goods, services or other property
"Consideration" Exclusion: …sales demonstration equipment and materials furnished at cost…

I ask the question again, "What is Direct Selling PRIMARILY about?" It must be PRIMARILY about products and services moving to consumers. The starting point, or root cause, of the majority of Attorney General actions with which I have been involved has been a thought process put into action in some form by the company or by distributors that the venture is about recruiting. Bottom line - change the thinking, change the actions, be about getting products/services to consumers, and significantly reduce legal risk.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

Direct selling companies and their independent (non-employee) sales representatives operate in a minefield of laws, codes, and regulations, and interpretations of those laws, codes, and regulations. Companies whose products (unless clearly indicated otherwise, "products" includes services) are sold to its representatives exclusively, with no true customers, pose a pyramid law challenge most everywhere. For the purposes of this analysis, assume some sales are being made to customers who are not also sales representatives. I suggest you can test any company against the ideas presented here. Some ideas are brand new and untested in the legal arena.

Regulatory agencies in the United States and in other countries have interpreted laws and regulations to mean that some percentage of sales of a direct selling company (that also has a multilevel form of compensation) must be to persons outside of the program. The two most common actual numbers are "more than 50 percent" or "70 percent." The 70 percent number coincides with the 70 percent rule from the Federal Trade Commission versus Amway case decided in 1979 in the United States, although the linkage and reference is incorrect. A careful reading of the Amway case will reveal that "70 percent," wherever it appeared, appeared in the context of a prohibition against inventory loading, rather than as a retail sales requirement "outside the program."

Why is this issue so important? Well, pyramids and endless chains are illegal in the United States and in most of the rest of the world. You cannot "pay to play." Very simply, that is why no company (following the United States model) which offers an income opportunity with multilevel compensation can charge anything to join, or can require a product purchase to join. The only exception carved out of this very clear prohibition is that a requirement to purchase an at-cost, non-commissionable sales or starter kit is permitted. Some statutes contain a specific exclusion for sales kits. Where there is no specific exclusion, the same conclusion is reached by interpretation. Another way to say this is that one cannot be charged for the right to recruit others. Such a "charge" is prohibited as an illegal "headhunting fee."

In my view, the only legal basis a legislator or regulator can have to prohibit or challenge commissions on independent representative consumption is to characterize product purchases as "headhunting" or "paying to play." Another version of the same problem is the specific requirement in many laws that the company's plan be "primarily" about moving products to consumers, rather than about recruiting more "participants." But that issue brings us back to the same place - if the product purchases are linked to recruiting, rather than to traditional marketplace supply and demand, then the product purchases will be deemed disguised "headhunting" fees.

Nothing I have written above is new. The traditional methods of dealing with these concerns are various forms of company-imposed requirements for sales to consumers, and differing levels of record keeping and retention or submission of those records to the company. These protections and techniques all have their good points, yet some regulators view them as inadequate or subject to manipulation, going so far as requiring company verification of independent representative submissions. The following is a new (and, I believe, complementary) idea, and applicable to companies whose structures allow them to identify what product purchases are for "intrinsic value," which means the purchaser wants the item and is willing to buy the item without the added incentive of an income opportunity. The idea is this: If the surrounding facts support the position that the product is being purchased for its intrinsic value, then the purchase is not being made "to play the game." The facts must counter the regulatory accusation or the statutory prohibition that but for the income opportunity no one would buy the products. I also propose (remember, I said these are new ideas) that the status of the purchaser (specifically, an outside, non-participant consumer, rather than some form of independent representative) should make no difference. I will expand on this by looking at various types of purchasers:

1 . The traditional retail customer.
A person totally unconnected to the direct selling company and usually unknown to the company, because the purchase was from the independent representative. There should be no question that sales to such persons are for intrinsic value.

2. The customer "direct fulfilled" by the company.
The company knows this person because the company has a distribution system that provides direct shipping to end-users. The independent representative tells the company to ship, or the customer calls the company, identifies the independent representative who told them about the company for sales credit purposes, and places an order. The company deals with each order as it occurs and maintains no separate file of customers. It treats the order as if placed directly by the independent representative, but with a different "ship to" address. There should be no question that sales to such persons are for intrinsic value.

3. The preferred customer.
Many companies encourage their independent representatives to connect preferred customers directly to the company. Sometimes application forms are used and identification numbers are issued. Customers order directly. These persons, however, do not sign an independent representative application and do not have an income opportunity. There should be no question that sales to such persons are for intrinsic value.

4. The independent representative without a right to sponsor.
Some companies offer a separately delineated, single-level income opportunity. None of the purchases of these people can possibly be deemed "to play the game of an endless recruiting chain," because these persons do not have the right to recruit other independent representatives. These sales are for their intrinsic value or for resale to customers, and no argument can be made that the sales are a disguised headhunting fee, since the person cannot recruit other income opportunity seekers.

5. The independent representative who "signs up" to buy wholesale.
This is very new thinking and not yet tested with regulators. I am willing to argue that the right to sponsor others in the independent representative agreement is an "offer" of a multilevel income opportunity, which is accepted when - and only when - the act of sponsoring occurs. A person signing up to purchase at the independent representative price, and choosing not to sponsor, cannot be purchasing "to play the game," since, again, no recruiting of income opportunity seekers has occurred.

6. The non-sponsoring independent representative.
This is also very new thinking and not yet tested with regulators. I am willing to argue, and if unable to convince a regulator, to the appropriate judge (with good facts), that purchases by a non-sponsoring independent representative cannot possibly be a disguised headhunting fee or a "payment to play." The reason is based on simple logic - the independent representative has (for the moment, at least) declined the company's offer to "participate" (a word with legal significance) in the multilevel portion of the income opportunity. No argument can be made that the purchase is to qualify for downline bonuses or for the right to recruit, since no recruiting of additional participants has occurred.

7. The sponsoring independent representative.
In many companies that have low monthly business volume requirements to qualify for bonuses on the business volume of downlines, the following occurs: The independent representative consistently orders in excess of the minimum needed to qualify for all available downline bonuses. First, the amount above the minimum needed to qualify is not "to play the game," since only the minimum is needed. A second, optional, argument can even be made that all of the order is for intrinsic value, since one ordering solely to "participate" would just order the minimum. This may be more aggressive than necessary, but is worth noting.

Conclusion
Many companies are structured to have available, at the corporation, records supporting the above types of purchases for intrinsic value. I believe sales defined in this manner (which is one approach, and not the only approach) directly address conduct that the anti-pyramid and endless chain laws everywhere seek to regulate. Note that I have avoided the use of the term "retail sale" or "retailing" throughout this article, and on purpose, because the concept I propose is more precise. The assumption (and legal argument in the proper forum, with good facts) is that the regulated and prohibited conduct is the sale of products that no one would buy for their intrinsic value, but instead would buy in order to participate in and further an illegal endless chain. Without "intrinsic value," such sales become disguised headhunting fees, specifically prohibited by the laws of most countries.

Would you buy the company's products absent the income opportunity? Would anyone? The answer needs to be "yes." If a company's sales are "primarily for intrinsic value," the company can withstand legal scrutiny. In closing, please note that in this area what is good for the legal health of the company is also required for the economic health of the company. That is a whole new subject and article. I will just conclude by saying "sales for intrinsic value" are an absolute necessity for both legal and economic survival of direct selling companies around the world.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

Tired of the wrong idea for starting a company - and I do not mean "To make money." That will always be at the core of a new company launch. But how will the company make money? By selling something. Great. That is also proper planning. Something people want and are willing to pay for. We are still on the right track. But now the train is about to get derailed.

What do people want the most? A way to make lots of money with little effort. So we will sell them a way to do that! WRONG - TILT - STOP! Start over. Income opportunities CANNOT be sold. A company that is in business to provide income opportunities CANNOT survive. Distributors who believe their mission is to provide income opportunities to everyone they come in contact with, and who will sign the always ready application, CANNOT, long term, survive. Products or services that no one will buy, unless an income opportunity is attached, DO NOT a company make. Let me explain.

The great song of the sixties has a line, "Where have all the flowers gone?" Well, I ask, "Where have all the products gone?" (and services). The first and paramount mission of every direct selling company and its independent contractor sales force MUST BE to place as many of its "better mousetraps" in the hands of as many end user consumers as possible. An end user consumer is a customer who is buying the "better mousetrap" for its intrinsic value or worth, and NOT to participate in an income opportunity. The argument that purchases are for intrinsic value is seriously weakened if the purchases are:

• Required to be made to be allowed to sign up as a distributor.
• Required to be made by a distributor to "open a product center."
• Required to be made by a distributor to qualify for a compensation plan payment.
• Required to be made by a distributor to advance in the compensation plan.
• Required to be made by a distributor to "re-enter" the same or a different "phase" or "cycle" of the compensation plan.
• Required to be made by a distributor to "buy in" to a higher compensation plan title or pay level.

The above list includes an assumption that the products stay with the distributor and are not consumed or do not move on to an end user consumer. Of course, distributors can "certify" that they consumed themselves or sold to customers X percent, and/or they have on file or have sent to the company the names of Y numbers of their retail customers. (My personal view is that personal consumption in reasonable quantities and not for qualification is a retail sale and fully commissionable. Al Sheldon, California Deputy Attorney General, said as much at the last MLMIA conference, and referenced the AuQuest Settlement with specific language on personal consumption. Not all state Attorney General Offices agree.) Note that this list DOES NOT exclude ALL purchases by distributors. In some programs the company itself has proof of "purchases for intrinsic value" by the nature of the ordering system and compensation plan. For example, all companies who direct ship to customers who are linked up to the company by their representatives can easily verify that they are shipping products to a non-representative name and address. A strong presumption is raised that these are purchases for intrinsic value.

Another example would be the second and subsequent purchases by representatives who have not sponsored anyone. I concede the first purchase by a distributor is most often made with the intent of "making money" or "working the program." But if they make a second purchase, and have not sponsored anyone, they cannot be making the purchase to qualify for any portion of the multi-level aspects of the pay plan, since, by not sponsoring, they have chosen to not participate in the multi-level aspects of the program.

Yet another example would be a company with a pay plan where say $45 of personal volume is all that is ever required to be classified as "active" and eligible to receive commissions on downline volume. If the average order size is $81, a strong presumption is raised that all purchases, or at least the amounts over $45, are purchases for intrinsic value.

But I am rambling. Back to my point. I want to leave for another day and another article the issue of WHAT PERCENT of the company's sales or an individual distributor's sales should be "for intrinsic value." What I am really tired about is when the percent is ZERO. First, the most obvious: the "bad design" programs. Another name I give to such programs is "Representative only" programs. The company is really trying to enter the income opportunity business. The products or services are an afterthought, and purchased by the representatives to "play the game." There are NO true customers. Regulatory actions in numerous states in the last year have sent the strongest message possible: "Such programs will not be tolerated."

The less obvious, but also "in jeopardy," programs are those that have a "good design," but bad implementation. Company executives and their marketing and legal advisors can only go so far in setting up the program. It then comes down to what the field forces, especially the leaders, do with the program. If they take a properly designed program and implement it as a "Representative only" money game, it is doomed. I have had regulators from seven key states say to me personally or to an audience I was in, the equivalent of, "We look past the paper to what is really going on in our state."

In closing, "How much retailing?" and "What is a retail sale?" is a serious issue for all legitimate MLM companies, and is probably the number one legal issue for MLM direct sellers. I am not addressing that issue here. BUT - The existence of ZERO retailing MLM companies just gives the regulators sitting ducks, AND the opportunity to paint all companies with the same brush. The plea from this tired lawyer to company entrepreneurs is, "Do not start yet another such venture." The plea from this tired lawyer to distributors is, "Do not work such a program expecting it to be long term, as it cannot survive, and do not distort the properly designed program you are working into a 'Representative only' program."

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

The Amway Case from the Price fixing Perspective

Someone reading the Orders in this case might miss the incredible significance to MLM and Pyramid law because of the significant focus on price fixing. The Order in the Initial Decision has half of its space devoted to price fixing. The FINAL ORDER of the commission has fully two-thirds of its space devoted to price fixing. The Judge concluded that Amway fixed prices. "Respondents (Amway, De Vos, Van Andel, and the Amway Distributor's Association) have agreed, combined and conspired with each other and Amway distributors to fix resale prices for Amway products, on sales between Amway distributors and to consumers, in violation of Section 5 of the Federal Trade Commission Act, 14 U.S.C. 45." The Commission, in reviewing the decision of the Judge, reached the same conclusion. "We conclude that respondents have agreed and combined with each other and/or Amway distributors to fix the resale prices of Amway products, at both the wholesale and retail levels, in violation of Section 5 of the Federal Trade Commission Act."

While no company relishes the thought of being declared a price fixer, the totality of the circumstances of this decision softened considerably the sting of such a result. First, the critical issue of an illegal pyramid was decided in Amway's favor. Second, the price fixing issue was "old news" in that much of the evidence was of practices long since discontinued and derived from manuals and literature long since amended or totally rewritten.

One view is that both the Judge and the Commission were particularly harsh on Amway on the price fixing issue to give to the Government some semblance of a victory, since the pyramid issues in the case were without merit. In the Final Order, which has no expiration date, the Commission dictated the ACTUAL WORDS of the disclaimer Amway must put on any wholesale or retail price list, order form, promotional material, or any other document which lists resale prices for products:

"The prices stated here are suggested prices only. Distributors are not obligated to charge these prices. Each Distributor is entitled to determine independently the prices at which products may be sold to other distributors or to consumers."

Section 5(a)(1) of the Federal Trade Commission Act is incredibly broad: It says "Unfair methods of competition in commerce, and unlawful or deceptive acts or practices in commerce, are declared unlawful." Combining and conspiring to fix resale prices is a prohibited act, says this Judge, says this Commission, and says hundreds of cases before and after the Amway case. The price fixing lesson from this case can be looked at from three viewpoints, the MLM or Direct Selling Company, the Distributor, in his or her relationship to the Company whose products or services the distributorship sells, and the Distributor in his or her relationship to other distributors.

A company has an absolute right to SET prices. SETTING prices is not FIXING prices. Combinations or conspiracies are needed to FIX prices and one cannot combine or conspire with one self. No matter how many employees of ABC Company sit around the conference table deciding what to charge for the new widget, it is not a conspiracy. However, no independent contractor distributor of the company should ever be at such a meeting. All of the company's employees are part of one legal entity, the corporation, for purposes of deciding whether "two or more persons" conspired to do anything. Have a distributor, or a competitor, or a supplier, or a visitor on a plant tour for that matter attend, and the requirement of "two or more persons" has been met. This, of course, is not automatically an illegal conspiracy, by why even take the chance. The classic example is two or more COMPETITORS agreeing to fix prices, usually to damage a third competitor or just to line their pockets at the expense of the consuming public. The variation on the classic theme, also prohibited by law, is retail price maintenance. It usually involves one manufacturer, with or without the knowing cooperation of one or more of its distributors. It can also involve just two or more distributors.

A company can unilaterally publish SUGGESTED retail prices. A company CANNOT do anything to require that its independent sales force sell at the prices suggested by the company. Amway's practices in the early Sixties were deemed to be illegal acts intended to maintain the retail price of its products.

It is on the issue of retail price maintenance that the Amway case becomes very specific. The Judge writes: "The Rules of Conduct of the Amway Sales Plan published in 1963 required that distributors sell Amway products to consumers at the specified resale price. It also provided that no unauthorized discount be given on sales to other distributors, and fixed the resale charge for freight. The record does not show when Amway stopped using this sales manual or whether distributors were ever clearly notified that it does not express Amway's policy. Such resale price maintenance is per se unlawful."

Amway argued that the quoted manual and the actual practice had been discontinued since at least 1972. Remember, the trial took place in 1978. The Judge listened but was not persuaded. He said "While much of the evidence of price fixing agreements is relatively old, it raises a presumption of continuity which respondents (Amway) have not rebutted." The Judge's view that there exists an affirmative duty to tell distributors they may set their own prices was further emphasized is this footnote, "The record does not show that Amway has ever clearly told its distributors that they are free to set their own prices on sales to other distributors or to consumers."

Clearly today's companies must have the right words in their literature. But beyond that, regulators and prosecutors, as they did with Amway, will examine the company's overall attitude toward the issue. Fertile ground are transcripts of company officer's speeches. Amway's Co-Founder, Rich De Vos, in 1971 in Dallas Texas, was recorded speaking to Amway Direct Distributors: "If you have a distributor who is selling Amway products at wholesale to a customer, our action has got to be first of all to get a complaint on it and find out who the distributor is that's doing it. Our next move has got to be to work on his removal, but that isn't an easy problem, because if this person wishes to sell to anybody on the street at whatever price he wants to, you're getting into some touchy areas on price fixing. Now the only thing you can point out is that sooner or later the distributor is going to go broke - because you can't go on selling the product at what you paid for it and survive in the business." In the same speech, De Vos said that price fixing is a serious matter that the federal people and the FTC watch like a hawk. Still he persisted in his advice to pressure the price cutting distributor into compliance. "You do a sales job on the guy and pointing out that if he's going to continue that he's going to destroy his own business, he's gonna work at a no-profit situation, he'll ultimately not be able to recruit distributors, because they can't make any money and what he's doing is destroying himself, and therefore in most cases where you have it happen it disappears quite rapidly."

The laws in the area of retail price maintenance are as strict today as they were in 1979 when the Final Order was issued in the Amway case. Enforcement is not limited to the FTC or the Federal arena. The States have become much more active, and Judges need little more than inappropriate quotes to support their rulings.

The lesson from the Amway case should be clear to any company selling through independent distributors: Do not directly or indirectly attempt to control or maintain the retail prices of your products. For added legal protection, remind your distributors in your literature that they have the final say in determining retail prices.

The lesson for the distributor is to resist any attempt by the company to control retail prices, and take affirmative action to get the practice stopped, both for your own protection, and the continued viability of the company. Asking the company's officers and/or counsel to read the Amway case would be a good first step.

An added lesson for the distributor is to avoid any temptation to combine or conspire with other distributors to maintain or control retail prices. A leader cannot tell his or her downline, "We sell at full retail in our line", for all the same reasons the company is prohibited from maintaining retail prices.

THE THINKIN’ NEEDS FIXIN’
by Gerald P. Nehra
MLM Specialist Attorney at Law

Before the first line was drawn on an architect’s board, thoughts and ideas swirled through the mind of the architect of what the project might look like. Even before words were spoken to a colleague, the mind had an idea. Thoughts precede words and deeds so routinely and automatically that we sometimes do not fully realize their incredible influence. This article discusses the “thinking” behind network marketing. Some of the “thinking” needs “fixing.”

A quick definition: Network marketing, to me, involves direct sales companies selling products and services to customers through independent contractor representatives using a compensation plan, which includes an offer of a continuing reward to the representatives, based on the sales volume of recruited representatives.

