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2 Questions on my Service and MLM

by JerryConklin » Tue Aug 08, 2017 3:17 pm


Hello. I have a question about a business I run and a question about the MLM systems.

I offer an online service for Facebook Messenger and I was thinking to introduce also a "representative/affiliate" element to increase my sales/customers. The service is at $80/month, so I was thinking for anyone someone brings to the service he will get half of that money, $40/month. So if someone introduces 4 people to the company/service he can get $160/month.

I want to confirm that this isn't any illegal scheme. It's just rewarding for bringing people to the company and there is an actual service that is sold and the money are not just made by recruiting. Am I right?

This is the first part and my first question. Now on to the 2nd one.

My 2nd question is related to the first one. If the first one is not illegal (for all the reasons explained) then if I change the service to some other service will it still be legal, right? If the service is exactly this rewarding/recurring payment to someone for the people that he introduces, is it illegal?

Let me explain better. Someone signs up for a company that its service is to reward you for new customers that you bring to the service. You sign up for $80/month and for every person that you bring you will receive $40/month. No downlines, no matrix bonuses nothing. Is this illegal and pyramid scheme? If yes why? What is the difference in this service form the first service that it is not illegal?

If I want to find further information at which service can I address? FTC? BBB? Can I email them with details of my intended business plan and let me know if they consider it pyramid scheme or legal Multi Level? Will they reply or it's pointless? :?:

Thanks for any replies on the matter.
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Re: 2 Questions on my Service and MLM

by Gery_D » Tue Aug 08, 2017 10:40 pm


On the surface, the first portion of your plan seems viable if it is a single level affiliate program, that is, where A refers B and earns a commission from their purchase but would receive no commission or override on anyone B refers to purchase the system'.

Your second scenario is a little trickier. You certainly have the right to change your business platform but your obligation to your affiliates will depend on your agreement. Secondly, the legality of your business model, should you change the type of service could depend on the type of content you would be offering.

In either case on item 1 and definitely on item 2 I would recommend that you contact a competent MLM consultant such as Americas MLM Consultants in San Antonio TX and/or a competent MLM Attorney to review your structure. You might get a little guidance from the FYC but not the BBB. Good luck.
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Re: 2 Questions on my Service and MLM

by JerryConklin » Wed Aug 09, 2017 8:09 am


Gery_D wrote: Secondly, the legality of your business model, should you change the type of service could depend on the type of content you would be offering.

What do you mean by this sentence? Not sure I totally understand it :)


Gery_D wrote: You might get a little guidance from the FYC but not the BBB. Good luck.
I can't find how to contact them in order to show them or explain the business plan. I only can find links to contact about complaints, claims, scam reports etc. Not anything for guidance/advice. Is there any specific place that I ask for help?
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Re: 2 Questions on my Service and MLM

by Gery_D » Fri Aug 11, 2017 2:52 pm


JerryConklin wrote:
Gery_D wrote: Secondly, the legality of your business model, should you change the type of service could depend on the type of content you would be offering.

What do you mean by this sentence? Not sure I totally understand it :)


If the service or product you switch to is not legal in the area sold from or the end user resides in then obviously you don't have a legal transaction. Additionally the referring member will likely be in violation of the law if compensated in some way.

JerryConklin wrote:
Gery_D wrote: You might get a little guidance from the FYC but not the BBB. Good luck.
I can't find how to contact them in order to show them or explain the business plan. I only can find links to contact about complaints, claims, scam reports etc. Not anything for guidance/advice. Is there any specific place that I ask for help?


There is no compendium of information on how to structure or operate MLMs or affiliate programs, merely guidelines that must be adhered to on certain subjects. Use search terms like "Multilevel Compensation" and you will find a number of signature cases the FTC has ruled on. You can investigate those further for more details. Endorsements and testimonials is another are that has guidelines posted. It really can be hunt and peck unless you know the best terms to use in search. Even the decisions themselves can be a bit confusing. There are a number of MLM Consultants, lawyers, and companies such as InfoTrax, the creator and sponsor of this site, that are experts in these areas.

The General consensus is that if you are paying someone to recruit into a matrix you are in violation. One way companies try to circumvent that issue is the "Get X and yours is free" model where one time or every month, depending on how you set it up, the member has, say 5, active memberships on the books then his or her membership is free for that month. Active meaning paying membership or buying product.

That's about all I can give you in this area. Good luck.
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