We’ve all been there. Whether it was a spouse or parent that was pitching an exciting business opportunity, we’ve all been sold an opportunity of a lifetime. And deep down in our gut, we felt…maybe a little uncertain. Is it legitimate? Is it legal? Unfortunately, distinguishing a good network marketing company from a bad one involves more art than science. It’s hard to tell a difference and there’s never a sure answer. I prepared this article to help consumers make wise choices during these tough economic times. The article is also written to be informative for network marketing executives to help them run their businesses.

Legitimate MLM or Pyramid Scheme: How can you tell?

FTC Cracks Down

See my notes below. They’re not edited, so be nice;)

Steve, conference all operator.
Press conference at the Federal Trade Commission office in D.C. Lots of chatter in the background.
Claudia: intro

David Vladeck, Director, FTC’s Bureau of Consumer Protection

Consumers are under tremendous anxiety for making ends meet. But for con artists, there’s an opportunity to exploit fears.

Promise to make a living while working from home, guaranteed jobs…

Promises them hope while driving them deeper in a hole.

Working with 14 states.

Massive coordinated crack down on scams that rip off financially strapped consumers.

Beverly Stewart, victim, will tell her story.

Federal government is committed to protect consumers.

“Seize on the economic stimulus dollars.” “Help consumers get free gov’t grant money for personal expenses.”
“Paying $ for job.”

John Beck was shut down today for his real-estate educational program. “Mentoring of America” His real estate system consisted of monthly website subscriptions for information that extracted money from victims.
“People want to believe that there is an opportunity that will guarantee financial success. There is no sure deal.”

“Best advice to anyone in an opportunity is fast no and slow yes.”

www.ftc.gov/moneymatters gives tips on how to recognize fraud and how to report them to the FTC.

Federal and state law enforcement officers are on the front line.

Tony West, Assistant Attorney General,
U.S. Department of Justice

Talks about collaboration b/w department of justice and FTC.
We’ve all heard of the opportunities that are “just too good to be true.”
Unfortunately, many opportunities are just that “too good to be true.” These schemes have caused consumers millions. Justice must be served to those who are partaking in these activities.

He oversees the office of consumer litigation. It has criminal and civil jurisdiction.

Justice can be brought to those that seek to defraud the public.

Schemes do not discriminate. They target everyone.

Many cases launched by the FTC end up as felony indictments.

Grand jury indicted individual for criminal contempt banning him from being involved in selling business opportunities again.
“If you operate an illegal biz op scheme, we will punish you if you break the law and seek to take advantage of the American public.”

Roy Cooper, Attorney General of North Carolina

People are losing everything. For a con artist, a bad economy is like a gold rush. Families often let their guard down. “A gold mine for scammers.”

We want to clamp down on con artists that get rich on other people’s misery.

They want you to pay cash up front. Con artists are clever and convincing.

Complaints are up 27% compared to a year ago.

N.C. has taken action against 19 companies.

i.e. concert promoter wanted to get up front fee before hiring.

Another company promised large income by starting online business…prospects had to pay for software.

Property investment schemes.

A victim of an employment scam

President has proposed a new consumer protection agency.

Right now, they need all hands on deck to fight fraud and protect consumers.

Education is important.

Don’t pay any money up front to someone that can cure your financial problems.

Beverly Stewart, victim

Single mother of two. She wanted a job and saw ad in Washington Post. It was for a cleaning position.

Asked to call a number, told to go online and download her certification, and gave her a bank account number for $89. She was told “we’ll get to you as soon as we can.” The website looked great, anyone would have fallen for it.

They depend heavily on consumer complaints. The FTC wants the complaints from other states.

They’re working to make the path easier for consumers.

“Get angry and do something.”

After she realized it was a scam, she called local authorities and the BBB…got no help.

The Washington Post said “we can’t control the ad.”

She called the FBI, consumer fraud, the US attorney’s office. She called the FTC. That’s when the help began.

When you take someone, even for a little bit of money, it takes a piece of their dignity.