Network marketing cannot be about selling business opportunities. “Thinking” that way leads to disaster. First—what you can do (but it is NOT network marketing): There is a body of law in the U.S. that recognizes and regulates the sale of business opportunities (other than franchises, which have their own body of law). One reason these laws do not impinge on network marketing is that what is typically charged to become a representative is less than the threshold exemption amounts in these statutes. If the cost to get in exceeds $200 to $500—this varies by state—and you obey the 22 state’s business opportunity statutes that include requirements of bonding, registration, disclosure, etc., you can offer, for example, a vending machine route business opportunity and charge $5000 or more for it. Note that there is no opportunity of multilevel compensation involved. You can offer a business opportunity in the U.S. for $199 or less—THAT IS NOT MULTILEVEL—and if the offer is not deceptive, you can be legal in all 50 states. I make this point that there IS a legal “business opportunity business” in the United States that can exist, which is exempt from the business opportunity laws by having the entry price below the thresholds, or by complying with the various legal requirements of the business opportunity laws. But IT CANNOT be network marketing, because of the multilevel aspects of the typical compensation plan. Network marketers, corporate and distributor, should not even think in those terms, because of the multilevel “gotcha.” Here is why: 46 of our 50 states’ laws, and federal law, contain a form of anti-pyramid or endless chain prohibition against charging for the right to bring more people into a business venture. There it is—pure and simple. You CANNOT be in the “multilevel” income opportunity business, at ANY dollar entry amount. “Thinking” you can is the beginning of trouble, even before words and actions begin.

Of course, it usually costs something to become a network marketing representative, so you need to know the exception. The various laws permit the required purchase of an at-cost, non-commissionable sales or starter kit. If the company can only offer an “at-cost” kit, it should not think it is in the income opportunity business, because that is not where its profits come from. If the kit sale is non-commissionable to the upline, the field should not think it is in the income opportunity business, as the kit sale generates no commissions. Correct “thinking” has you in the nutrition business or the telecommunications business or household products business. When you define yourself by the products and services brought to the marketplace, the thinking process has begun correctly.

Does your corporation have a mission statement? Do the distributorships have mission statements? If all it says is “Help people better their lives through a great income opportunity,” the thinking that led to those words needs fixing. The legal basis for the existence of the company and its distributors—the movement of products and services to consumers—has been left out. Correct thinking goes something like this: “A way to better your life with this great income opportunity flows first from an enthusiasm about the products and services and a willingness to move them to consumers. Also, a multiplier effect is available when you share the enthusiasm with other income opportunity seekers.”

To conclude, “thinking” you can be in the multilevel income opportunity business has led many companies and their distributors astray. Do not fall into that trap.

Top of Page

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

Permission is hereby granted to duplicate this article, AS LONG AS the biographical information above is included.

The United States of America includes 50 states, and yes, Louisiana is one of them. I was told in law school that the Common Law of England is the basis for the American legal system, except in Louisiana, where the basis is the Napoleonic Code. What is that? The system of law in Louisiana has its origins with a short French emperor, and to give Bonaparte his due, he was not only a brilliant general, he was a brilliant administrator. To govern his empire, he felt a uniform system of law had to be in place, so he took existing law, which was largely based on ancient Roman law, and codified it, which means he put all the law into writing, so it could be understood by everyone.

So how are the other 49 states different? They all have laws based on English common law. Common law is a system of law that is based on court precedent. Laws and statutes are interpreted, and the ruling of one judge may influence or even control the ruling of another judge. The Code Napoleon takes the civilian law approach. Civilian law is based on scholarly research and the drafting of legal code which is passed into law by the legislative branch. It is then the judge's job to interpret that intent more than to follow judicial precedent.

How much practical difference is there? Not much, really. The differences are eroding every day. Much of Louisiana's codes are being replaced by uniform law, to be more in step with other states. This is especially true in the area of commercial law. Louisiana has adopted the Uniform Commercial Code used in other states to keep on a competitive footing with the other states.

Direct sellers have some unique "Louisiana" stuff to deal with. Blame Napoleon? Who knows? And it does not matter anyway. Let's look at a few:

DICTATING TYPE STYLE
Yes, Louisiana goes deep into the workings of the print shop, peers over the shoulder of the forms designer, and says: You must use a minimum of ten-point bold. Last year I had a submission rejected on this technicality, when the sentence was in 12-point, ALL CAPS, because it was not in bold. Below is this part of the law:
a. to fail to provide in the contract of participation in bold face type of a minimum size of 10 points a statement substantially indicating that such contract may be canceled for any reason at any time by a participant upon notification in writing to the company of his election to cancel.

REQUIREMENT THAT LOUISIANA LAW BE USED
Contract drafters all over the United States put in terms like "Texas law applies" or "Claims may only be brought in the State courts of California, Los Angeles County." In almost all cases, these are valid and enforceable terms, EXCEPT against a resident of Louisiana. That is right. Louisiana law declares such terms unenforceable against their residents. This explains why you often see the following in independent contractor agreements: Louisiana residents only: In the event of a dispute for jurisdictional purposes, a Louisiana resident distributor shall be entitled to file an adjudicatory claim or lawsuit in the jurisdiction of Louisiana and the governing law shall be Louisiana law. Below is this part of the law:
A. A consumer transaction or modification of a consumer transaction is made in this state when: (1) a writing signed by the consumer and evidencing the obligation is received by the merchant in this state, or when (2) the merchant negotiates in this state personally or by mail, telephone or otherwise, for a transaction with a consumer consummated outside the state.
B. Notwithstanding any other provision of law to the contrary, this Act applies if the consumer is a resident of this state at the time of the consumer transaction and either of the conditions specified in Subsection A of this section are present.
C. The following terms of a writing executed by a consumer are invalid with respect to consumer transactions or modifications thereof: (1) that the law of another state will apply; (2) that the consumer consents to the jurisdiction of another state; or (3) any term that fixes venue.

VERY DETAILED BUYBACK
A 90 percent buyback law exists in nine states and Puerto Rico, and is a 50-state requirement of company membership in the Direct Selling Association. But note that Louisiana gets right into the product shelf life issue and speaks in detail to the seasonal and discontinued items. Below is this part of the law:

7) "Reasonable commercial terms" includes repurchase by the seller, at the participant's request, and upon termination of the business relationship or contract with the seller, of all unencumbered products purchased by the participant from the seller within the previous twelve months which are unused and in commercially resalable condition, provided that repurchase by the seller shall be for not less than ninety percent of the actual amount paid by the participant to the seller of the products, less any consideration received by the participant for purchase of the products which are being returned. A product shall not be deemed nonresalable solely because the product is no longer marketed by the seller, unless it is clearly disclosed to the participant at the time of the sale that the product is a seasonal, discontinued, or special promotional product, and not subject to the repurchase obligation.

REGISTRATION AND CONTINUING UPDATE REQUIREMENT
Louisiana, and only Louisiana, requires multilevel direct sellers, as a condition of doing business in their state, to provide, and continually update, their distributor list. Line item 6 and line item 8 of the Multi-Level Distribution Scheme Registration Form, provided by the Office of the Attorney General (I hate that use of the word "scheme" and have told them so), is shown below:
6. List the name, mailing address, and permanent address of each of your distributors in Louisiana.
8. All of the information contained herein must be kept current. Should you plan to continue business at additional locations or obtain new distributors, the information must be supplied to this office.

Yes, it is different down there. Louisiana is part of the United States-just do not tell a Louisiana government official, "That's not how we do it in the rest of the country." They already know and, in my personal experience, are NOT scrambling to align themselves with the other 49.

This article is meant to inform, and is not meant to dispense legal advice. Please consult your attorney for specific guidance on the above issues.

So the entrepreneurial bug has bitten you, BEYOND being an independent contractor representative for a direct selling company. You want to own and operate your own direct selling company. Question: Where to incorporate? Answer: It does not matter.

Of course it matters. The answer in this brief article is very narrowly focused to mean: It does not matter with regard to the anti-pyramid laws and other laws specific to multi-level direct selling companies. What may matter to you and the other co-founders of the new company joining with you, are issues of corporate governance, required disclosures and privacy, tax consequences, costs to incorporate, costs to remain in good standing, reporting requirements and possibly other issues I have not thought of. But multi-level marketing specific laws will not be a factor. Where you choose to incorporate, even off-shore, will not change the fact that offering an income opportunity, with a multi-level form of compensation, to US residents subjects you to such laws, regardless of where you are incorporated.

My experience is this (and I do not form corporations for my clients) about half choose to incorporate in the state where their home office is located, and the other half choose to incorporate in Nevada. Over the last few decades Nevada has become the state of choice, over Delaware, for those choosing to incorporate in other than their home state. Wyoming wants some of that Nevada incorporation business, and has emerged lately as another choice to Nevada.

Why Nevada, or a state other than your home state? Two answers, both of which are non-answers. First, I do not know. Legal and financial (both tax and accounting) specialists in corporate structure and corporate governance do know, and stand ready to listen to the goals and needs of the co-founders of the new entity and advise on how a careful choice of the state of incorporation may meet those goals and needs. Second answer, and what I do know: It does not matter from the perspective of laws specific to multi-level direct selling. When you offer an income opportunity with multi-level compensation to the residents of any of our 50 states, the regulators in that state will expect compliance with their laws. They will not care if you are incorporated within their state, or in Nevada or elsewhere, or even off-shore.

My two cents worth on off-shore corporate entities. Such structures can be set up properly and legally in all respects. Such structures can meet the unique goals and needs of the co-founders. But such structures create no immunity from US laws applicable to the activities of offering income opportunities with multi-level compensation to the residents of the United States. From personal experience, if an Attorney General in the heartland does not like what you are doing, you better get in there and fix it. Laying back with an attitude of - "I have made it very difficult for that Agency to serve me a subpoena for documents, because I am in Belize," is NOT recommended. The Agency may turn its guns on the lead distributors in their state, who may be very easy to find and serve. That is not a turn of events that will have a happy ending for anyone.

The decision of where to incorporate a new direct selling venture that will offer a multi-level form of compensation requires careful consideration. But from the perspective of an attorney focused almost solely on the unique laws specific to this business model - the location of incorporation does not matter. So give all the factors that do matter appropriate consideration, and choose, knowing that this multi-level legal expert will not second guess you.

What follow are my personal observations on the subject of commissions on sales aids. This article should not be construed as the rendering of legal advice. Companies and distributors needing specific counsel in this area should retain an attorney skilled in direct selling law.

In an analysis of the laws of the 45 states that prohibit the operation of pyramids and endless chains, the word "primarily" shows up in 17. The context is always the same. The venture must "primarily" be about selling products and services to consumers, rather than bringing in more income opportunity seekers. The laws that do not contain the word "primarily" also convey the same meaning.

First, the design of the program must address the hurdle of the cost of entry, since there can be NO cost of entry, and NO required product or service personal purchase as a condition of participating in the income opportunity. There is one nationally recognized exception. A requirement to purchase a non-commissionable sales or starter kit, or pay a sign-up or administration fee, is permitted expressly in these statutes, or by custom and usage in the states without express language. In addition to the non-commissionable nature of this payment, the pricing structure of the kit or fee should be at "cost recovery," and not a profit center for the company. Next, the regulators look at what the business is "primarily" in existence for. It MUST be about selling products or services to consumers. It CANNOT be to reward people for recruiting, nor can it be to reward people, if the recruited people buy training and sales aids.

The conventional wisdom followed by the vast majority of companies is to pay no commissions on sales aids. What follows is the reason "why": Although no specific state or federal law prohibits paying commissions on sales aids, if the company gives independent contractor representatives an incentive to recruit more representatives, and that incentive is greater than the incentive to sell products and services to consumers, that is exactly what those representatives will do.

The few companies paying some form of commissions on sales aids, and who in my view are not at risk, have that portion of their business a VERY SMALL portion of their total business. I believe 15 percent or less is very small and defensible, as long as there are no other regulatory issues. Also, the commissionable sales aids are always optional, and never a requirement of participation in the income opportunity.

My personal recommendation has always been to not pay commissions at all on sales aids. The answer to this particular question is similar to the answer to so many questions about the structure and implementation of a legal direct selling company with a multi-level form of compensation. If the company is "primarily" about selling products and services to consumers, rather than recruiting more income opportunity seekers, the company most likely can withstand legal scrutiny.

ARTICLES

by Dan Jensen (used with permission):

• Industry Definitions


• Principles of a Successful Compensation Plan


• The 10 Most Common Mistakes in MLM


• Compensation Plan Types


• Are you wasting your hard-earned commission dollars?


• Compensation Plan Breakage - Why and How

by Leonard Clements (used with permission):

• Is this a Pyramid Scheme? - by Leonard Clements who has concentrated his full-time efforts over the last six years on researching and analyzing all aspects of Network Marketing.

by Doug Cloward (used with permission):

• WOLF! WOLF! WOLF! Read what this compensation plan expert has to say on training programs and similar business tools.

by Jay E. Leisner (used with permission):

• Business Plans and Budgets - Who Needs Them?

by Dan Jensen, Jenkon International, Inc.

Accumulated Group Volume (AGV)
A Representative's group volume from the day he or she becomes a Representative to present. This value does not clear or reset each commission period; it continues to grow.

Accumulated Personal Volume (APV)
A Representative's personal volume from the day he or she becomes a Representative to present. This value does not clear or reset each commission period; it continues to grow.

Active
Only Active Representatives may have earnings. A Representative is considered Active when they have a predefined minimum amount of Personal Volume and/or a predefined minimum amount of Group Volume within a set predefined period of time. Some plans impose other requirements as well.

Back End
A term used to describe the portion of a Step-Level / Breakaway plan which pays commissions to breakaway representatives. (Also see Front End)

Bonus Volume (BV)
The Qualifying Volume from the sales order that will be the volume credited for a sale. It is added to the Personal Volume (PV) of the purchasing Representative, his Group Volume, and the Group Volume of any upline Representatives according to the plan. This volume may optionally be different than the volume on which the commissions are paid (See Commissionable Volume).

Breakage
Many Representatives are either unqualified or ineligible to receive some or all types of commission each month. When the company retains unpaid commissions, it is called Breakage. Breakage also happens when an order is placed by a Representative who is close to the top of the genealogy such as a Representative sponsored directly by the company or an orphan. In these cases, some or all of the commissions that would normally be paid to an upline are retained by the company because there are few, if any, Representatives in the purchasers upline. Please note that commissions are always paid upline. When the upline is small or nonexistent, the company retains the unpaid commissions, causing Breakage.

Breakaway
When Representatives are promoted to a certain title, they "break away" from their sponsors and are thereafter called "breakaway" Representatives. Their group volume is no longer included in their sponsor's group volume. Breakaways are entitled to additional compensation, which is usually referred to as a Generation Override. Breakaway positions are usually considered sales leaders.

Commissionable Volume (CV)
The pre-assigned value of each product purchased, and on which commissions are paid. It is in the currency of the country in which the order was placed (though the eventual commission check may be issued in yet a different currency). Sales aids usually have no Commissionable Value. Commissionable products have a Commissionable Value, which does not have to equal the price paid for the product.

Commissions
An amount paid to a Representative on his or her direct and downline Commissionable Volume. It usually comprises Commissionable Volume within his own Group. Some plans call all forms of payment to Representatives a "commission".

Compression
See Roll-Up. Also used to describe the impact on a genealogy when a Representative is terminated. In this case, the downline of the terminated Representative is linked to the sponsor of the terminated Representative causing a "compression" effect on the downline.

Distributor
A person or entity in the genealogy with a class of "D" (Representative) is a Representative. Anyone who gets credit for a purchase or can receive commissions must be in the genealogy. All Representatives must sign a Representative Agreement to avoid being considered employees of the corporation. Some companies allow two or more people to join together as a single Representative entity. Often called a "Representativeship" or Independent Representative.

Downline
The Representatives personally sponsored by a Representative, as well as all the Representatives they sponsor, etc. Example: You sponsor Jim, who sponsors Mary, who sponsors Ted. All these Representatives are in your downline.

Enrolling Sponsor
A Representative who recruits another (new) Representative or customer into the business is a Sponsor. This person may be different from the Sponsor assigned to the new recruit in some compensation plans such as Matrix or Binary. It may also be different if the Enrolling Sponsor of a Representative is terminated. In this case, the Representative is placed under the sponsor of the terminated Representative. (Also see Sponsor, Compression)

Exemptions
Representatives may be permanently or temporarily exempted from meeting certain requirements for qualification. These should be clearly defined but not published. Representatives should not expect to be exempted when they fail to meet their qualifications even when they have an 'excuse'. Reality requires this capability, however, to deal with corporate mistakes and other exceptions.

Front End
A term used to describe the portion of a Step-Level / Breakaway plan which pays commissions to non-breakaway Representatives. (Also see Back End)

Genealogy
The downline sales organization of a company or Representative often called simply a Downline.

Generation
The relationship between an upline breakaway and a downline breakaway, not including non-breakaways The first breakaway in any leg is called a first generation breakaway. Generations are counted based on this period's fully qualified title.

Generation Override
The commissions paid to upline Generations based on Group Volume. This is only paid to Breakaways.

Group
A Representatives entire downline, but not including any breakaway Representatives or their groups.

Group Count
The count of Representatives in a group not including one's self. Also called Group Size.

Group Volume (GV)
The total of all Personal Volume (PV) sold by a group for a commission period. This includes one's own Personal Volume (PV).

Inactive
Each commission period (month?) that a Representative is not Active, he is considered Inactive.

Leg
Each personally sponsored Representative and all his or her downline. Also referred to as Line of Sponsorship. If a Representative recruits five other Representatives and places them on his first level, each recruit comprises a Leg of the sponsor. Leg is also used to signify a single chain of Representatives where "A" sponsors "B" who sponsors "C" who sponsors "D", etc. Together, they are often referred to as a Leg.

Level
The position a Representative has in a downline relative to an upline Representative. Representatives personally sponsored are level one to the sponsor. Those Representatives sponsored by a level one Representative are level two, relative to the original Representative. (Also see Qualified Level)

Level Override
The commissions paid upline Representatives based on relative position in the genealogy. Note this is only paid to qualified levels. This type of commission is usually paid only in Uni-level compensation plans, not Step Level / Breakaway plans.

Orphan
When a new Representative joins a company, a Representative application form is completed and sent to the company. On the application, the new Representative's sponsor name and account number is noted so the company can link the new Representative to his sponsor. Occasionally, the sponsoring Representative noted on the application is either incorrect or nonexistent making it impossible to correctly link a new Representative to an existing sponsor. In such cases, the new Representative is called an orphan. Procedurally, most companies have a Representative in their genealogy called "Orphan Account" to which all orphans are temporarily linked until their correct sponsor can be resolved. Commissions normally paid on the purchases made by orphans are usually kept by the company (called breakage) because orphans have no upline. Resolving orphan-sponsor linkages quickly is a high priority with most companies to avoid problems caused by not paying commissions to the correct upline.

Paid-as Title
The title a Representative is qualified for in each commission period. This title is not necessarily the Representative's permanent "official" title. The Paid-As Title may change with each commission run but the Title does not. The Paid-As Title will never be greater than the permanent Title.

