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MLM Scams and Legal News

MLM companies and independent contractors (distributors) must understand the local, national and international laws that regulate the MLM and direct selling industry. In the United States, the direct selling industry is regulated by Federal Trade Commission rulings that influence commission plans or income claims. The sale of products is also regulated for all industries such as the three day return rate. In international legal cases, national and local laws vary.

  • September 23, 2015

    Back to the Breakaway?

    One of the key arguments in the recent Vemma versus the FTC case was about the use of personal volume (PV) requirements for compensation qualification. The FTC contends that compensation must be paid on the sale of product and not on recruitment. But if a company requires PV for compensation, it is unclear if... Read more ›

  • September 3, 2015

    FTC v. BurnLounge: Lessons Learned for MLM/Direct Selling

    FTC stated policy has been to prosecute egregious pyramid schemes as opposed to mainstream direct selling. By and large, this has been the case since the famous 1979 FTC Amway unsuccessful prosecution. FTC and major court pyramid decisions, including FTC v. BurnLounge,  focus on front-loading, large inves... Read more ›

  • July 8, 2015

    Third Party Marketing Materials and Product Substantiation

    Every few years, someone makes front page news with a scandal about an exaggerated or unsubstantiated claim about their product. Typically, some crisis comes first such as Swine Flu. Next, someone decides that their product will fix said crisis. Making headlines can be great for business, but not these kinds ... Read more ›

  • July 6, 2015

    Product Substantiation: Direct Selling’s Key to Success

    The key issues in nutritional supplements are (1) that products have substantiation for their claims, (2) that consumers have information about the nutritional supplements, and (3) that products contain the ingredients listed. Substantiation Substantiation matters. That is, scientific proof for the efficacy... Read more ›

  • June 9, 2015

    You’ll Pay Millions in Fines if You Violate These Rules by Jennifer Fong and Spencer Reece

    If you are in a direct sales or network marketing company, your policies and procedures forbid product claims. Don't believe me? Go read 'em. Trust me, it's in there. OK everyone, this is really important, so put down whatever you’re doing and listen up.  I’m giving you my *serious eyes.*  I mean it,... Read more ›

  • April 10, 2015

    Corporate Feature: Self-Assessment of Consumer Use Tax

    Introduction For most companies, the imposition of sales tax is a normal part of business operations. However, consumer use tax is often overlooked, leading to costly transactional audit penalties and interest, or unnecessary overpayments. Consumer use tax associated with untaxed purchases often represents t... Read more ›