QUESTIONS FROM THE PRESS

Can you really say that “fraud is up” during the economic downturn? Yes.

Reporter from the Detroit Press asked if Michigan was a part of the effort. Answer: No.

I asked if the network marketing industry would be more thoroughly regulated. Answer: we will not comment on ongoing investigations but we will pursue any company that seeks to exploit consumers. They are looking for scammers at large. They’re not looking to exclude any kind of scam. “We are not passing on any kind of scam that presents a danger to the American people.”

Boogie Man and the FTC

There’s a lot happening now in the network marketing industry.  Recent rhetoric suggests that the FTC is  re-engaging in an industry that desperately needs it.  The Burnlounge decision is expected to be published soon, which will help clarify the law in the industry.  USANA recently got hit (again) with another class action lawsuit.  And the FTC is saber rattling.

As I mentioned in my ebook, the industry is torn over the issue of recruitment versus retail sales.  Can a distributor skip selling entirely and simply “buy from themselves” and recruit other participants to do the same?  Should distributors be required to rack up outside sales to nonparticipants?  If so, what’s enough?  In my opinion, the law is moving in a direction that will require 50% of a company’s revenue to be tied to customer sales (people outside the program).

These are major questions that, if left unanswered, lead to broad misrepresentation and abuse.  Since these questions are largely unanswered in America, we’re seeing numerous class action lawsuits filed by angry distributors, all stating the same allegations (distributors are required to focus on recruiting countless participants to earn income i.e. pyramiding).  The industry needs oversight.  Instead of relying on costly lawsuits filed by disgruntled distributors, there needs to be uniform standards that empower the FTC and local state Attorney Generals to maintain order in an industry seeping with impropriety.  Where there’s smoke, there’s fire.

“New FTC Asserts Itself”

In a string of articles, it seems as though the FTC has finally woken up. With the new Obama administration, there are fewer impediments holding the FTC back from policing the consumer markets. New commissioner, Jon Leibowitz, has already expressed a desire to be more relevant for consumers. After pursuing a case against Kellogg’s, he said, “This is a signal that we’re going to be bringing cases against major corporations,” he said. “If you want to make sure advertising is truthful, you have to go after not only the bottom-feeders but America’s best-known corporations.””>, he said, “This is a signal that we’re going to be bringing cases against major corporations,” he said. “If you want to make sure advertising is truthful, you have to go after not only the bottom-feeders but America’s best-known corporations.”

The FTC has also finished up with an old case against another pyramid scheme involving internet kiosk services. The original complaint alleged that the company misrepresented / overstated the opportunity. In February of 2009, two of the defendants pled guilty to securities fraud and are serving seven years in prision.

USANA gets hit with another class action lawsuit

Last year, various distributors filed a class action lawsuit alleging, among other things, that USANA distributors could only earn income by focusing on recruiting other participants, not by selling USANA products.  Yesterday,  it appears a similar lawsuit was filed in Nevada. Angela at the Business Opportunities Blog wrote a short summary of the USANA lawsuit here. The plaintiffs allege,

Those already in the pyramid are greedily incentivized to recruit more and more distributors to grow the base for the benefit of those higher up on the pyramid,” Chirco’s suit charges. “It isn’t until one is locked into a distributorship that it becomes clear that merely selling products to consumers without a pyramid position is not a realistically sustainable option. The only way for an associate to economically stay afloat is to recruit lower ranks for the Usana pyramid.

If I’m in a business that relies on constant recruitment for sustainability, I’d be worried. But as Bernie Madoff indicated in his statement to the victims, “If I’m in a business that relies on constant recruitment for sustainability, I’d be worried. But as Bernie Madoff indicated in his statement to the victims before he went to prison,  once a ponzi is started, it’s impossible to stop without collapsing the entire structure.  And since money is addicting, it’s hard for people to walk away.

I want to say “Thank you!” to all my readers! In the video below, I talk about the pending Burnlounge decision and what it could mean for the network marketing industry. I also talk about the need to root out irresponsible companies in order to save the reputation of the industry. Take care!

Defining the Gray_full Version