Personal Volume (PV)
The value of commissionable products purchased in a commission period is called Personal Volume or PV. It is based on the sum of each purchased product's Qualifying Volume. It is credited to one and only one purchasing Representative in a commission period. It represents the total value of commissionable product purchased. It is usually included in the Representative's Group Volume. When retail customers buy directly from the company, the Qualifying Volume of their order is usually included in the Personal Volume (and Group Volume) of their sponsoring Representative.

Qualifying Volume
The value of a commissionable product applied toward Representative qualifications in the compensation plan. This value is added to both Personal Volume (PV) and Group Volume (GV) when purchased. It is different than Commissionable Volume. Commissionable products have a Qualifying Volume, which does not have to equal the price paid for the product. (Also see Commissionable Volume)

Qualified
In most plans, a Representative is "qualified" if they can receive Generation Overrides.

Qualified Level
Some Uni-level plans pay commissions based on Levels instead of rank or title based on Qualified Levels. In these plans, a Qualified Level is represented by each qualified Representative in a single Leg or in a single chain of Representatives. Inactive Representatives are not counted as Qualified Levels in these plans. (See also Roll-Up)

Recruit
A Representative recruited by another Representative to participate in the compensation plan or business opportunity. Retail Volume The total retail value of commissionable products is called Retail Volume. Retail Volume is seldom used by compensation plans; most plans rely on wholesale values to determine Qualifying and Commissionable Volumes used in their compensation plan.

Roll-up
If a commission payment cannot be paid to a Representative due to that Representative's being inactive, unqualified or not eligible in a given period, the payment will "roll up" to the next qualified, active and eligible Representative upline. In most plans, the volume does not roll up with the payment which would result in increasing the Group Volume of upline Representatives based on the poor performance of their downline - the practice of volume roll-up is not recommended while the practice of commission or override roll-up is recommended.

Sponsor
The Representative immediately upline of a Representative. It is usually the person who originally recruited the Representative but may be different if the Sponsor has inherited one or more people through Compression due to the termination of previously sponsored Representatives. It may also be different in plans that automatically place new recruits in certain spots or positions based on plan rules such as in Matrix or Binary plans. In these plans it is common for the sponsor to be different from the original Enrolling Sponsor. (Also see Enrolling Sponsor)

Stacking
A usually undesirable technique used by Representatives to manipulate the compensation plan. Stacking occurs when a Representative recruits other Representatives placing them in a single Downline Leg or chain instead of directly under the recruiting Representative.

Unencumbered Group Volume (UGV)
To avoid the Group Volume of one Representative inadvertently promoting his sponsor (and his sponsor, etc., which is often called Stacking), some plans require Group Volume used for advancement to Breakaway position to be derived from sources other than new breakaway Representatives. These other sources are most often other legs within the Group, which are not being advanced to Breakaway positions. The Group Volume derived from these other sources is considered Unencumbered Volume. This distinguishes it from the Group Volume used by a downline Representative that breaks away (encumbered volume). Some plans allow a portion of the Group Volume of a Representative achieving Breakaway status to be included in the Unencumbered Group Volume of his sponsor. For example, a plan might allow the excess or unused Group Volume of a downline Representative who is achieving Breakaway to be included in his sponsor's Unencumbered Group Volume. The purpose of Unencumbered Group Volume is to avoid Representatives manipulating the intent of the compensation plan by funneling all their volume into one downline Representative which causes an entire leg to be advanced to Breakaway status. (Also see Stacking)

Upline
A Representative's sponsor, along with his or her sponsor, etc. All Representatives in the genealogy above a Representative are referred to as his upline. For example, if A sponsors B who sponsors C who sponsors D, then the upline of D consists of A, B, and C.

All contents © Copyright Jenkon International, Inc. 1996. All rights reserved. Permission is granted to reproduce this article, AS LONG AS the biographical section above is included with the article.

by Dan Jensen, Jenkon International, Inc. Introduction

A compensation plan that fails to motivate the company's representatives will stagnate that company faster than any other factor. While there may be many other factors that contribute to the success or failure of a direct selling company, the compensation plan is probably the biggest. I have often been asked, "What is the best compensation plan available today?" Unfortunately, there is no one right answer to this question. There are, however, proven principles of success that are common to virtually all successful plans.

The Golden Rules you should always follow:
Always provide incentive dollars for a specific desired behavior. Don't waste your incentive dollars on behaviors that provide little value to you or the representative. Question each type of compensation and verify that it will provide the expected return on investment.
Leverage the principle of relationships. Most people recruit others they already know because they want to work with them. Be sure your plan builds on these relationships. A plan where a new recruit is trained or mentored by a person other than the sponsor usually results in poor recruitment and weak relationships.

Recognition is as important as compensation. Remember, "Representatives will work for money but they'll kill for a cause." - Jim Adams

The five objectives of a successful compensation plan

1.Sell Product to end consumers
Retailing products to the end consumer is key to moving products. Corporate failure is inevitable as people stop buying product that they do not or cannot sell.
Have a motivating retail/wholesale profit - a minimum of 25% discount below retail or 33% markup over wholesale is common. This retail profit is the basis on which people are motivated to sell (retail) products. Other motivations are often artificial and will not withstand the test of time.
Set a realistic retail price otherwise people won't be able to sell the product to the end consumer.
Don't sell products whose wholesale price is really the market retail value and then add an artificial retail price on top.
Require heavy emphasis on retailing from field leaders, training and marketing materials. Retailing products based on the hope of future rewards will never result in the movement of product to retail consumers. If a representative is selling product by promoting a dream that the buyer will earn future commissions when the buyer, in turn, sells the product to another buyer, you will eventually be sitting on a "time bomb" of unhappy representatives who have a lot of inventory sitting in their garages. Proper retailing moves only the amount of product from representatives to the end user that is justified by natural consumption of the product.

2.Build organizations (recruit)
Done by placing incentives on group volume building. Recruits must see that it is easier to build their businesses by having others help do the selling in addition to their own selling.
Recognition and reward should be built into the plan, especially for the new recruit. Most recruits are lost in the first 60 days because they lose the confidence that they will succeed in the long term.
Rewarding new recruits early on helps to keep their interest and excitement levels high.
Lack of rewards for new recruits often results in sales leaders promoting 'buy in' organization building.
They pitch people that a 'buy in' is an investment in their future. While the new recruit has enough 'equity' (inventory) to keep them in the business longer, they often quickly become disillusioned and are quick to complain to regulatory officers that 'they were taken'. Regulators are always on the watch for 'investment schemes' of this nature.
Reward people early by building a series of goals and rewards. As they reach each goal, new recruits are quickly recognized and compensated. This helps build the confidence that they can actually achieve their future dreams.
Early rewards build the initial skills required to become managers. Lack of early incentives builds ineffective field managers who do not have the skill to sell or recruit based on product viability.

3.Build Managers (people who train others to sell and recruit)
Follow Step 2, above (Build Organization). Otherwise the field force will have many ineffective managers who do little to earn their compensation.
Managers are built by learning the basic skills of success as representatives through product retailing and recruiting. Once a representative learns these skills, they become a manager when they teach others (those they recruit) to do the same. Successful managers learn the power of duplication.
Incentives are placed on group activities (group volume and recruiting). Group Volume incentives usually reward both selling and recruiting.

4.Build Sales Leaders (people who train others to manage)
Incentives must exist to motivate and reward managers who build other managers. Avoid disincentives that penalize a manager when a new manager is created. Otherwise, a manager will work hard to suppress their own star performers from reaching their full potential for fear of losing significant compensation in the future.
Provide incentives that reward leaders for several 'generations' of downline managers so that these leaders will want to train their managers to build other managers as well.
Avoid making it too easy to become a sales leader. Representatives who don't know how to build or train other managers to succeed should not be entitled to become sales leaders or the field organization will become superficial and weak. Remember that building strong sales leaders takes time, money, and effort. Invest in training them to become effective sales leaders, to build effective managers and to recruit product retailers and recruiters.
Provide incentives for your top performing sales leaders. Avoid having the plan quickly 'Max out,' otherwise top performers will wonder "what's next" and you won't have an answer.

5.Retention
Retain people by helping them receive significant reward for their time. You compete for their time and attention with many other opportunities and distractions. Make it worth while early on. As a representative works the business, they build an 'equity investment' in their downline organization and will continue to work the business if their downline continues to work the business. This is why a balanced emphasis on product retailing and recruiting is so important.
Representatives who build a downline are far more likely to continue to be active than those who do not build a downline are. If your product is consumable, consider using an "Auto Ship" program to build repeat business, both retail (preferred customers) and wholesale (to representatives).
Promote contests and competitions that can be won by everyone. Avoid 'top ten' contests where everybody loses except your top 10 performers.

Other principles of a successful compensation plan
Reasonable compensation percentages: Most compensation plans of today pay between 30% to 50% to field representatives. If a company promotes a plan paying only 25% or so, they will have a hard time recruiting and keeping representatives unless other factors offset this competitive weakness. These factors might include how well the public accepts the product (telephone service or other common consumables) or intangible incentives that motivate representatives. Real percentage pay out should fall between 35% and 42%, in my opinion. Higher percentages are possible with high product margins. Theoretical pay out (the percentage the plan would pay if all commissions were paid out in every case) should not be more than 8% above actual to avoid disappointing representatives expecting more.

Keep it simple: Many plans are designed by Multilevel Marketing (MLM) professionals for other MLM professionals. These plans often assume most people already understand the terms and principles of MLM or can at least learn them quickly. Time has shown that this is definitely not the case. While experience is essential when designing compensation plans, one must never forget that ordinary people are the ones who must be motivated by the plan. If a new recruit isn't motivated early, he or she will quickly fall away. The more complex a plan becomes, the fewer people that plan will motivate. The plan needs to affect the heart of a representative first, before it can affect their pocketbook.

Avoid novelty or "fad" plans: Changing a compensation plan is costly in terms of lost momentum and representative commitment. When a representative recruits another person, the compensation plan is often a significant part of the selling process. To change it later is, in essence, admitting that the original plan was not very good after all. Some people may perceive the change as a "bait and switch" tactic. By staying within more traditional plans, plans that have proven themselves over the years, a new MLM company can still be innovative but know that the plan has staying power. It's often joked that compensation plans are like men's ties; when one plan goes out of fashion, you can count on it coming back a few years later. Stick to more traditional plans that won't need to be changed as new fads come and go.

Don't put too much credence in the impact of your compensation plan: Many entrepreneurs are convinced that they have the best possible compensation plan imaginable. When asked what product or service they will sell, they sometimes respond, "We're still looking for the right product." Obviously, these well intentioned people have focused on only one issue of starting their business by thinking that the compensation plan is the only key to their future success. Many companies have gained great success despite poorly designed compensation plans! Don't change the plan very often: Companies that experiment with their compensation plan are asking for frustrated representatives to join other more stable opportunities. Even good change can be traumatic. Be very reluctant to change the plan. Be careful when recruiting "heavy hitters": These very successful Multilevel Marketing professionals can bring tremendous short term success to a company but can also be a major cause for failure when they grow bored with your company and join another, often taking thousands of their downline with them. Wise companies always build slowly for the first few years until they have the critical mass to handle changes in business volumes. Don't design your compensation plan to focus on attracting these heavy hitters.

All contents © Copyright Jenkon International, Inc. 1996. All rights reserved. Permission is granted to reproduce this article, AS LONG AS the biographical section above is included with the article.

by Dan Jensen, Jenkon International, Inc.

Multi-Level Marketing, also called Network Marketing, is the essence of free enterprise. Thousands of MLM companies have sprouted during the last few decades. Sadly, many are no longer in business. Having been entrenched in the MLM industry for over a decade seeing hundreds of companies come and go, I have observed a pattern that might be of help to an entrepreneur wanting to build a successful MLM organization in today's competitive marketplace. This pattern includes at least ten common challenges facing new start up ventures. These common challenges include:

1.Adequate Funding
2.A Business Plan
3.Management and Leadership
4.Staff Training
5.Computer Systems
6.Compensation Plans
7.Have a Lawyer Review your Compensation Plan
8.Customer Service
9.Corporate Marketing Personality
10.Fast Growth

While these challenges are not in any particular order, they carry differing levels of severity. For example, Adequate funding is required to keep a company in business. And while a compensation plan can become a major obstacle to the success of the organization, it isn't too difficult to creating a good one.

Let's suppose you want to build a house and have borrowed $150,000 to complete the project. You have $50,000 of your own money to add to the mortgage and expect the house to cost no more than $200,000. During the construction, you found a few unforeseen problems. While digging the basement, a water spring was found that had to be capped and routed to a different part of the property. Cost: $8,000. Lumber prices rose 30% from the time you started the project. Cost: $12,000. You upgraded the carpeting hoping to make up the difference in other areas. Cost: $9,000. As you near the end of the project, try as hard as you can, you can't get the house complete without another $40,000. You've already borrowed as much as you can to get the $150,000. You have no more money of your own. What will you do?

So it is with starting a business. Many well-intentioned entrepreneurs embark on a long journey to prosperity full of hopes and dreams. As they journey along the road, they hit a few "springs", and find many things costing far more than expected. They make a few mistakes, which are expensive to fix, and soon find they didn't budget enough money to get the business off the ground. These people always come from the experience learning a golden rule of business: Know how much money you need and secure the funds before you start.

How does a person find enough capital to start an MLM business, and how much does he need? Nobody will be willing to risk his or her money without a plan.

Common sources for funding include:

• Home Equity financing through banks, savings and loans, etc.
• Venture capital organizations that specialize in helping new businesses. This type of investor or investor group will expect a significant ownership position for taking the risk. Venture capital groups are found by networking with financial planners, accountants, bankers, and merger/acquisition specialists.
• Private investors, including friends, business associates, friends of friends, etc. Find them by networking with everyone you know. Talk to financial planners, accountants, business owners, etc.
• Small Business Administration, or other federal and state agencies. These agencies will either loan the money, or guarantee a loan through a bank. In either case, you'll need to be able to pay back the loan on a set schedule.
• Local community bond funding. Some communities, especially those with high unemployment, work aggressively with businesses to acquire funding for starting or expanding. Contact local county and state agencies to see if programs are available in your area.
• General Financing from banks. Banks will often lend based on credit history and assets with a personal guarantee of the business owner or another creditworthy third party.

Don't become impatient and launch the business without the necessary funding! How much funding is necessary will depend on your business plan. Some companies start for as little as $10,000, while others find they require several million dollars. As my father wisely told me when I started Jenkon, consider every dollar in the beginning as being worth five dollars later on. Save your precious start up capital as if your life depends on it.

The business plan is the blueprint of your success. Companies that are successful without a plan gain their success more by accident and luck than by design and thought. Which type of success do you want? Are you willing to trust luck for your success? A business plan is a "first creation" of the business, just like an architect's blue print is the first creation of a beautiful home. A good architect will plan out every detail of a home long before the first shovel of earth is moved. So it must be with any MLM business. You must become a business architect before you build the business.

Another aspect of the business plan is that it is often used to attract potential investors, lenders, and vendors. No investor will be willing to risk his or her hard-earned money on a business venture without a well-designed plan. You shouldn't either! As you establish credit with vendors, they will be more generous granting credit if they can review a well-prepared business plan. Remember, that any credit granted by vendors reduces your starting capital requirements; if your manufacturer is willing to extend 90 days terms up to $100,000 for product, you will need $100,000 less to start.

Key elements of a business plan should include:

• An Overview: One or two pages describing the business will help a potential investor become interested in learning more of the opportunity. If an overview is missing, few investors will be interested enough to take the time to read the entire plan. The overview should describe the products or services being sold, the principals involved, funds required to launch, and estimated return on investment, both conservative and potential. This overview is also known as the Executive Summary.
• Background of Principals: A summary resume of the owners and executives of the company is a critical part of a business plan that will be read by investors, banks, and other trade creditors.
• A mission statement that clearly identifies what the company is all about should be included. It's been said that distributors will work for money, but kill for a cause. Your mission statement should be something you can proudly display in literature or on a wall plaque. A corporate motto might be taken from the mission statement. Most mission statements are expressed in one or two paragraphs. Find samples of mission statements in annual stockholder reports of many public companies. There are a number of books available that also teach how to write and use a mission statement.
• Goals and objectives should be identified and each should spring from the mission statement. Goals might reflect the level of customer satisfaction, order turnaround, staff efficiency, but most certainly sales and profits.
• A market analysis must be done to determine the potential of the product or service, priced as it is to be priced. The analysis should address market demand, similar products and how they have been accepted and marketed, competition, etc. This information can be found in libraries, universities, and other business consulting groups.
• The Small Business Administration has access to large amounts of information, or people who can get the information for you. Many universities have students who would love to do market research for businesses, often at no charge, for their MBA requirements.
• Implementation plans: How much office space will you need? How many employees will be needed to handle the expected business volumes? Warehouse space, telephone equipment, initial product orders, printing, distributor kits, videos, and scores of other issues must be addressed in as much detail as possible. This section may be the most important section of all and is usually the one people try to gloss over. It's more fun to make sales projections than to figure out how much office space is needed. Yet, one major mistake in this area can cost tens (or hundreds) of thousands of dollars. This part of the plan takes time, often several months. Time spent here will pay large dividends in the future.
• Projections: Profit/Loss and cash flow projections are critical to every business plan. A competent consultant or accountant can assist in this effort by identifying common areas of expenses for new start-up businesses. With computer programs like Lotus 1-2-3, Microsoft Excel, and other spreadsheet analysis systems, many different scenarios can be created once an initial spreadsheet format is built. Always prepare a pessimistic "worst case" scenario, a middle of the road scenario, and an optimistic (but realistic) best case version. As you develop your business plan, always plan on the conservative side, but be ready to upscale into the more optimistic version should the need arise. Remember that if your investor has read the overview, the next thing he'll want to know is how much money is needed. These projections are critical to a prospective investor. Return on Investment Analysis is important for those investing into the business. This is why they would want to take the risk. Attractive charts and graphs are essential. This section answers the investor's question of what's in it for me?
• Risk Analysis: Careful study of the risks involved should be explained in this section. While not intended to "turn off" a potential investor, most investors will do their own risk analysis but with only the bits and pieces of information available. This is an opportunity for you to address the potential concerns of an investor in a positive and controlled fashion. If you don't need an investor, this section will make your business plan more bulletproof. No plan is viable that hasn't addressed the potential points of failure and risk.

Once the plan is complete, bind it so it can make an attractive presentation. Include a table of contents, index tabs, and an impressive cover. Don't put the plan on the shelf! Use it in each manager's meeting, refer to it like the corporate bible. Change it when needed, but follow it carefully.

Part of the business plan, of course, is to plan to be a profitable company. It's amazing how many companies fail to plan to be profitable. A general rule might be:

• 40% of income should be set aside for commissions to the field.
• 20% of income should be set aside for cost of goods or products.
• 20% of income should be set aside for administrative expense such as payroll, facilities, utilities, etc.
• 20% of income for profit.

