As many North American readers would know, in 2006 the US Federal Trade Commission (FTC) proposed a new Business Opportunity Rule which, as written, would require multi-level marketing opportunity promoters to provide prospects with a whole range of new information, such as names of other local participants, lawsuits, etc etc etc. It also imposed a mandatory 7-day waiting period before a person could join.
The MLM and Direct Selling Industry argued that the requirements were not only unduly burdensome on legitimate companies, they would in fact have little effect on illegitimate companies. The FTC has agreed, and MLMs are effectively exempt from the proposed new rule.
There is some very interesting information in the full FTC discussion paper. One area of discussion was the problem of declaring average incomes, when many people join purely for the purpose of receiving “wholesale pricing”. Shaklee for example, revealed that 85% of folk who join that company do so for that reason.
The FTC included summaries of the claims of the bogus “consumer advocates” Pyramid Scheme Alert (Robert FitzPatrick) and Consumer Awareness Institute (Jon Taylor) but appeared unswayed by their arguments that MLM are effectively all illegal pyramids. One particular line from the Jon Taylor’s CAI which always makes me laugh –
“[i]t is extremely rare for MLM victims to recognize the fraud in an MLM program without intensive de-programming by a knowledgeable consumer advocate”
Good grief, get a life Jon.
Folk have argued that the UK BERR and the FTC have recently been in regular contact regarding MLMs. In particular a number of critics have claimed the BERR case has put MLM, and in particular, Amway, under strong FTC scrutiny. If this paper is any reflection of what the FTC and BERR have discussed, then it augurs well for that case.
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