No business can rise to the pinnacle of success and sustain it without effective management and leadership. It's been said that leadership is doing the right things. Management is doing things right. Yet, the graveyard of free enterprise is littered with the bones of companies who were poorly managed or poorly led. Most often, the mismanagement started with an enthusiastic business owner with little or no experience believing that he or she could handle the job. While there are many who launch businesses very successfully, there are few that have the skills to sustain the success.

A wise business owner must be honest about his or her shortcomings and hire talent that makes up the difference. He or she must then empower the hired talent to do their job effectively; don't hire skilled people and then ignore their wisdom and talent!

The role of the business owner becomes leader once effective managers are empowered to handle the operations. Leadership becomes one of planning, reviewing results, promoting, and motivating. Let the managers do their job according to the business plan. It becomes the yardstick to which the managers are accountable.

What NBA basketball team would recruit a new player, place him on the floor his first day, and expect him to perform like the rest of the team? Without training with the rest of the team, his performance, at best, would be mediocre. At worst, disastrous, and the game would be lost.

Such it is with any new employee, especially if the whole staff is new as in a new business launch. Who should train them? What should they be trained to do? How do we know if they have completed their training? These questions need to be addressed individually:

Who should train new employees?
Don't let the old adage, the blind leading the blind be said of the trainers. If you are a new start up company, find very competent people for each department and have an experienced general manager orchestrate the various departments like a symphony. Don't be led into the trap of saving money on inexpensive workers in the beginning; it will cost far more than it saves.

One critical department that needs to be trained is the Order Processing department. This group is charged with taking orders over the phone and receiving orders by mail and FAX. They are in constant contact with field distributors and portray an image of your business to everyone they talk to. If you hire educated, warm, and friendly people, your image will also be such. If you hire minimum wage clerks to take orders, they will portray a much less impressive image. These people need to be screened during the hiring process for personality traits, patience with frustrated callers, and their ability to think on their toes. They must be trained by others employees who are of the highest level of competence; don't let them receive training by less experienced peers.

The second most critical department is the Distributor Services Department. Each person in this department will handle problems, complaints, inquiries, and a thousand other issues that arise. These people must comprise an elite "SWAT" team with an obsession for customer service excellence to the field distributors. These people must have a similar obsession for excellence.

Where will you find experienced people to do the training if your company is just starting? Look to consultants (a list is provided at the end of this report), trade organizations such as the MLMIA, and the DSA for names, and advertise in industry publications. Executive search firms can often be fruitful as well.

What should they be trained to do?
As an experienced person is hired to supervise a department, their first task is to design and document a "system" or method of operation. For example, to process sales orders, a diagram of how an order must flow through the office could be created. Exceptions should be noted with a flow chart or diagram to handle each. What should an order entry operator do if the credit card is declined while the caller is on the phone? What should a warehouse person do if some of the products ordered are not in stock? Every conceivable problem must be documented in advance with an appropriate solution. Policies need to be documented and organized into a handbook for the staff. They might even be put "on line" on the office computer system for instant look up. Professional MLM consultants can be an invaluable source to help prepare these flow charts and documentation.

Once the systems, policies, and procedures are documented, training can begin. With documented systems in place, training proceeds quickly and thoroughly. Without systems, policies, and procedures, training can never be complete, and takes many times longer.

How do we know if the employee has been trained?
An evaluation process should be established which takes a new employee through a sequence of duties and responsibilities. For example, an order entry operator might be required to take ten phone orders with a supervisor at his/her side before being allowed to take an order alone. A distributor services rep might not be allowed to handle commission related questions until they have explained the compensation plan to the department supervisor thoroughly, top to bottom. In summary, each department must also establish a minimum level of competence before allowing an employee to perform their assigned tasks alone. Until then, they are "buddies" with another peer or supervisor. Many companies have tests that are taken and scored which focus on the various objectives each job has. The best tests focus on objectives rather than on the mechanics of the job.

In the section on training, I addressed the need to have good "systems" that, if followed, comprise the methods to handle each type of business transaction, whether the transaction is a sales order, a phone inquiry, a complaint, or the return of product for a refund. Computer systems in Multi-Level Marketing companies become the glue that binds the office departments together, a "core around which the business is built. No successful MLM Company has ever sustained their success without a well-designed computer system. Likewise, there are many MLM companies that have failed due primarily to the lack of a good computer system. Don't let your new venture become just another statistic. Choose your software vendor wisely.

What is a good MLM computer system?
There are three major pieces to any computer system:

• The equipment or "hardware" is comprised of the main processor which does the "thinking", disk drive to store the business information, work station screens, and printers for reports. Fortunately, the cost of equipment has declined drastically in recent years while the performance or capacity to process business information has increased many times.
• The operating system software makes the computer work when you turn it on. It comprises the programming language that the business software is written in, the commands necessary to create a back up tape of the data to avoid losing all the information, and many other commands necessary to simply keep the computer working as conditions change. Without an operating system, the computer is nothing but plastic, metal, chips, and silicon. Operating systems include MS/DOS, UNIX, PICK, VMS, AIX, and scores of others.
• The application software is the most important part of the computer because it is the piece that determines how you will run your business. The hardware and the operating system are of little importance compared to the application software. This software provides input screens for order processing, creates your commission checks, prints downline genealogy reports, and provides look up information to handle distributor inquiries when they call the office. In short, this software is the core of running your business successfully. It will make or break an MLM business.

The greatest challenge companies face in this area is to think they can save money by writing their own software. This can take months or years, it can never include the experience and know-how that packaged MLM software contains. Why reinvent the wheel? Would it be worth the risk of losing the business to poorly designed software resulting in incorrect commission checks, errors in tracking a person's downline records, lost orders, and so forth? Those companies that elect to write their own MLM software often find later on that they are vulnerable to the programmer who wrote it. What if he moved away, or became injured or sick? Never let someone convince you they can program an MLM software system in weeks or months. It's never been done successfully before. Why should you believe it could be done, now? Companies such as Jenkon have spent many years writing MLM software that works right the first time, every time, and offer it to the public for a small fraction of what it costs to create it. It's the best money you'll ever spend.

How do I choose a good MLM software package?
While this report does not have the space to address this subject fully, a few suggestions should be noted:

• Choose a reputable vendor. There are many fly-by-night software companies that make many claims of experience, know how, and software gadgetry. Unless you are willing to be a guinea pig, choose a vendor that has developed a proven track record. Track records are built over many years of working with MLM companies, not just selling a software package a few times. Indeed, only having a small handful of clients may speak more about a company's persuasive abilities than their actual know how and skill. Above all, check out at least six references. Remember that vendors will be eager to provide only their best references. Always get the names of other companies from these first references that you might call. You might be surprised to find a different story when you call companies not included in the reference list.
• Visit the Software Company's office. When you choose an MLM software package, you not only choose the software; you also choose the vendor's support services. If the vendor is not able to provide support services acceptably, what will you do when you need to change your compensation plan, or add a new input field to the order entry screen? Jenkon has serviced over 500 MLM companies since 1982 and has yet to find one company that has not needed support services. There is only one constant among all MLM companies - they constantly change things! While at the vendor's office, meet the vendor's people that will service you. What kind of people are they? How long have they worked for the vendor? If you find they are relatively new, either the vendor has little experience, is growing rapidly (in which case you may have trouble competing with other clients for good service), or has high staff turnover. All these can mean trouble for you, as the vendor may not be able to handle your needs quickly and competently. Be willing to pay for experience and competence. You'll pay far less in the long run. If you think knowledge is expensive, try ignorance!
• Avoid very small software companies. Small software companies, to compete with larger established firms, must offer software at bargain prices. This often puts them on shaky financial ground during their most critical years. Many MLM companies, trying to save money by purchasing software from these small software houses, find themselves virtually abandoned later on when they need assistance. The problem is that servicing one highly successful client can consume virtually all of the human resources of a small software company leaving the other clients out in the cold. It can take months (or years) to train competent software technicians on an MLM software package. The more deadly problem, however, is that smaller companies tend to go out of business without warning. The MLM industry is especially brutal on small software companies and has caused a number of firms to close their doors leaving their clients high and dry. If you value your business, stay away from the small vendors and stick to those with staying power and track records.
• Buy a software package that allows you to create your own reports. Many packages force you to live only with those reports they put on the menus. Managers must resort to running large reports to answer small questions or concerns instead of small exception reports on demand. Small exception reports can be reviewed quickly and accurately. Large general-purpose reports can take hours to review and digest; this is not a wise use of a manager's time. The computer industry has adopted a standard in modern software engineering that allows non-programmer users to type free-form queries on a computer terminal. In response, the computer provides specific and focused information according to the query. For example, suppose a manager wants to see a list of all the distributors in Florida with a group volume of $5,000 or more. Most modern software systems would allow the manager to type a relatively simple command sentence to obtain the report.
• Make sure the company can program your compensation plan. Compensation plans are complex and take massive amounts of experience to program properly. When you have your tax return prepared, do you go to an inexperienced person, or do you find the most competent one who is also reasonably priced? Compensation plan programming is not something inexperienced programmers should be doing.
• Do you plan to expand internationally someday? If so, choose a software package that incorporates international issues such as currency conversion, language translation, cross border sponsoring, VAT tax reporting, and foreign address formats.
• Buy software that can work on bigger computers and a PC. While personal computers are terrific for starting a new company, they are not cut out for larger successful MLM operations. Most personal computers allow only one person to use the computer at any given time. Networks allow PCs to be linked together and can grow to become quite powerful and large. Networks are good but expensive. Minicomputers allow less expensive workstations to be connected to more powerful systems and are usually less complex to manage than networks. Most large MLM companies have either a minicomputer with several hundred workstations attached, or larger mainframe computers. In either case, if you expect to be successful, don't limit yourself by choosing software that only runs on PC computers. If you do, you will be forced to use networking to expand, the most expensive way to connect employees together.
• Compare features. Software is designed to handle specific business issues and often has a great deal of difficulty dealing with matters outside designed limitations. It's difficult to force a software package to do things it was never intended to do. Wise computer buyers compare features and capabilities, side by side, of one package to another. Ask the vendor which features they consider are unique to their package compared to others. A package that is missing an important piece will never be a bargain at any price. As you compare software packages, use the feature list of the package that has the most to offer as a guide and compare the features of the other packages against it feature by feature. You'll be quite surprised as to how many "holes" the other packages might have.

A compensation plan that fails to motivate distributors will stop a company fast. Some people believe that a good compensation plan is the key element to success. I have found this not to be the case as I've observed many successful companies reach very enviable sales volumes with poorly designed compensation plans. At the heart of the issue is the question what makes a compensation plan good? Let's address a few points:

• Reasonable compensation percentages. Most compensation plans of today pay between 30% to 50% to field distributors. If a company promotes a plan paying only 25% or so, they will have a hard time recruiting and keeping distributors. Real percentage pay out should fall between 35% and 42%, in my opinion. Theoretical pay out (the percentage the plan would pay if all commissions were paid out in every case) should not be more than 8% above actual to avoid disappointing distributors expecting more.
• Keep it simple. Many plans are designed by MLM professionals for MLM professionals. While experience is essential when designing compensation plans, one must never forget that ordinary people are the ones who must be motivated by it. The more complex a plan becomes, the fewer people it will motivate. The plan needs to affect the heart of a distributor first, before it can affect his pocketbook.
• Avoid novelty or "fad" plans. Changing a compensation plan is costly in terms of lost momentum and distributor commitment. When a distributor recruits another person, the compensation plan is often a significant part of the selling process. To change it later is, in essence, admitting that the original plan was not very good after all. Some people may perceive the change as a "bait and switch" tactic. By staying within more traditional plans, plans that proved themselves over the years, a new MLM company can still be innovative but know that the plan has staying power. It's often joked that compensation plans are like men's ties; when one plan goes out of vogue, you can count on it coming back a few years later. Stick to more traditional plans that won't need to be changed as new fads come and go.
• Don't put too much credence in the impact of your compensation plan. Many entrepreneurs come to Jenkon convinced that they have the best possible compensation plan imaginable. When asked what product or service they will sell, many respond, "we're still looking for the right product." Obviously, these well-intentioned people have focused on only one issue of starting their business thinking that the compensation plan is the key to their future success. The facts, however, are different. Many companies have gained great success despite badly designed compensation plans. Put simply, the plan is only one part of the puzzle; it isn't the only part.
• Don't change it often. Those that experiment with the compensation plan are asking for frustrated distributors to join other more stable opportunities. Even good change can be traumatic. Be very reluctant to change the plan.
• Avoid recruiting "heavy hitters". These very successful MLM professionals can bring tremendous short-term success but can also be a major cause for failure when they grow bored with your company and join another, often taking thousands of their downline with them. Wise companies always build slowly for the first few years until they have the critical mass to handle changes in business volumes. Don't design your compensation plan to focus on attracting these heavy hitters.

While a compensation plan may motivate distributors, unless it is acceptable by every state or country where it will be used, it could put the company in jeopardy. There are many legal statutes that must be complied with in order to carry out an MLM business in any state or country. Those affecting Multi-Level Marketing vary and are well beyond the scope of this report. Several major points, however, should be discussed:

• Nobody should profit by recruiting another person. Pyramid schemes are illegal and allow distributors to profit simply by recruiting people. Many companies avoid pyramid statutes by paying commissions solely on the sale of product (or services) and stipulating that people are not required to buy any commissionable product in order to join. Never pay commissions on distributor kits or other materials purchased as a condition of joining the company.
• Have a generous return policy. Inventory loading is a term used to describe a distributor who buys too many products, more than can be sold in a reasonable period of time, to qualify for higher commission percentages. Many states have acted aggressively against this unethical practice. Many companies, to avoid any association with inventory loading, have instituted generous return policies allowing customers and distributors to return unused product. The Direct Selling Association (DSA) has recently established a requirement for all company members to offer a 12-month, 90% buy back policy. Most companies are now adopting this rule and deduct commissions from distributors and their uplines when products are returned. Incidentally, automatic calculation of commission adjustments for returned product is often considered a major requirement in a software package. Otherwise, it must be done manually costing hours of wasted time and leading to embarrassing mistakes.
• Sell products and services at a real market price. If your product or service can't be sold unless an MLM compensation plan attached, regulatory agencies will eventually take action. Imagine selling toothpaste for $10 a tube, but paying out $9 in commissions. While some people might be attracted to this scheme, it will most certainly demand the attention of consumer protection agencies as well.
• Make no claims of income. While it's a tremendous temptation to explain the potential income available in your new venture, avoid it at all costs. Regulatory agencies are notorious for video taping distributor meetings to gather evidence of unsubstantiated claims of income. If you mention any income statistics, then mention also the average income. It is not enough to simply tell the truth in this case. You must also avoid setting unrealistic expectations.

Many companies enter the industry thinking they sell business opportunities and their products. They soon learn that they sell a third product, one of immense power: customer service. Distributors are fickle and seem to join the company that offers the most. One great discovery of our age, however, is that people love to be served well, and their loyalty is placed on those who service them best. Some MLM companies find their average distributor stays active only six months. Others find it is several years. What's the difference between them? It's not the compensation plan. It's not the products they sell. Instead, it is how well the distributor is served.

Excellent customer service does not come by accident. It is the result of well thought out plans and hard work. It starts by having a very committed Distributor Services Manager empowered to implement the necessary systems, policies, and procedures to achieve excellence. The Customer Excellence System (CES) must comprise at least four areas:

• Customer Information Data Base
• Follow Up Systems
• Satisfaction Measurement
• Work Load Monitoring

Customer Information Data Base
In today's modern business, customers have very high expectations for service. When a distributor calls the home office to ask for information, they expect to receive their answer immediately, not an hour later. With a customer information data base, the service rep on the phone can instantly access information that would otherwise take minutes or hours to find. The goal of any customer information database is to know everything possible about the distributor that might be the source of a question. From order status to commission problems, the customer service software must provide instant answers to distributors as they call the office.

Follow Up Systems
If 1,000 distributors were recruited this month, and 10,000 distributors had already joined, how many phone calls would they place with the home office? Statistically, well over 1,000 phone calls would need to be answered by professional, courteous, and competent office staff during the month. Of the 1,000 calls, how many would require a "call back"? It depends entirely on the quality extent of the customer information database. The better the on line information, the fewer call backs necessary. The goal of a good customer service system should be to have less than 5% of the calls requiring a call back. If 30% of the calls required callbacks, there would be at least 300 opportunities for not following up and finishing the call.

Any customer service system that strives for excellence has a means of tracking each phone call to completion. Open calls can be tracked and aged with priority given to the oldest calls, or to the most important distributors. Such a system, often called an Event Management System, becomes the hub of any professional customer service system. In essence, it tracks every inbound phone call from the field and makes sure that each call is answered quickly. It provides the department manager with the reports needed to avoid having a call "open" too long.

Satisfaction Measurement
If you don't know how well your customer service people are doing, then you don't know how your future will be. If they are doing poorly, the company is doomed to failure. If the distributors rave about the excellent service they receive, you can be assured of future success. A customer service system must include the ability to track satisfaction levels. How is this done?

When a distributor phone call is logged and closed, a follow up call is placed, or a survey letter mailed to the distributor asking:

• Was your call answered in a timely manner?
• Was the customer service representative courteous and professional?
• Was your question answered to your satisfaction?

Complement an "on the road" campaign with effective videotapes that motivate, sell, and train. While nothing can substitute for being with them, videotape is the next best thing.

What businessman would start a new company and stay in the office waiting by the phone for customers to call? Time after time, the most successful MLM companies have proved the effectiveness of having corporate marketing people hold meetings on the road. Distributors need contact with corporate people for motivation, training, and especially, to help them recruit. There is no substitute for being in the field. Your success will be greatly enhanced by putting highly motivated corporate personalities "on the road".

While most businesses would give their right arms to grow at exponential rates, MLM has a track record of just that. Unfortunately, this kind of growth has often been a major demise of many otherwise successful ventures. Success is wonderful, but it can bury you.

New businesses have new staff, new computer systems, new facilities, and are short on the experience to handle business efficiently. An office can only handle a certain volume of business. What if that volume is exceeded? Something must give. Many companies go on a spending spree, throwing money at their problems. While growing, cash seems to be unlimited. This too, is a false security, for as surely as the growth came, it will level out, and eventually go downward for periods of time. It is far better to limit growth temporarily, than to succumb to its demands.

How can an MLM company control its growth?

• Start locally by not accepting distributor applications from everywhere. Distributors who seek to join from unopened regions are simply given a courteous thank you letter. Let them know how much you want to have them join, but that the opportunity isn't available yet in their area. Notify them when they can join.
• Don't sponsor road trips by corporate or field promoters. Take advantage of the less expensive local opportunities, first. Meetings can be held locally every night of the week for the cost of one meeting on the road.
Don't recruit professional MLM promoters or big hitters. If they want to join, then they must join as any other distributor. Don't, however, go out of your way to recruit them.

by Dan Jensen, Jenkon International, Inc.

1.Direct Selling Plans

• Traditional Direct Selling
  One on one, the distributor sells direct to the consumer and earns commission on those sales. Management is limited and often appointed. Sponsoring is not aggressively pursued except by those in sales management. Retail commissions are a large percentage of sale and are paid to the Distributor/Agent or retained in cash payment. Example: Rainbow Vacuum sales.


• Party Plan
  A one to many sales environment with the distributor arranging sales "parties" typically through a hostess. Distributor earns commissions on the inventory sold directly to retail customers in the party. Sales management is usually shallow. Distributors can often promote themselves to management through their recruiting and sales efforts though higher levels of management are often appointed. The distributor recruits other agents and hostesses who hold parties and recruit retail customers. Hostess receives purchase credit for efforts based upon party success. Generally, there are several levels of management commissions but only a small percentage of total sales dollars is paid to management. High retail profits (35 to 50%) are common. Example: Tupperware

2.Network Marketing / MLM Plans

• Stair-Step / Breakaway
  Characterized by distributors who are responsible for personal and group sales volumes. Volume is created by recruiting and retailing products. Various discounts or rebates are paid to group leaders. A group leader can be any distributor with one or more downline recruits. Once personal and group volumes are achieved, a distributor becomes a manager, and "breaks away" from their upline manager. From that point, the new manager's group is no longer considered part of his upline manager's group - hence he is called a "breakaway". Managers receive commissions on the group sales of their downline managers which often becomes the majority of their earnings. These plans pay unlimited commission on limited downline groups. This is the most common type of Network Marketing plan.
  
• Uni-Level
  Often considered the most simple of compensation plans, Uni-Level pays commissions primarily based on the number of levels a recipient is from the original distributor purchasing product. Commissions are not based on title or rank achieved. By qualifying with a minimum sales requirement, distributors earn unlimited commissions on a limited number of levels of downline recruited distributors. Typically, there is no sales management position to achieve. Example: Kaire International, Inc.
  
• Matrix
  Similar to Uni-Level plan except there is a limited number of distributors who can be placed on the first level. Recruits beyond the maximum number of first level positions allowed are automatically placed in other downline positions. Matrix plans often have maximum width and depth. When all positions in a distributor's downline matrix are filled (maximum width and depth is reached for all participants in a matrix), an additional matrix is started. Like Uni-Level, distributors earn unlimited commissions on limited levels of volume with minimal sales quotas. Example: Melaleuca, Inc.


• Australian or 2-up Plan
  Based on a large commission on unlimited depth of a small amount of a distributor's total group. Large scale recruiting is necessary to drive the program. The distributor gives up the first two of his/her recruits to their qualifying upline. This pass up may move through an infinite number of levels. Typically, sales management positions are minimal. Volumes accumulate through unlimited depth but limited width. Earnings are unlimited.


• Binary
  Requires distributors to constantly assess their personal recruiting and sales management. Distributors activate Income Centers (also called Business Centers), then recruit distributors into each one. Income Centers can be considered a distributorship entity or business. Volume in each Income Center accumulates on each of it's two legs (only two legs are allowed per Income Center - a left and a right leg). Successful distributors in a Binary plan must constantly watch their downline to ensure volume accumulates evenly. Compensation is made at fixed intervals of evenly accumulated volume up to a threshold where the maximum payment is made during a pay period. Volume accumulation starts again in the next period after maximum payment. Binary pans pay limited commission on unlimited levels of volume.2

By Dan Jensen, Chairman, Jenkon International, Inc.

As one looks at the bottom line on a profit and loss statement, one quickly realizes the largest cost factor is for commissions. For many companies, this ranges between 30% to 50% of revenue. While executives search for ways to reduce expenses, "commissions" is seldom touched because it drives the motivation and loyalty of the distributors. Cut the commission check and distributors leave. Increase commissions, and distributors are more motivated (theoretically, at least), but the bottom line suffers dramatically.

The real question an executive should ask is not "how do we reduce our commission expense?", but rather "are we wasting any incentive dollars?". If there was an accurate way to measure it, I believe many companies would find they are wasting between 10% to 50% of each commission dollar. In other words, incentive money is being spent without any resulting behavior or effect.

Identifying wasted commission dollars

In our last newsletter, I described five foundational objectives or behaviors a compensation plan should include. These are:

1.Sell product to end consumers (retailing)
2.Build organizations (recruiting)
3.Build Managers (people who train others to sell and recruit)
4.Build Sales Leaders (people who train others to manage)
5.Retention (keep them active)

Step 1 - Is it accomplishing the five basic objectives in a balanced manner?
As you look at your compensation plan, determine how well it accomplishes these fundamental objectives. Figure out where it's weak and where it's strong. For example, suppose you look at your plan and realize that there are few incentives to retail product. Symptoms might include garages full of inventory or distributors who have to sell product to other distributors because they bought too much. Perhaps distributors focus on recruiting but fail to train them how to sell the product. As you look at the plan, you realize that the retail profit is poor (maybe only 20%) and that the presentation of the plan doesn't emphasize retail profits as part of the overall compensation system.

Try making a chart like the one below to see how each commission type contributes to the desired behaviors (your types of commissions may be very different than in my example):

by Dan Jensen, Chairman, Jenkon International, Inc.

Breakage is defined as the commissions left unpaid each month compared to the theoretical maximum of the plan. If a compensation plan pays a maximum of 45% but the actual pay-out is 35% each month, then the breakage would be 10%. On the surface, one might suggest that breakage is unfair, unethical, or at the very least, misleading, considering a plan that represents itself as paying 45% but actually pays 35%. Upon further study, however, a plan which uses breakage wisely will reward the producers much more generously than one without Breakage. It allows a company that can only afford 35% for commissions expense to pay perhaps 45% or more to the distributors doing the greatest amount of work. Breakage can be a strong competitive advantage if it is used correctly and for the right reasons.

Objectives for breakage in a plan
Every piece of a good compensation plan has a specific purpose or desired result. With breakage, we want to:

• Keep the total commission expense at or below a target maximum. If we can only afford to pay 30%, with breakage we can often afford a plan which can pay out up to 35% to 40% (or more) to the productive distributors.
• Reward specific behaviors which are most desired by the company such as recruiting, retailing, building managers and leaders, and retention. (See my Principles of a Successful Compensation Plan)
• Reward those who exceed minimum levels of performance more than those who don't.
• Avoid rewarding distributors who fail to perform consistently.

The benefits of properly using breakage

• Breakage is applied by imposing reasonable rules to qualify for commissions. If a distributor fails to perform at a desired level, the commission that he would otherwise receive is retained by the company. For example, if a distributor failed to meet his $100 minimum personal volume requirement, the company might keep his commissions instead of paying them to another distributor. This allows the company to pay more to other distributors who are meeting or exceeding the desired level of production. In essence, the company withholds commissions for lack of performance and increases the compensation of those performing well. The advantages are obvious.
• Distributors who meet or exceed expectations are rewarded more generously using commission dollars that would have been kept by distributors who are performing less.
• The company can afford to pay more than they could otherwise afford expanding the capacity of the plan to provide incentives for desired behavior. The company gets more of what it wants (desired behavior) and the performing distributor gets more of what he wants – compensation and recognition. Breakage can be a win-win deal for both company and distributor.

1.Bob, a breakaway manager, fails to meet his minimum $100 personal purchase for the month. He would have otherwise received a 25% commission of $200 on his group volume. Rather than paying it to his upline, Bob's $200 is retained by the company. The company determines that about 1% of total pay-out is retained from unqualified managers like Bob each month. The company decides to put this 1% into a bonus pool paid to every distributor who sponsors at least three people in the month. For each new recruit, the participants in the bonus pool receive one share of the pool. The company happily discovers that redirecting the commissions into the pool has resulted in a 10% increase in recruiting and a 4% increase in sales volume for the fiscal year from those new recruits. Equally important, over $100,000 has been paid to those distributors recruiting three or more people in a month making a number of very happy and committed distributors.

2.After a recent compensation plan change, the plan calls for a 4% first generation bonus to managers who achieve $100 in personal volume and $1,000 in group volume. If a manager achieves $2,000 in group volume, the commission is increased to 7%. When the 4% is paid instead of the 7%, the company retains the difference as breakage. The company has determined that about 25% of their managers achieve the $2,000 GV level, so they pay out the 7% 1st generation bonus about 25% of the time. The total 1st generation bonus paid is about 5%. In their old plan, the company paid out a 5% 1st generation bonus if the manager achieved $1,000 GV. In their new plan (4% - 7%), they pay out the same commission but have found a 50% increase in managers achieving $2,000 GV each month. They can afford to pay 7% to the higher producers out of the 1% obtained by lowering the original 5% to 4%.

• Shallow company downlines: Companies that sponsor wide and new start up operations find a "windfall" in the commissions left unpaid because there is no upline to pay them to. Be careful, however, because as the downline grows and matures, this short term windfall diminishes.
High end titles and ranks:
• Many companies implement plans where the top end ranks or titles are achieved so rarely that few, if any, collect the corresponding commission benefits. These unpaid commissions provide breakage until more and more leaders achieve these higher titles and collect the commission benefits.

Finding breakage opportunities in your plan
To determine where your breakage opportunities are, follow these steps:

1.Write down each type of commission your plan pays and what it's maximum pay-out could be. For example, if your plan pays out 5 generations in the "back end" of 5%, then your maximum generation bonuses total 25%. Try to identify each individual type of commission such as 1st generation, 2nd generation, group volume bonus, etc.
2.Determine how much each type of commission actually pays out. Jenkon's Summit V Commissions Module provides standard reports each month that provide this valuable information.
3.Subtract the actual pay out from the maximum for each commission type. The difference is your breakage.

1996 Leonard W. Clements

"Questionable" MLM programs continue to flood the market at a record pace. But unlike their predecessors, they're hiding their true nature better than ever. Many quasi-pyramids and money games today are taking great advantage of the ignorance of most people as to what constitutes an illegal pyramid. Please understand, I do not use the term "ignorance" derogatorily. The term comes from the word "ignore" and many of us are simply ignoring two basic, simple facts that make up a composite of a typical pyramid scheme. Also, understand that I am not an attorney, an attorney general, or a postal inspector. But I know what questions they ask, and so should you! One of the most common, and least accurate, questions we're taught to ask is, "Is there a product involved." Terrible question. Almost every pyramid out there today has thrown in some kind of token product knowing you'll ask that question. Some extremists will go so far as to tell us that the "service" they provide in exchange for your fee is their administration of the intake and outgo of cash. Some will claim you are paying to have your name added to a mailing list! Of course, the typical chain letter leads you to believe you are paying for a report of some kind. However, there are literally dozens of schemes out there that are not nearly as obvious. Some offer what appears to be an abundance of bona fide, tangible products.

One of the best examples I can recall was a program called The Ultimate Money Machine. For $300.00 you were to receive such items as luggage, a 35mm camera, and a seminar on cassette tape valued at, of course, hundreds of dollars. Well, the camera was a cheap, plastic job that Sports Illustrated couldn't give away, and the luggage you unrolled from a tube. Total cost to the company for all of these products was probably less than ten bucks!

A program called Euro-Round required a $100.00 payment in exchange for nothing. Later, to "make the program legal," they added a little book.

Remember Marathon? Here you were asked to invest over $2,000.00 for a series of cassette tapes and some literature. The participants claimed that "education was priceless." Let's give them the benefit of the doubt and say the information may even have been worth the $2,000.00. I guess it's possible. Unfortunately, this was an ongoing monthly fee! Were the tapes and literature supplied by Marathon worth over $24,000 to a participant who'd been in for a year? Probably not.

Several companies today offer product vouchers or certificates that can be spent on items out of a catalog or from various local merchants. They then claim to be offering "thousands" of products. Uh uh. They are only offering the funds to purchase these products from third-party, unrelated vendors. How many folks do you know that would be willing to purchase a $200.00 product certificate for $200.00 cash?

So don't just ask if there is a product involved. Question whether the product is even close to being worth the overall price paid. You don't have to be an economics genius to know the answer. Just ask yourself this question:

"Would anyone realistically ever purchase this product or service without participating in the income opportunity?"

Thousands of people purchase products from such companies as Nu Skin, Watkins, Herbalife and Amway every day without becoming distributors. They just want the product. This is true for most of the MLM companies out there. But ask yourself, Would anyone have ever subscribed to Washington Power Digest for $125.00 per year just for the publication alone? Very few. Did many people pay over $350.00 to Consumer's Buyline just for the $39.00 discount buyers service? Doubtful. How many folks would pay over $30,000 for a two day seminar in the Bahamas, as was offered by CommonWealth and several other such schemes? Unless it was one helluva seminar, probably no one.

Another consideration would be whether or not there is any kind of financial reward for just the act of recruiting. But this question is trickier than it seems as well.

For example, what if a product based company also offered upline commissions on sales aids and training fees? Wouldn't it then be possible to earn commissions by just signing up new distributors and getting them trained and ready to do the business of selling the products long before they've actually sold any products?

They key question here is, Does the product or service have value to someone who just wants the product or service? Is it retailable? Again, would someone pay for it even if they were not a distributor? So, would someone go to your company's distributor training meeting or buy your company's brochure if they were not going to participate as a distributor? Of course not. Does the company claim you only have to make a one time purchase? I've seen several programs recently where they claim you pay once, then sit back and wait for the residual income to roll in. But think about that. Where is the "new" money coming from? Obviously they can't pay out more than they take in, so the only way the program can continue is if people keep recruiting. So, even if the "one time" fee is for a perfectly legitimate, tangible product of reasonable value, and upline commissions are only coming from that purchase, it may still violate the principle of a financial reward for the act of recruiting. If youÕre not convinced, then ask yourself this question:

"If all recruiting stopped today, would this company still be able to pay monthly commissions in the months ahead?"

If you only have to pay a one time fee in the beginning, then the answer would be a definite NO. Eventually all the existing funds would be used up and no new funds would be coming in. Commissions could only be paid if people continued to recruit. Whereas legitimate, legally sound MLM companies could continue to pay commissions from the ongoing buying and selling of their products.

So if you can't answer the above two questions with a confident, resounding "Yes," you should probably tell your prospective sponsor "No!"

Epilogue:
I want to make it clear that the previous article is not necessarily based on the author's opinion of the way it should be. It's simply the way it is. Personally, I believe we are all intelligent, mature adults and should be allowed to do what ever we want with our own money as long as there is full disclosure and we are made aware of the risks involved. Also, much of this discussion is based on years of precedent, not just my lawmen's interpretation of the law.

In fact, the roots of most MLM law is founded on the Amway vs FTC decision in 1979. Perhaps the single most defining characteristic of a legal network marketing company came from these hearings. Essentially, the question was asked...

"Can the last person in still make money?"

Obviously, the last person in a pyramid scheme (the most obvious of which have no product at all, only a cash investment) will never make a dime. But if you were the very last person to ever sign up as a distributor for Amway, Nu Skin or Shaklee, could you still make money? Of course. By buying the product at wholesale and selling it at retail. In some MLM compensation plans it would even be possible to earn commissions or bonuses based on national bonus pools, car allowances, or other prize awards.

If you were the last person to sign up in your MLM program, could you reasonably expect to be able to mark up the product or service and resell it to an end user? That is, someone who only wants the product or service.

Understand that I'm in no way suggesting that any company who might be violating any of the above three principles are necessarily going to be shut down. First of all, federal and state regulators don't go out searching for them. Usually, someone must bring them to the attention of the regulators. As long as the scheme is keeping people happy and no one complains, it could last for years.

There are also some very good, honest programs out there that might not receive a "yes" answer to one or both of these questions. For example, I know of one very promising program that does pay commission on sales aids. Again, that does not necessarily put them in dire jeopardy. If a regulator has a problem with this, they'll just stop paying commissions on sales aids. Most of the time, unless it's just an outright scam, the offending company will always be given the opportunity to fix the problem long before there are any serious consequences.


Leonard Clements has concentrated his full-time efforts over the last six years on researching and analyzing all aspects of Network Marketing. He is a professional speaker and trainer, and currently conducts Facts & Myths of Multi-Level Marketing seminars throughout the U.S., Canada and Mexico. He is also a contributing editor of Profit Now (previously published as MarketWave), an opportunity analysis newsletter focusing on the MLM industry. Mr. Clements is the author of the controversial book Beyond The Veil, an objective, no-holds-barred, insider's look at MLM industry. He is also the author of the best selling cassette tape Case Closed! The Whole Truth About Network Marketing, which has been labeled "the best" generic recruiting tape by six MLM company presidents. Mr. Clements has been involved in the MLM industry for sixteen years and is a successful distributor for a prominent MLM program (which is never mentioned in either the book or the cassette tape).

To receive additional information about MarketWave and its products, please call 1-800-688-4766, or write to MarketWave, 7342 North Ivanhoe Avenue, Fresno, CA 93722.

by Doug Cloward

Wolf, wolf, wolf! There are wolves in the flock! This cry of alarm from a self-proclaimed shepherd of the direct selling pasture is neither prank nor the effect of fanatic "sky is falling" hysteria. The wolves are among us in direct selling sheep clothing, and the shepherds have lowered their staff of defense.

The wolves of which I speak are those direct selling companies, DSA members and non, whose compensation systems are largely dependent on the revenues of fees they charge their distributors. They are companies whose consumer products cannot sustain sufficient margin to drive their sales organization. Therefore they seek to employ methods to "artificially build and support" their network salesforce with a variety of wolf schemes. Because we have not seen through sheep's clothing we have allowed these wolf companies and their tactics into the fold. Again, I call wolf!

Companies that resort to selling training programs, sales aids, kits and other business support tools to fund their businesses, knowingly or unknowingly, establish what amounts to a pyramid system. Systems that are dependent on the buy-in of newcomers to fund the profits for those who got into the deal earlier are using classic pyramid technology. In reality they are selling "opportunity." Often, the program requires some token business activity to qualify to share in the "booty" of the future participant's buy-in "investment." These types of compensation plans and their "legitimizing" requirements amount to the purchase of a position in a chain of participant fees. They are illegal, unethical and are putting the industry at great risk.

These wolf-clothing programs are often camouflaged with legitimate sounding names like "training bonuses, customer acquisition plans and coding bonuses." The name alone does not condemn the program as a pyramid "laundering" system, but all too often when we uncover this camouflage we find a wolf. And, we discover that the compensation is in reality tied to headhunting. They are hunting in your pastures.

A few of these wolves can devour a lot of "sheep" investments. Again, it is my opinion that these devices cross the line of selling product and enter the realm of selling business opportunity. Thereby they constitute a significant threat to the rest of the flock.

Shepherds awake! As "wolves" get into the pasture and feel free to feed on the hopeful aspirations of the sheep who flock to their "something for nothing" promises, more wolves will feel free to work this mayhem. They are excelling. We cannot continue to turn our heads and allow these practices to infect our industry. Nor can we assume that the policing is the sole responsibility of consumer protection agencies and organizations.

What is most alarming is the attitude some shepherds are taking. "Surely if they were wolves someone would have stopped them by now." "They can't be that bad. After all, they are a successful public company." "Our attorneys reviewed their practice and said it is okay, even recommendable."

And so the shepherds are lulled into a false sense of security and return their attention to their own flocks and ignore the encroaching wolves. Worse - some of the shepherds are actually considering the greener pastures they might afford by adopting the wolves' practices.

In a complex, competitive recruiting marketplace, short-term success at the expense of long-term principle has its allure. But, its cost, the good name and legitimate value of our products and channel of distribution, is too high a price to pay. We must not ignore nor succumb to the cunning deception of those whose rapid growth is fueled by a wolf system that will eventually fall and leave scars on the lives of its participants and the direct selling industry.

For those who are true shepherds, who are committed to the continued feeding of their flocks, who are so dependent on free access to the public pasture, it is time to raise the warning cry and the staff of defense. We must identify the wolves, drive them out.

We have a shepherd's union. We pay for mutual defense. Has our focus to keep the dogs at bay at the gate on the hill allowed the wolves to come in through the holes in the fences in the field? Should we reexamine the defenses and the priorities of our defenders?

Again, I call wolf, wolf! Do not wait to act until they are nipping at your heels and feeding on your sheep. It is time to get more specific with the code and more vigilant in enforcing its adherence.

Doug Cloward is President and CEO of Salesforce Development Solutions, a full service direct sales consulting firm. He is an industry expert in salesforce compensation. With over 20 years of direct selling experience as a distributor, corporate executive and consultant, Mr. Cloward's breadth of service brings a wealth of experience and timely advice. Doug can be reached at 851 East 1100 South, Spanish Fork, Utah 84660, 801-798-8874, 801-798-9504 fax.

by Jay E. Leisner, Sylvina Consulting

Many people think that the sole purpose of a business plan is to secure outside investment capital. However, this is only one of the two purposes.

A business plan helps demonstrate that you have thought through the business in detail and can show convincingly that you have a viable, profitable model. Before you spend time convincing others, focus on convincing yourself.

Some folks think that budgets are only for big companies. "We're bootstrapping the business. We don't have much money and certainly we don't have the time to create a budget. Our budget is to spend as little as possible to get this business off the ground."

A budget helps to identify not only the costs but also the items that you may need to purchase (including those for which you decide to defer the purchase). Before you spend any of your money, take the time to identify the items that may consume your money.

Writing a business plan forces you to think about the seemingly endless collection of details about the business you plan to launch. The exercise of writing the business plan is key to the process of working through the plan as you write it. The pain is worth the gain. You'll see what you know already, and you'll also see what you have yet to learn.

Having a business plan gives you a concise document to share with those you'll contact as resources to help launch your business.

If you have your business model reviewed by a qualified attorney, he or she may ask to see your business plan (and any other documents you've written about your business, such as your compensation plan).

If you choose to engage a business consultant to help you fine tune your business model, having a business plan will save you money in reducing the amount of time the consultant will need to spend to understand your business model.

When the time arrives to make decisions with respect to software, your software company will appreciate reading your business plan for it will help to identify unique requirements that may need to be addressed with software.

Don't view your business plan as a static document, once written, that shouldn't be changed. On the contrary, your business plan should change as you adjust your business model prior to and after the launch of the business.

Preparing a budget is first an exercise in identifying the major items that you'll need to purchase to launch your business. The process of assigning costs to each budget item comes next.

Deciding when to purchase each item is also important. Some items will need to be created or purchased immediately, such as a compensation plan and hostess program (if you'll be launching a party plan company).

During the excitement of preparing your business plan, don't forget about the legal aspects of your business. For a long business life, you'll want to make certain that both your products and your business opportunity don't violate any laws, as there are many laws that apply to direct selling companies.

Unless you're an attorney with experience with this marketing channel, don't presume that you already know what's legal. Engaging the services of a qualified attorney is a wise decision before you open your doors for business. While you may have a relationship with a general practice attorney, for your new business we strongly suggest you contact an attorney who has worked with other direct selling/network marketing companies.

Be sure to include the costs of legal representation in your business plan.

Other items, like software, sometimes can be delayed until the business is larger.

Working with a consultant can give you insights into what's possible and practical when launching a new company.

Jay Leisner is President of Sylvina Consulting, a business and software consulting firm with more than 18 years of experience working with over 150 direct selling, party plan, and multi level marketing companies.

For more information on Sylvina Consulting or to request a complete information packet including several white paper articles about how to launch a direct selling company, contact Jay Leisner at 503.244.8787 or visit www.sylvina.com

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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

• Les Produits Ont-Ils "La Valeur Intrinseque"?, Do The Products Have Intrinsic Value? in French


• Verkörpern Die Produkte Einen 'Eigenständigen' Wert'?, Do The Products Have Intrinsic Value? in German


• Cosa Rende il MLM Legale?, The MLM Legality Test in Italian
• I Prodotti Hanno "Valore Intrinseco"?, Do The Products Have Intrinsic Value? in Italian


• Los Productos Tienen "Valor Intrinseco"?, Do The Products Have Intrinsic Value? in Spanish

LES PRODUITS ONT-ILS "LA VALEUR INTRINSÈQUE"?

par Gerald P. Nehra, Attorney-at-Law

Les compagnies de vente directe et leurs représentants de ventes indépendants (d'non-employé) fonctionnent dans un champ de mines des lois, des codes, et des règlements, et des traductions de ces lois, codes, et règlements. Les compagnies dont les produits (à moins que clairement indiqués autrement, les "produits" inclut des services) sont vendu à ses représentants exclusivement, sans les clients vrais, posent un défi de loi de pyramide le plus partout. Pour les buts de cette analyse, supposez que quelques ventes sont faites aux clients qui ne sont pas également des représentants de ventes. Je suggère que vous puissiez examiner n'importe quelle compagnie contre les idées présentées ici. Quelques idées sont nouvelles et non essayées dans l'arène légale.

Les organismes de normalisation aux Etats-Unis et dans d'autres pays ont interprété des lois et des règlements pour signifier qu'un certain pourcentage des ventes d'une compagnie de vente directe (qui a également une forme à multiniveaux de compensation) doit être aux personnes en dehors de du programme. Les deux nombres réels les plus communs sont "plus de 50 pour cent"ou d'"70 pour cent." Le nombre de 70 pour cent coïncide avec la règle de 70 pour cent de la Commission commerciale fédérale contre le cas d'Amway décidé en 1979 aux Etats-Unis, bien que la liaison et la référence soit incorrecte. Une lecture soigneuse du cas d'Amway indiquera que "70 pour cent," partout où il est apparu, apparus dans le contexte d'une prohibition contre le chargement de inventaire, plutôt que comme condition de ventes au détail "en dehors du programme."

Pourquoi cette question est-elle si importante? Bien, les pyramides et les chaînes sans fin sont illégales aux Etats-Unis et dans la majeure partie du reste du monde. Vous ne pouvez pas "payer pour jouer." Très simplement, c'est pourquoi aucune compagnie (après le modèle des Etats-Unis) qui donne une occasion de revenu avec la compensation à multiniveaux ne peut charger n'importe quoi se joindre, ou peut exiger d'un achat de produit de se joindre. La seule exception découpée hors de cette prohibition très claire est qu'une condition d'acheter un à-coût, des ventes non-commissionable ou un kit de démarreur est autorisée. Quelques statuts contiennent une exclusion spécifique à vendre des kits. Là où il n'y a aucune exclusion spécifique, la même conclusion est tirée par traduction. Une autre voie de dire ceci est qu'une ne peut pas être facturée la droite de recruter d'autres. Une telle "charge" est interdite comme "honoraires headhunting illégaux."

Dans ma vue, la seule base juridique un législateur ou le régulateur peut devoir interdire ou les commissions de défi sur la consommation représentative indépendante doit caractériser des achats de produit comme "headhunting" ou "payant pour jouer." Une autre version du même problème est la condition spécifique dans beaucoup de lois qui le plan de la compagnie soit "principalement" au sujet des produits mobiles aux consommateurs, plutôt qu'au sujet de recruter plus de "participants." Mais cette issue nous apporte de nouveau au même endroit - si les achats de produit sont joints au recrutement, plutôt qu'à l'offre et la demande traditionnel de marché, alors les achats de produit soyez les honoraires "headhunting" déguisés considérés.

Rien que j'ai écrit ci-dessus n'est nouveau. Les méthodes traditionnelles de traiter ces soucis sont de diverses formes des conditions compagnie-imposées à vendre aux niveaux de consommateurs, et de différer de l'enregistrement conservant et conservation ou soumission de ces enregistrements à la compagnie. Ces protections et techniques toutes ont leurs points positifs, pourtant quelques régulateurs les visualisent en tant qu'insatisfaisant ou sujet à la manipulation, allant autant qu'exigeant la vérification de compagnie des soumissions représentatives indépendantes. Ce qui suit est une nouvelle (et, je crois, complémentaire) idée, et applicable aux compagnies dont les structures leur permettent d'identifier quels achats de produit sont pour "la valeur intrinsèque," qui signifie que l'acheteur veut l'élément et est disposée à acheter l'élément sans incitation ajoutée d'une occasion de revenu. L'idée est ceci: Si les faits environnants supportent la position que le produit est acheté pour sa valeur intrinsèque, alors l'achat n'est pas fait "pour jouer le jeu." Les faits doivent parer l'accusation de normalisation ou la prohibition statutaire que mais pour l'occasion de revenu personne n'achèteraient les produits. Je propose également (rappelez-vous, je dit ceux-ci sont de nouvelles idées) que le mode de l'acheteur (spécifiquement, un extérieur, consommateur de non-participant, plutôt qu'une certaine forme du représentant indépendant) ne devrait faire aucune différence. J'augmenterai sur ceci en regardant de divers types d'acheteurs:

1.) le client au détail traditionnel.
Une personne totalement non liée à la compagnie de vente directe et habituellement inconnue à la compagnie, parce que l'achat était du représentant indépendant. Il ne devrait y avoir aucune question que les ventes à de telles personnes sont pour la valeur intrinsèque.

2.) le client "dirigent accompli" par la compagnie.
La compagnie connaît cette personne parce que la compagnie a un système de distribution qui fournit l'expédition directe aux utilisateurs. Le représentant indépendant indique la compagnie se transporter, ou les appels de client la compagnie, identifie le représentant indépendant qui leur a dit au sujet de la compagnie à vendre le crédit, et passe une commande. La compagnie traite chaque commande pendant qu'elle se produit et ne met à jour aucun fichier séparé des clients. Elle traite la commande comme si placé directement par le représentant indépendant, mais avec un "bateau différent" pour adresser. Il ne devrait y avoir aucune question que les ventes à de telles personnes sont pour la valeur intrinsèque.

3.) le client préféré.
Beaucoup de compagnies encouragent leurs représentants indépendants à relier les clients préférés directement à la compagnie. Parfois des formulaires de demande sont utilisés et des numéros d'identification sont émis. Les clients passent commande directement. Ces personnes, cependant, ne signent pas une application représentative indépendante et n'ont pas une occasion de revenu. Il ne devrait y avoir aucune question que les ventes à de telles personnes sont pour la valeur intrinsèque.

4.) le représentant indépendant sans droite de commanditer.
Quelques compagnies donnent une occasion séparément tracée et réelle de revenu. Aucun des achats de ces personnes ne peut probablement être considéré "pour jouer le jeu d'une chaîne recruteuse sans fin," parce que ces personnes n'ont pas le droit de recruter d'autres représentants indépendants. Ces ventes sont pour leur valeur intrinsèque ou pour la revente aux clients, et aucun argument ne peut être fait que les ventes sont des honoraires headhunting déguisés, puisque la personne ne peut pas recruter d'autres chercheurs d'occasion de revenu.

5.) le représentant indépendant vers le haut dont "signe" pour acheter en gros. C'est pensée très nouvelle et pas encore testé avec des régulateurs. Je suis disposé à arguer du fait que la droite de commanditer d'autres dans l'accord représentatif indépendant est une "offre" d'une occasion à multiniveaux de revenu, qui est reçue quand - et seulement quand - l'acte du commanditaire se produit. Une personne signant jusqu' à l'achat au prix représentatif indépendant, et choisissant de ne pas commanditer, ne peut pas acheter "pour jouer le jeu," puisque, encore, aucun recrutement des chercheurs d'occasion de revenu ne s'est produit.

6.) le représentant indépendant non-non-sponsoring. C'est également pensée très nouvelle et pas encore testé avec des régulateurs. Je suis disposé à discuter, et s' incapable convaincre un régulateur, au juge approprié (avec de bons faits), qui achète par un représentant indépendant non-non-sponsoring ne peut pas probablement être des honoraires headhunting déguisés ou un "paiement de jouer." La raison est basée sur la logique simple - le représentant indépendant (pour le moment, au moins) a diminué l'offre de la compagnie à "participent" (un mot avec la signification légale) à la partie à multiniveaux de l'occasion de revenu. Aucun argument ne peut être fait que l'achat doit qualifier pour des bonifications d'unité centrale au périphérique ou pour la droite de recruter, puisqu'aucun recrutement des participants supplémentaires ne s'est produit.

7.) le représentant indépendant de commanditaire.
À beaucoup de compagnies qui ont de basses conditions mensuelles de volume des affaires de qualifier pour des bonifications sur le volume des affaires de downlines, ce qui suit se produit: Les commandes indépendantes de représentant uniformément au-dessus du minimum ont dû qualifier pour toutes les bonifications disponibles d'unité centrale au périphérique. D'abord, la quantité au-dessus du minimum requis pour qualifier ne doit pas "jouer le jeu," puisque seulement le minimum est nécessaire. Un deuxième, facultatif, argument peut même être fait que toute la commande est pour la valeur intrinsèque, puisqu'on passant commande seulement à "participent" commanderait juste le minimum. Ceci peut être plus agressif que nécessaire, mais vaut la peine de noter.

Conclusion

Beaucoup de compagnies sont pour avoir disponibles structuré, à la société, des enregistrements supportant les types ci-dessus d'achats pour la valeur intrinsèque. Je crois que les ventes définies de cette manière (qui est une approche, et pas la seule approche) adressent directement la conduite que les lois d'anti-pyramide et de chaîne sans fin partout recherchent à régler. Notez que j'ai évité l'utilisation du terme "vente au détail" ou "vente au détail" dans tout cet article, et sur le but, parce que le concept que je propose est plus précis. La prétention (et l'argument légal dans le forum approprié, avec de bons faits) est que la conduite réglée et interdite est la vente des produits que personne n'achèteraient pour leur valeur intrinsèque, mais à la place achèterait afin de participer dedans et promeut une chaîne sans fin illégale. Sans "valeur intrinsèque," de telles ventes deviennent les honoraires headhunting déguisés, spécifiquement interdits par les lois de la plupart des pays.

Achèteriez-vous les produits de la compagnie absents l'occasion de revenu? n'importe qui? La réponse doit être "oui." Si les ventes d'une compagnie sont "principalement pour la valeur intrinsèque," la compagnie peut résister à l'examen minutieux légal. En se fermant, notez s'il vous plaît que dans cette zone ce qui est bon pour la santé légale de la compagnie est également exigé pour la santé économique de la compagnie. C'est un nouveaux sujet et article entiers. Je conclurai juste en disant des "ventes pour la valeur intrinsèque" suis une nécessité absolue pour la survie légale et économique des compagnies de vente directe autour du monde.

Unternehmen des Direktvertriebs und ihre unabhängigen (nicht angestellten) Vertriebsrepräsen-tanten bewegen sich in einem Minenfeld, das mit Gesetzen, Verhaltenscodices und Vorschriften sowie mit deren Auslegungen bestückt ist. Unternehmen, die ihre Produkte (Waren oder Dienst-leistungen) ausschließlich an ihre Vertriebsrepräsentanten absetzen, ohne Kunden im eigentlichen Sinne des Wortes zu haben, geraten eigentlich überall in Schwierigkeiten mit einer, wie auch immer gearteten Anti-Pyramiden-Gesetzgebung. Für die Zwecke dieser Untersuchung sollten Sie aber davon ausgehen, daß gewisse Umsätze auch mit Kunden gemacht werden , die nicht zur Schar der Vertriebsrepräsentanten gehören. Ich unterstelle, daß Sie jedes beliebige Unternehmen an Hand der hier vorgstellten Gedanken überprüfen können. Einige dieser Gedanken sind brandneu und im eigentlichen Rechtsbereich noch nicht erprobt worden.

Aufsichtsbehörden in den Vereinigten Staaten und auch in anderen Ländern haben aus den ein-schlägigen Gesetzen und Regelungen die Folgerung gezogen, daß ein gewisser Prozentsatz der Verkäufe eines Direktvertriebsunternehmens mit einem Multi-Level-Vergütungsplan mit solchen Kunden getätigt werden muß, die nicht dem Vertriebssystem angehören. Die beiden am weitesten verbreiteten Zahlen in diesem Zusammenhang lauten 'über 50 Prozent' oder '70 Prozent'. Die Zahl '70 Prozent' stimmt mit der sogenannten '70-Prozent-Regel' aus dem Verfahren 'Federal Trade Commission gegen AMWAY' überein, das in den U.S.A. im Jahre 1979 entschieden worden ist. Sie wird allerdings meistens in einen falschen Zusammenhang gestellt. Die sorgfältige Lektüre des AMWAY-Falles macht nämlich deutlich, daß die '70 Prozent', wo immer sie eine Rolle spielten, dies im Zusammenhang mit einem Verbot des sogenannten 'inventory loading' taten, also des Vollpumpens der Vertriebsrepräsentanten mit Lagerware, und nicht als eine Anforderung an den Wiederverkauf an 'Abnehmer außerhalb des Systems' gedacht waren.

Warum ist diese Frage von so großrer Bedeutung? Nun, 'Pyramiden' und 'Endlosketten' verstoßen in den Vereinigten Staaten und fast überall sonst in der Welt gegen das Gesetz. Es ist nicht zulässig, daß man etwas zahlen muß, um 'mitspielen' zu können, also einen 'Spieleinsatz' zu leisten. Dies ist der sehr einfache Grund, warum kein Unternehmen, das sich an das U.S.A.-Modell hält und Verdienstmöglichkeiten im Rahmen eines ML-Vergütungsplans anbietet, für die Aufnahme in die Organisation eine finanzielle Gegenleistung verlangen kann, auch nicht in Form eines Bezugs von Waren. Die einzige Ausnahme von diesem ganz klaren Verbot besteht darin, daß es zulässig ist, den Erwerb eines 'Verkaufs- oder Starter Kits' zu verlangen, wobei der Preis die Selbstkosten nicht überschreiten und auch nicht 'verprovisioniert' werden darf. Es gibt Gesetze, die eine spezielle Ausnahmereglung für solche 'Verkaufs-Kits' enthalten. Wo das nicht der Fall ist, kommt man im Wege der Gesetzesauslegung zu demselben Ergebnis.

Man kann alles dies auch auf andere Weise ausdrücken: Für den Erwerb des Rechts, andere anzuwerben, darf einem nichts berechnet werden, da dies als die Forderung einer rechtswidrigen und daher verbotenen 'Headhunting'-Gebühr anzusehen wäre.

Ich für meinen Teil bin der Ansicht, daß die einzige Rechtsgrundlage, auf die sich eine Gesetzgeber oder ein Aufsichtsbehörde berufen könnte, wenn die Verprovisionierung von Eigenbedarfskäufen eines selbständigen Vertriebsrepräsentanten verboten oder angegriffen werden soll, darin bestünde, solche Käufe als 'Headhunting-Gebühren' oder als 'Spieleinsätze' zu charakterisieren. Eine andere Spielart der gleichen Problematik ist es, wenn manche gesetzlichen Regelungen ausdrücklich verlangen, daß der Vertriebsplan des Unternehmens sich 'in erster Linie' dem Vertrieb von Produkten an Verbraucher widmet und nicht der Anwerbung von neuen Systemteilnehmern. Aber auch dieser Ansatz bringt uns wieder an die gleiche Stelle zurück: wenn Warenbezüge mit dem Anwerben verknüpft werden und sich nicht an den überkommenen Gesetzen von Angebot und Nachfrage auf einem Makrt orientieren, dann laufen diese Warenbezüge Gefahr, als verschleierte 'Headhunting-Gebühren' angesehen zu werden.

Nichts von alledem, was ich hier dargelegt habe, ist neu. Die traditionelle Art und Weise des Umgangs mit diesem Problembereich besteht in unterschiedlichen Arten von Vorschriften der Unternehmen im Hinblick auf den Warenverkauf an Verbraucher sowie auf das Erstellen und Aufbewahren einschlägiger Aufzeichnungen bzw. deren Vorlage beim Unternehmen. Derartige Schutzmaßnahmen und -techniken haben alle ihre guten Seiten, jedoch werden sie von etlichen Aufsichtsbehörden als unzureichend oder als Gegenstand von möglichen Manipulationen ange-sehen, was dazu führt, daß von den Unternehmen die Überprüfung der vorgelegten Berichte verlangt wird. Beim nunmehr Folgenden handelt es sich um eine neue (und wie ich glaube: ergänzende) Sicht der Dinge. Sie kann auf solche Unternehmen angewendet werden, deren Struktur es ihnen erlaubt, jene Wareneinkäufe zu identifizieren, die wegen des 'eigenständigen Werts' der betreffenden Produkte zustandekommen, also deswegen, weil der betreffende Käufer gerade diesen Gegenstand haben und also auch ohne den zusätzlichen Anreiz einer Verdienstmöglichkeit erwerben möchte. Diese Überlegung läuft auf das Folgende hinaus: Wenn die Gesamtumstände dafür sprechen, daß das betreffende Erzeugnis wegen seines 'eigenständigen Werts' gekauft wird, dann kann es sich bei diesem Kauf nicht um den Erwerb eines Tickets für's Mitspielen, also einen 'Spieleinsatz' handeln. Diese Gesamtumstände müssen geeignet sein, den Hintergrund der einschlägigen Beschuldigungen der Aufsichtsbehörden bzw. des einschlägigen gesetzlichen Verbots aufzuheben, daß ohne die in Aussicht gestellte Verdienstmöglichkeit niemand die fraglichen Pro-dukte kaufen würde. Ich gehe dabei davon aus (Achtung: Ich sagte schon, daß es sich dabei um Neuland handelt!), daß die Frage des Status des Käufers, insbesondere ob es sich bei ihm um einen, nicht der Organisation angehörenden Verbraucher oder um irgendeine Art Vertriebsreprä-sentant handelt, dabei keine Rolle spielen kann. Mit dieser Frage werde ich mich etwas näher befassen und dabei verschiedene 'Käufertypen' beleuchten:

1.) Der typische Einzelhandelshandelskunde
Eine Person, die zu dem fraglichen Direktvertriebsunternehmen in keiner Beziehung steht und üblicherweise dem Unternehmen unbekannt ist, weil sie von einem selbständigen Vertriebsre-präsentanten gekauft hat. Hier kann man auf jeden Fall davon ausgehen, daß Verkäufe an solche Kunden wegen des 'eigenständigen Werts' der erworbenen Produkte zustandekommen.

2.) Der Direktbelieferungskunde
Dem Unternehmen ist diese Person deswegen bekannt, weil es ein Liefersystem unterhält, das den Warenversand direkt an den Endabnehmer vorsieht. Entweder gibt dabei der selbständige Vertriebsrepräsentant den Versandauftrag oder aber der betreffende Kunde wendet sich an das Unternehmen und erteilt den Auftrag, wobei er den Vertriebsrepräsentanten, der ihn vermittelt hat, benennt, damit diesem seine Vermittlungsprovision bzw. seine Handelsspanne gutgeschrieben werden kann.
Das Unternehmen wickelt die Aufträge so ab, wie sie eingehen, und nimmt die betreffenden Kunden in keine eigene Kundenliste auf: Es behandelt diese Aufträge als Aufträge der jeweiligen Vertriebs-repräsentanten mit unterschiedlichen Lieferadressen. In diesem Zusammenhang sollte es keinen Zweifel daran geben, daß die Verkäufe an derartige Kunden wegen des 'eigenständigen Werts' der Waren erfolgen.

3.) Der 'Vorzugskunde'
Viele Unternehmen regen bei ihren selbständigen Vertriebsrepräsentanten an, daß diese ihnen eine direkte Geschäftsbeziehung zu sogenannten 'Vorzugskunden' vermitteln. Gelegentlich werden dafür eigene Antragsformulare eingesetzt und Identifikationsnummern (ID-Nummern) ausgegeben. Die Kunden bestellen direkt, unterschreiben jedoch keinen Vertriebsrepräsentanten-Antrag . Es gibt für sie auch keine Verdienstmöglichkeit. Auch hier kann kein Zweifel daran aufkommen, daß dieser Personenkreis wegen des 'eigenstän-digen Werts' der Produkte kauft.

4.) Der selbständige Vertriebsrepräsentant ohne 'Sponsoring-Berechtigung'
Einige Unternehmen bieten eine gesondert ausgelegte, 'einstufige' Verdienstmöglichkeit. Wenn dieser Personenkreis kauft, so kann dies unmöglich als 'Beteiligung an dem Glücksspiel einer unendlichen Anwerbekette' verstanden werden, weil die Betreffenden nicht berechtigt sind, andere Vertriebsrepräsentanten zu rekrutieren. Sie kaufen wegen des 'eigenständigen Werts' der Produkte oder mit dem Ziel des Weiterverkaufs an Kunden. Hier kann nicht argumentiert werden, es handele sich bei diesen Kaufgeschäften um verschleierte 'Headhunting-Gebühren', da dieser Vertriebsreprä-sentant gar nicht in der Lage ist, andere Interessenten für diese Art der Verdienstmöglichkeit zu rekrutieren.

5.) Der selbständige Vertriebsrepräsentant, der sich einschreibt, weil er zu Großhandelspreisen kaufen will.
Dies ist absolut neues Gedankengut und noch nicht im Umgang mit Aufsichtsinstanzen erprobt. Ich beabsichtige, die Auffassung zu vertreten, daß das im Vertriebsrepräsentanten-Vertrag verankerte Recht, andere anzuwerben und zu fördern ('Sponsoring') das 'Angebot' einer Multi-Level-Verdienst-möglichkeit' darstellt, das erst dann - und ausschließlich dann - angenommen ist, sobald eine Sponsoring-Tätigkeit aufgenommen wird. Eine Person, die sich einschreibt, um Waren zum Einkaufpreis der Vertriebsrepräsentanten kaufen zu können und gar nicht die Absicht hat, irgendeine 'Strukturarbeit' in Form von Sponsoring-Aktivitäten zu leisten , kann gar nicht einkaufen 'um mitspielen zu können', da es - nocheinmal sei es betont - gar nicht zur Anwerbung von Interessenten an einer Verdienstmöglichkeit gekommen ist.

6) Der selbständige Vertriebsrepräsentant ohne Sponsoring-Aktivitäten
Auch hier handelt es sich um absolut neues Gedankengut, das noch nicht im Hinblick auf Aufsichts-instanzen erprobt worden ist. Gegenüber Aufsichtsinstanzen und, falls ich diese nicht überzeugen kann, bei geigneter Tatsachenlage auch gegenüber dem zuständigen Gericht, beabsichtige ich, die Auffassung zu vertreten, daß die Einkäufe eines Vertriebsrepräsentanten, der keine Sponsoring-Aktivitäten ausübt, unmöglich eine 'verschleierte Headhunting-Gebühr' oder einen
'Mitspiel-Geldeinsatz' darstellen können. Dies läßt sich mit Hilfe ganz simpler Logik begründen: Der betreffende Vertriebsrepräsentant hat (wenigstens zum gegebenen Zeitpunkt) das Angebot des Unternehmens abgelehnt, sich im eigentlichen, rechtlich relevanten Sinn am Multi-Level-Teil der gebotenen Verdienstmöglichkeit zu beteiligen. Es kann in diesem Fall nicht argumentiert werden, daß der betreffende Einkauf dazu dient, sich für Downline-Einküfte oder die Anwerbe-Berechtigung zu qualifizieren, da gar keine Anwerbung zusätzlicher Systemteilnehmer stattgefunden hat.

7.) Der selbständige Vertriebsrepräsent mit Sponsoring-Aktivitäten
In etlichen Unternehmen, die geringfügige monatliche Umsatzergebnisse als Qualifikation für Boni auf die Umsatzergebnisse der Downline verlangen, passiert das Folgende: Der Vertriebsrepräsentant bestellt laufend mehr, als er zum Zwecke der Qualifizierung für alle ihm zustehenden Donwline-Boni benötigen würde. Zum ersten: Der Betrag, der das Qualifikationsminimum überschreitet, scheidet als 'Mitspiel-Einsatz' aus, da als solcher eben nur das festgesetzte Minimum benötigt wird. Und es kann, zweitens, sogar argumentiert werden, daß die gesamte Bestellung wegen des 'Eigenwerts' der Ware erfolgt, da jemand, der ausschließlich bestellt, um 'im Spiel zu bleiben', sicherlich nur das erforderliche Minimum bestellen würde. Es mag sein, daß man sich mit diesem Argument zu weit vorwagt, aber man sollte es sicherlich im Auge behalten.

Abschlußbemerkung
Viele Unternehmen sind so aufgebaut, daß sie in der Zentrale statistisches Material zur Verfügung haben, mit dem das Vorhandensein der oben definierten Typen von Einkäufen, die lediglich wegen des Eigenwerts der Waren erfolgen, belegt werden kann. Ich bin der Ansicht, daß ein so definiertes Einkaufsverhalten (was einen, aber nicht den einzigen Ansatz darstellt) ganz direkt jenes Verhalten anspricht, welches die Gesetze gegen Pyramiden- und Endlosketten-Systeme in den Griff in den Griff zu bekommen suchen. Beachten Sie, daß ich es in diesem ganzen Artikel vermieden habe, den Begriff 'Verkauf im Einzelhandel' etc. zu verwenden - und zwar mit Absicht, weil das von mir vorgestellte Konzept sachgenauer ist. Es geht von der Annahme aus (und benützt diese bei geeigneter Tatsachenlage auch als Rechtsargument vor dem zuständigen Gericht), daß es bei den fraglichen Norm- und Verbotstatbeständen immer um den Vertrieb von Produkten geht, die niemand wegen ihres 'Eigenwerts' kauft, die vielmehr nur deswegen erworben werden, damit der Käufer sich an dem betreffenden Endlosketten-Geschäft beteiligen und es weitertreiben kann. Wenn ein solcher 'Produkt-Eigenwert' nicht gegeben ist, werden derartige Verkäufe zu verschleierten 'Headhunting-Gebühren', wie sie spezifisch von den Gesetzen der meisten Länder verboten sind.

Würden Sie die Produkte des Unternehmens auch ohne die angebotene Verdienstmöglichkeit kaufen? Würde überhaupt irgendjemand das tun? Die Antwort muß JA heißen. Wenn ein Unternehmen seine Produkte 'hauptsächlich wegen ihres Eigenwerts' verkauft, kann es rechtlicher Überprüfung standhalten. Zum Abschluß sollten Sie bitte beachten, daß alles, was dazu führt, daß ein Unternehmen rechtlich auf sicheren Beinen steht, auch eine wesentliche Voraussetzung für seine Wirtschaftskraft darstellt. Es bleibt mir nur noch der letzte Hinweis, daß 'Verkäufe um des Eigenwerts der Produkte willen' überall auf der Welt eine absolute Notwendigkeit sowohl für das rechtliche, als auch für das wirtschaftliche Überleben der Direktvertriebsunternehmen bedeutet.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

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Ci sono tante caratteristiche, o "campanelli d'allarme" che distinguono una piramide illegale da una oppurtunità leggitima nel network marketing o multi-level (spesso chiamato MLM.) Queste sono state scritte spesso in tante pubblicazioni e necessariamente contengono spesso termini legale e termini in gergo. Inoltre, segni pericolosi possono essere camuffati o risolti con la nuova generazione di piani così che è necessario stare in guardia per nuovi e differenti faccie dello stesso problema.

Esiste un test semplice e facile da applicare che una persona possa applicare ad una azienda di MLM , per valutare il rischio di piramide senza dover conoscere tutta la terminologia della legge sulle piramidi? Esiste. Quello che segue parla di questa necessità. E' semplicemente il test del PRIMO LIVELLO per valutare il valore dell'opportunità di business in multi-level.

Ability to MAKE Money Through Customer Sales is IMPORTANT!La possibilità di guadagnare soldi con le Vendite Personali è IMPORTANTE! Funziona così: Una persona può guadagnare soldi lavorando in SINGLE-LEVEL, cioè senza sponsorizzare altre persone ( "business seekers" ) ?? Fai attenzione al significato della parola "può" , piuttosto che della parola "potrebbe". Solitamente è sottinteso che chiunque ti parli di una attività di MLM sia intenzionata a sponsorizzare, e che a questo domanda potrà rispondere che il "vero guadagno" lo si ha costruendo il gruppo.

Su questo siamo d'accordo, MA QUANTO - per coloro che scelgono di non sponsorizzare, POSSONO GUADAGNARE. Anche qui fai attenzione all'uso della parola "POSSONO", significa "POTER GUADAGNARE" non "SPENDERE SOLDI", signifa pagare tasse sul guadagno che si ha lavorando. Compreare per uso personale a prezzo da distributore piuttosto che a prezzo da cliente, oltre ad essere un risparmio, non genera guadagno sul quale è richiesto di pagare tasse.

Comprare per uso personale non è una proposta di guadagno, se la proposta che ti stanno facendo consiste SOLAMENTE di comprare per uso personale e sponsorizzare altre persone, senza nessun tipo di riserva per le vendite ai clienti, ha dei difetti. MORE than Personal Consumption to Pass the TestOCCORRE più del consumo personale per passare il Test Questo semplice test necessita di essere applicato a due aspetti di una opportunità nel MLM Il primo spetto è li design. Cosa dicono i documenti dell'azienda su come essa possa ottenere profitti? Come funziona il Piano dei Compensi Provigionali?

Non tutti i dettagli delle commissioni, dei bonus o dei premi devono essere capiti esattamente , ma semplicemente, POSSO GUADAGNARE senza sponsorizzare? Ricorda, una persona NON guadagna soldi quando compra dei prodotti o dei servizi. L'applicazione di questo testo dovrebbe in nessun modo implicare che c'è qualcosa di sbagliato o illegale sul consumo personale. Solamente questo da solo non può essere la base di una attività di MLM How is the Plan Being TAUGHT? Come viene spiegato il Piano Marketing? Il secondo aspetto dell'applicazione del testo è la struttura del Piano Marketing. Alcuni piani sono studiati correttamente ma contengono appositamente dei difetti nella loro implementazione.

Una persona può guadagnare , anche senza sponsorizzare, , così come il piano che ti viene spiegato dal tuo possibile sponsor o distributore si avvicina a quello che vuole lui o lei? Se non esiste nessun riconoscimenteo per la persona che non sponsorizza , qualcosa non funziona, qualcosa di sbagliato, forse non nel design, ma sicuramente nell'implementazione. Le aziende di MLM rispettabili e legali, implementano una possibilità di guadagno SUL LAVORO PERSONALE a coloro i quali scelgono di non sponsorizzare . Naturalmente, se una persona sponsorizza altre persone, allora altri soldi EXTRA arriveranno quando tali persone genereranno del fatturato.

If the ONLY WAY to make money is by sponsoring, STAY AWAY!Se il SOLO MODO di guadagnare soldi è sponsorizzare, STANNE ALLA LARGA! Applica questo testo alle aziende di multi-level o network marketing. Guarda il piano dei guadagni , guarda il modo in cui il piano è stato implementato dagli sponsor e dai clienti. Se il SOLO MODO di guadagnare soldi è sponsorizzare, STANNE ALLA LARGA, quel piano contiene dei difetti.

Gerald P. Nehra è un Avvocato privato specialista del MLM. Egli è solo uno dei pochi avvocati in tutta la nazione la cui pratica è stata dedicata esclusivamente alla vendita diretta ed ai problemi del multi-level marketing . I suoi 33 anni di esperienza includono 9 anni con Amway Corporation in cui era direttore della divisione legale. Si trova al 1710 BeachStreet, Muskegon, MI 49441, 231-755-3800, 231-755-4700 FAX. E-Mail Address is GNehra@mlmatty.com Web Site is www.mlmatty.com

Permesso di duplicazione , compreso la duplicazione delle informazioni personali.

English to Italian translation provided by Leonardo Battagli.

Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.

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da Gerald P. Nehra, Attorney-at-Law

Le aziende vendere diretto ed i loro rappresentanti indipendenti (dell' non-impiegato) funzionano in un minefield delle leggi, dei codici e delle regolazioni e delle interpretazioni di quei leggi, codici e regolazioni. Le aziende di cui i prodotti (a meno che indicati chiaramente al contrario, "i prodotti" includa i servizi) sono venduti ai relativi rappresentanti esclusivamente, senza i clienti allineare, propongono una sfida di legge della piramide il più dappertutto. Per gli scopi di questa analisi, presupporre che alcune vendite stanno facende ai clienti che non sono egualmente rappresentanti. Suggerisco che potete verificare tutta l' azienda contro le idee presentate qui. Alcune idee sono brandnew e non provate nell' arena legale.

Le agenzie regolarici negli Stati Uniti ed in altri paesi hanno interpretato le leggi e le regolazioni per significare che una certa percentuale delle vendite d'un' azienda vendere diretto (che egualmente ha una forma multilivelli di compensazione) deve essere alle persone fuori del programma. I due numeri reali più comuni sono "più di 50 per cento" o "70 per cento." Il numero di 70 per cento coincide con la regola di 70 per cento dalla Commissione commerciale federale contro il caso di Amway deciso in 1979 negli Stati Uniti, anche se il collegamento ed il riferimento è errati. Una lettura attenta del caso di Amway rivelerà che "70 per cento," dovunque compaia, comparsi nel contesto d'una proibizione contro caricamento di inventario, piuttosto che come requisito di vendite al dettaglio "fuori del programma."

Perchè è questa edizione così importante? Bene, le piramidi e le catene continue sono illegali negli Stati Uniti ed in la maggior parte del resto del mondo. Non potete "pagare giocare." Molto semplicemente, quello è perchè nessun' azienda (dopo il modello degli Stati Uniti) che offre un' opportunità di reddito con compensazione multilivelli può caricare qualche cosa unirsi, o può richiedere un acquisto del prodotto unirsi. L' unica eccezione intagliata da questa proibizione molto chiara è che un requisito comprare un-COSTO, lle vendite non-commissionable o un kit del dispositivo d'avviamento è consentito. Alcuni statuti contengono un' esclusione specifica da vendere i kit. Dove non ci è esclusione specifica, la stessa conclusione è raggiunta tramite l' interpretazione. Un altro modo dire questo è che uno non può essere addebitato la destra reclutare altri. Una tal "carica" è proibita come "tassa headhunting illegale."

Nel mio punto di vista, l' unica base giuridica un legislatore o il regolatore può dovere proibire o le commissioni di sfida su consumo rappresentativo indipendente deve caratterizzare gli acquisti del prodotto come "headhunting" o "pagando giocare." Un' altra versione dello stesso problema è il requisito specifico in molte leggi che il programma dell' azienda è "soprattutto" circa i prodotti commoventi ai consumatori, piuttosto che circa il reclutamento dei più "partecipanti." Ma quell' edizione li porta di nuovo allo stesso posto - se gli acquisti del prodotto sono collegati al reclutamento, piuttosto che alla domanda e l' offerta tradizionale del mercato, quindi gli acquisti del prodotto essere tasse "headhunting" travestite ritenute.

Niente che abbia scritto sopra è nuovo. I metodi tradizionali di occuparsi di queste preoccupazioni sono varie forme dei requisiti azienda-imposti da vendere ai livelli differire e dei consumatori del record che si conservare e ritegno o presentazione di quei record all' azienda. Queste protezioni e tecniche tutte hanno loro buoni punti, tuttavia alcuni regolatori li osservano come inadeguato o conforme a manipolazione, andante per quanto richiedendo la verifica dell' azienda delle presentazioni rappresentative indipendenti. Ciò che segue è una nuova (e, credo, complementare) idea ed applicabile alle aziende di cui le strutture li permettono di identificare che acquisti del prodotto sono per "valore intrinseco," che significa che l' acquirente desidera l' articolo ed è disposte a comprare l' articolo senza il motivo aggiunto d'un' occasione di reddito. L' idea è questa: Se i fatti circostanti sostengono la posizione che il prodotto sta comprando per il relativo valore intrinseco, allora l' acquisto non sta facendo "per giocare il gioco." I fatti devono ricambiare il accusation regolatore o la proibizione statutaria che ma per l' occasione di reddito nessuno comprerebbero i prodotti. Egualmente propongo (ricordarsi di, io detto questi sono nuove idee) che la condizione dell' acquirente (specificamente, una parte esterna, consumatore del non-partecipante, piuttosto che certa forma del rappresentante indipendente) non dovrebbe non fare differenza. Spiegherò questo guardando i vari tipi di acquirenti:

1.) il cliente al minuto tradizionale.
Una persona completamente disgiunta all' azienda vendere diretto e solitamente sconosciuta all' azienda, perché l' acquisto proveniva dal rappresentante indipendente. Non ci dovrebbe essere domanda che le vendite a tali persone sono per valore intrinseco.

2.) il cliente "dirige soddisfacente" dall' azienda.
L' azienda conosce questa persona perché l' azienda ha un sistema di distribuzione che fornisce il trasporto diretto agli utilizzatori finali. Il rappresentante indipendente dice all' azienda di spedire, o alle chiamate di cliente l' azienda, identifica il rappresentante indipendente che ha detto loro circa l' azienda da vendere gli scopi di accreditamento ed ordina. L' azienda si occupa di ogni ordine mentre accade e non effettua archivio separato dei clienti. Tratta l' ordine come se disposto direttamente dal rappresentante indipendente, ma con "una nave differente" per richiamare. Non ci dovrebbe essere domanda che le vendite a tali persone sono per valore intrinseco.

3.) il cliente preferito.
Molte aziende consigliano ai loro rappresentanti indipendenti collegare i clienti preferiti direttamente all' azienda. A volte i moduli di domanda sono usati ed i numeri di identificazione si pubblicano. I clienti ordinano direttamente. Queste persone, tuttavia, non firmano un' applicazione rappresentativa indipendente e non hanno un' occasione di reddito. Non ci dovrebbe essere domanda che le vendite a tali persone sono per valore intrinseco.

4.) il rappresentante indipendente senza una destra patrocinare.
Alcune aziende offrono un' opportunità esclusivamente delineata e single-level di reddito. Nessun degli acquisti di questa gente possono possibilmente essere ritenuti "per giocare il gioco d'una catena di reclutamento infinita," perché queste persone non hanno la destra reclutare altri rappresentanti indipendenti. **time-out** questo vendita essere per loro intrinseco valore o per resale cliente, e nessun argomento pot essere fa che vendita essere un travest headhunting tassa, dato che persona pot non reclut altro reddito occasione cercatore.

5.) il rappresentante indipendente su che "firma" per comprare all'ingrosso.
Ciò è molto nuovo pensare e non ancora esaminato con i regolatori. Sono disposto a sostenere che la destra patrocinare altre nell' accordo rappresentativo indipendente è "un' offerta" d'un' occasione multilivelli di reddito, che è accettata quando - e soltanto quando - l' atto di patrocinio accade. Una persona che firma fino all' acquisto al prezzo rappresentativo indipendente e scegliente non patrocinare, non può comprare "per giocare il gioco," poiché, ancora, nessun reclutamento dei cercatori di occasione di reddito ha accaduto.

6.) il rappresentante indipendente non-non-sponsoring.
Ciò è egualmente molto nuovo pensare e n ancora esaminato con i regolatori. Sono disposto a discutere e se incapace convincere un regolatore, al giudice adatto (con i buoni fatti), che compra da un rappresentante indipendente non-non-sponsoring non può possibilmente essere una tassa headhunting travestita o "un pagamento giocare." Il motivo è basato su logica semplice - il rappresentante indipendente (per il momento, almeno) ha declinato l' offerta dell' azienda a "partecipa" (una parola con importanza legale) alla parte multilivelli dell' occasione di reddito. Nessun argomento non può essere fatto che l' acquisto deve qualificarsi per le indennità di trasferimento dal sistema centrale verso i satelliti o per la destra reclutare, poiché nessun reclutamento dei partecipanti supplementari ha accaduto.

7.) il rappresentante indipendente di patrocinio.
In molte aziende che hanno requisiti mensili bassi del volume di affari qualificarsi per le indennità sul volume di affari dei downlines, ciò che segue si presenta: Gli ordini indipendenti del rappresentante al di sopra del minimo hanno dovuto costantemente qualificarsi per tutte le indennità disponibili di trasferimento dal sistema centrale verso i satelliti. In primo luogo, la quantità sopra il minimo stato necessario per qualificarsi non deve "giocare il gioco," poiché soltanto il minimo è necessario. Un secondo, facoltativo, argomento può persino essere fatto che tutto l' ordine è per valore intrinseco, poiché si che ordina solamente a "partecipa" appena ordinerebbe il minimo. Ciò può essere più aggressiva di necessaria, ma vale la pena di notare.

Conclusione

Molte aziende sono per avere disponibile strutturato, alla società, record che sostengono i suddetti tipi di acquisti per valore intrinseco. Credo che le vendite definite in questo modo (che è un metodo e non l' unico metodo) direttamente richiamano il comportamento che le leggi della catena continua e della anti-piramide dappertutto cercano di regolare. Si noti che ho evitato l' uso del termine "vendita al dettaglio" o "vendere al dettaglio" durante questo articolo e su scopo, perché il concetto che propongo è più preciso. Il presupposto (ed argomento legale nella tribuna adeguata, con i buoni fatti) è che il comportamento regolato e proibito è la vendita dei prodotti che nessuno comprerebbero per il loro valore intrinseco, ma preferibilmente comprerebbero per partecipare dentro ed avanzano una catena continua illegale. Senza "valore intrinseco," tali vendite si transformano in in tasse headhunting travestite, specificamente proibite dalle leggi della maggior parte dei paesi.

Comprereste i prodotti dell' azienda assenti l' occasione di reddito? chiunque? La risposta deve essere "sì." Se le vendite dell' azienda sono "soprattutto per valore intrinseco," l' azienda può sostenere l' esame accurato legale. Nella chiusura, notare prego che in questa zona che cosa buono per la salute legale dell' azienda egualmente è richiesto per la salute economica dell' azienda. Quello è un nuovi oggetto ed articolo interi. Concluderò appena dicendo "le vendite per valore intrinseco" sono una necessità assoluta per sia la sopravvivenza legale che economica delle aziende vendere diretto intorno al mondo.

por Gerald P. Nehra, Attorney-at-Law

Las compañías de la venta directa y sus representantes de ventas independientes (del no-empleado) funcionan en un campo de minas de leyes, de códigos, y de regulaciones, y de interpretaciones de esos leyes, códigos, y regulaciones. Las compañías que productos (a menos que estén indicados claramente de otra manera, los "productos" incluyen servicios) se venden a sus representantes exclusivamente, sin clientes verdaderos, plantean un desafío de la ley de la pirámide lo más por todas partes posible. Para los propósitos de este análisis, asuma que algunas ventas se están haciendo a los clientes que no son también representantes de ventas. Sugiero que usted pueda probar a cualquier compañía contra las ideas presentadas aquí. Algunas ideas están brandnew y no comprobadas en la arena legal.

Las agencias reguladoras en los Estados Unidos y en otros países han interpretado leyes y regulaciones para significar que un cierto porcentaje de ventas de una compañía de la venta directa (que también tenga una forma de niveles múltiples de remuneración) debe estar a las personas fuera del programa. Los dos números reales más comunes son "más de 50 por ciento" o "70 por ciento." El número de 70 por ciento coincide con la regla de 70 por ciento de la Comisión comercial federal contra el caso de Amway decidido en 1979 en los Estados Unidos, aunque el acoplamiento y la referencia es incorrectos. Una lectura cuidadosa del caso de Amway revelará que "70 por ciento," dondequiera que apareciera, aparecidos en el contexto de una prohibición contra el cargamento del inventario, más bien que como requisito de las ventas al por menor "fuera del programa."

Por qué es esta edición tan importante? Bien, las pirámides y los encadenamientos sin fin son ilegales en los Estados Unidos y en la mayoría del resto del mundo. Usted no puede "pagar jugar." Muy simplemente, ése es porqué ninguna compañía (después del modelo de Estados Unidos) que ofrece una oportunidad de la renta con la remuneración de niveles múltiples puede cargar cualquier cosa ensamblar, o puede requerir una compra del producto ensamblar. La única anomalía tallada fuera de esta prohibición muy clara es que un requisito para comprar un en-coste, ventas non-commissionable o un kit del arrancador está permitido. Algunos estatutos contienen una exclusión específica para los kits de las ventas. Donde no hay exclusión específica, la misma conclusión es alcanzada por la interpretación. Otra manera de decir esto es que una no se puede cargar para que la derecha reclute otras. Tal "carga" se prohíbe como "honorario headhunting ilegal."

En mi opinión, la única base jurídica un legislador o el regulador puede tener que prohibir o las comisiones del desafío en la consumición representativa independiente son caracterizar compras del producto como "headhunting" o "pagando jugar." Otra versión del mismo problema es el requisito específico en muchos leyes que el plan de la compañía sea "sobre todo" sobre productos móviles a los consumidores, más bien que sobre el reclutamiento de más "participantes." Pero esa edición nos trae de nuevo al mismo lugar - si las compras del producto se conectan al reclutamiento, más bien que a la fuente y demanda tradicional del mercado, después las compras del producto sea honorarios "headhunting" disfrazados juzgados.

Nada que he escrito arriba es nuevo. Los métodos tradicionales de ocuparse de estas preocupaciones son varias formas de requisitos compañía-impuestos para las ventas a los niveles de los consumidores, y el diferenciar del expediente que guardan y retención o sumisión de esos expedientes a la compañía. Estas protecciones y técnicas todas tienen sus buenas puntas, con todo algunos reguladores opinión las como inadecuado o conforme a la manipulación, yendo en cuanto requieren la verificación de la compañía de sumisiones representativas independientes. Lo que sigue es una nueva (y, creo, complementario) idea, y aplicable a las compañías que estructuras permiten que identifiquen qué compras del producto están para el "valor intrínseco," que significa el comprador desee el item y está dispuestas a comprar el item sin el incentivo agregado del oportunidad de la renta. La idea es ésta: Si los hechos circundantes utilizan la posición que el producto se está comprando para su valor intrínseco, entonces la compra no se está haciendo "para jugar el juego." Los hechos deben contradecir la acusación reguladora o la prohibición estatutaria que pero para la oportunidad de la renta nadie comprarían los productos. También propongo (recuerde, yo dicho éstos son nuevas ideas) que el estatus del comprador (específicamente, un exterior, consumidor del no-participante, más bien que una cierta forma de representante independiente) no debe diferenciar ningún. Me ampliaré en esto mirando varios tipos de compradores:

1.) el cliente al por menor tradicional.
Una persona totalmente no relacionada a la compañía de la venta directa y generalmente desconocida a la compañía, porque la compra era del representante independiente. No debe haber pregunta que las ventas a tales personas están para el valor intrínseco.

2.) el cliente "dirige satisfecho" por la compañía.
La compañía conoce a esta persona porque la compañía tiene un sistema de la distribución que proporcione al envío directo a los usuarios finales. El representante independiente dice la compañía enviar, o las llamadas de cliente la compañía, identifica al representante independiente que les dijo sobre la compañía para los propósitos del crédito de las ventas, y pone una orden. La compañía se ocupa de cada orden mientras que ocurre y no mantiene ningún fichero separado de clientes. Trata la orden como si sea colocada directamente por el representante independiente, pero con una diversa "nave" para tratar. No debe haber pregunta que las ventas a tales personas están para el valor intrínseco.

3.) el cliente preferido.
Muchas compañías animan a sus representantes independientes que conecten a clientes preferidos directamente con la compañía. Los formularios de inscripción se utilizan a veces y se publican los números de identificación. Los clientes ordenan directamente. Estas personas, sin embargo, no firman una aplicación representativa independiente y no tienen una oportunidad de la renta. No debe haber pregunta que las ventas a tales personas están para el valor intrínseco.

4.) el representante independiente sin una derecha de patrocinar.
Algunas compañías ofrecen una oportunidad por separado delineada, single-level de la renta. Ningunas de las compras de esta gente se pueden juzgar posiblemente "para jugar el juego de un encadenamiento de reclutamiento sin fin," porque estas personas no tienen la derecha de reclutar otros representantes independientes. Estas ventas están para su valor intrínseco o para la reventa a los clientes, y ningún argumento no puede ser hecho que las ventas son un honorario headhunting disfrazado, puesto que la persona no puede reclutar a otros buscadores de la oportunidad de la renta.

5.) el representante independiente encima de quien "firma" para comprar al por mayor.
Éste es muy nuevo pensamiento y no todavía probado con los reguladores. Estoy dispuesto a discutir que la derecha de patrocinar otras en el acuerdo representativo independiente es una "oferta" de una oportunidad de niveles múltiples de la renta, se valida que cuando - y solamente cuando - ocurre el acto de patrocinar. Una persona que firma hasta compra en el precio representativo independiente, y eligiendo no patrocinar, no puede comprar "para jugar el juego," puesto que, otra vez, ha ocurrido ningún reclutamiento de los buscadores de la oportunidad de la renta.

6.) el representante independiente no-non-sponsoring.
Éste es también muy nuevo pensamiento y no todavía probado con los reguladores. Estoy dispuesto a discutir, y si es incapaz convencer un regulador, al juez apropiado (con buenos hechos), que compra por un representante independiente no-non-sponsoring no puede posiblemente ser a un honorario headhunting disfrazado o a un "pago que juegue." La razón se basa en lógica simple - el representante independiente (para el momento, por lo menos) ha declinado la oferta de la compañía a "participa" (una palabra con la significación legal) en la porción de niveles múltiples de la oportunidad de la renta. Ningún argumento no puede ser hecho que la compra es calificar para las primas del downline o para la derecha de reclutar, puesto que ha ocurrido ningún reclutamiento de participantes adicionales.

7.) el representante independiente que patrocina.
En muchas compañías que tengan requisitos mensuales bajos del volumen de negocio para calificar para las primas en el volumen de negocio de downlines, lo que sigue ocurre: Las órdenes independientes del representante en el exceso del mínimo necesitaron constantemente calificar para todas las primas disponibles del downline. Primero, la cantidad sobre el mínimo necesitado para calificar no es "jugar el juego," puesto que solamente el mínimo es necesario. **time-out** uno segundo, opcional, argumento poder incluso ser hacer que todo orden ser para intrínseco valor, puesto que uno pedir único "participar" apenas pedir mínimo. Esto puede ser más agresivo que necesario, pero vale el observar.

Conclusión Muchas compañías son para tener disponibles estructurado, en la corporación, expedientes que utilizan los tipos antedichos de compras para el valor intrínseco. Creo que las ventas definidas de esta manera (que sea un acercamiento, y no el único acercamiento) tratan directamente la conducta que los leyes de la contra-pirámide y de encadenamiento sin fin por todas partes intentan regular. Observe que he evitado el uso del término "venta al por menor" o el "vender al por menor" a través de este artículo, y en propósito, porque el concepto que propongo es más exacto. **time-out** asunción (y legal argumento en apropiado foro, con bueno hecho) ser que regular y prohibir conducta ser venta producto que nadie comprar para su intrínseco valor, pero en lugar de otro comprar para participar adentro y fomentar uno ilegal sin fin encadenamiento. Sin "valor intrínseco," tales ventas se convierten en honorarios headhunting disfrazados, prohibidos específicamente por los leyes de la mayoría de los países.

Usted compraría los productos de la compañía ausentes la oportunidad de la renta? cualquier persona? La respuesta necesita ser "sí." Si las ventas de una compañía están "sobre todo para el valor intrínseco," la compañía puede soportar escrutinio legal. **time-out** en cerrar, por favor observar que en este área cuál ser bueno para legal salud compañía ser también requerir para económico salud compañía. Eso es un nuevos tema y artículo enteros. Apenas concluiré diciendo las "ventas para el valor intrínseco" soy una necesidad absoluta para la supervivencia legal y económica de las compañías de la venta directa alrededor del mundo.

Gerald P. Nehra es abogado del ejercicio privado del especialista de MLM. Él es uno solamente de algunos abogados en los Estados Unidos que práctica se dedica exclusivamente a las ediciones de la venta directa y de la comercialización de niveles múltiples. Sus 33 años de la experiencia legal incluyen nueve años en Amway Corporation, donde él estaba director de la división legal. Él puede ser alcanzado en 1710 la calle de la playa, Muskegon, MI 49441, 1-231-755-3800, fax 1-231-755-4700. Su direccionamiento del E-mail es GNehra@mlmatty.com. A le invitan que visite su Web site en www.mlmatty.com.

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