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  1. #1
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    Pyramids, Ponzis and MLMs - The Difference

    I know that I had already gave my thoughts on this and put a link in another thread in this forum, but I found another article that is pretty good about mlm and pyramid schemes. This actually gives an honest look at how these things work, what to watch out for and what your responsibility is if you are involved in mlm. It's actually written by the Federal Trade Commission and it is from there site. So, if you want to know the real-deal on this one, this is the best article to read seeing that it is from a government site.

    Here is the link: The Bottom Line About Multilevel Marketing Plans

    Here is the article:

    FTC Consumer Alert

    * PDF Format
    *

    * Email

    The Bottom Line About Multilevel Marketing Plans

    Multilevel or "network" marketing plans are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you'll receive commissions - for your sales and those of the people you recruit to become distributors. These recruits sometimes are referred to as your "downline."

    Some multilevel marketing plans are legitimate. However, others are illegal pyramid schemes. In pyramids, commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors - not to consumers in general. The underlying goods and services, which vary from vitamins to car leases, serve only to make the schemes look legitimate.

    Joining a pyramid is risky because the vast majority of participants lose money to pay for the rewards of a lucky few. Most people end up with nothing to show for their money except the expensive products or marketing materials they're pressured to buy.

    If you're thinking about joining what appears to be a legitimate multilevel marketing plan, take time to learn about the plan. What's the company's track record? What products does it sell? Does it sell products to the public-at-large? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the plan? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?

    Be skeptical if a distributor tells you that for the price of a "start-up kit" of inventory and sales literature - and sometimes a commitment to sell a specific amount of the product or service each month - you'll be on the road to riches. Often consumers spend a lot of money to "build their business" by participating in training programs, buying sales leads or purchasing the products themselves. Too often, these purchases are all they ever see for their investments.
    Your Responsibilities

    If you decide to become a distributor, you are legally responsible for the claims you make about the company, its product and the business opportunities it offers. That applies even if you're repeating claims you read in a company brochure or advertising flyer. The Federal Trade Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to a potential customer.

    In addition, if you solicit new distributors, you are responsible for the claims you make about a distributor's earnings potential. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.
    Evaluating a Plan

    The FTC suggests that you use common sense when evaluating a multilevel marketing opportunity and consider these tips as you make your decision:

    1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
    2. Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids in disguise.
    3. Be cautious of plans that claim you will make money through continued growth of your downline, that is, the number of distributors you recruit.
    4. Beware of plans that claim to sell miracle products or promise enormous earnings. Ask the promoter to substantiate claims.
    5. Beware of shills - "decoy" references paid by a plan's promoter to lie about their earnings through the plan.
    6. Don't pay or sign any contracts in an "opportunity meeting" or any other pressure-filled situation. Insist on taking your time to think over your decision. Talk it over with a family member, friend, accountant or lawyer.
    7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering - especially when the claims about the product or your potential earnings seem too good to be true.
    8. Remember that no matter how good a product and how solid a multilevel marketing plan may be, you'll need to invest sweat equity as well as dollars for your investment to pay off.

    The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit Federal Trade Commission - Home or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
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  2. #2
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    Re: MLM and Pyramid Schemes

    'OK' post.

    There are better, more informative sites for MLM research.

    Try HERE for one...

    And, you might try this one too!

    Try this one as well!

    Ponzi vs Pyramid?

    Best to you!

    Welcome to the forum...

    Kerry
    As long as it is acceptable for a person to beLIEve that he knows how god wants everyone on Earth to live, we will continue to murder one another on account of our myths. ~ Sam Harris, 'The End Of Faith'
    ~~~~~
    Christianity demands the crucifixion of the intellect.
    ~ Susan Kierkegaard

  3. #3
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    Aug 2009
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    8

    Re: MLM and Pyramid Schemes

    Quote Originally Posted by ohein56 View Post
    'OK' post.

    There are better, more informative sites for MLM research.

    Try HERE for one...

    And, you might try this one too!

    Try this one as well!

    Ponzi vs Pyramid?

    Best to you!

    Welcome to the forum...

    Kerry
    Thanks FRIEND!
    The Latest News Relating to Nigerian 419 Fraud From Around the World.
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  4. #4
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by 419legalscam View Post
    Thanks FRIEND!
    You bet.

    Hope you get something from the links. The FTC site is limited in scope, and isn't quite as accurate as I'd like to see it when it concerns itself with MLM/NWM/DS.

    Peace,

    Kerry
    As long as it is acceptable for a person to beLIEve that he knows how god wants everyone on Earth to live, we will continue to murder one another on account of our myths. ~ Sam Harris, 'The End Of Faith'
    ~~~~~
    Christianity demands the crucifixion of the intellect.
    ~ Susan Kierkegaard

  5. #5
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    188

    Re: MLM and Pyramid Schemes

    Quote Originally Posted by ohein56 View Post
    Hope you get something from the links. The FTC site is limited in scope, and isn't quite as accurate as I'd like to see it when it concerns itself with MLM/NWM/DS.
    What's inaccurate in the FTC article?

  6. #6
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by Juulie Downs View Post
    What's inaccurate in the FTC article?
    Hi Juulie.

    I've even brought this little issue up with Len Clements, and he agrees with the error, but the FTC doesn't listen to anyone 'out there' concerning matters like this.

    Here's what I found that I have a problem with. I'm sure you'll agree.

    Quote Originally Posted by FTC.gov/MLM link
    If a plan offers to pay commissions for recruiting new distributors, watch out! Most states outlaw this practice, which is known as "pyramiding." State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.
    The underlined part is inaccurate.

    It gives one the distinct impression that if you were in my MLM business as a wholesale customer, I shouldn't earn any commissions on any of that wholesale volume, as it's NOT 'retail sales' volume!?

    That's just wrong.

    Here's the link;

    Click Here...

    Kerry
    As long as it is acceptable for a person to beLIEve that he knows how god wants everyone on Earth to live, we will continue to murder one another on account of our myths. ~ Sam Harris, 'The End Of Faith'
    ~~~~~
    Christianity demands the crucifixion of the intellect.
    ~ Susan Kierkegaard

  7. #7
    Join Date
    Sep 2006
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    350

    Re: MLM and Pyramid Schemes

    Quote Originally Posted by ohein56 View Post
    Hi Juulie.

    I've even brought this little issue up with Len Clements, and he agrees with the error, but the FTC doesn't listen to anyone 'out there' concerning matters like this.

    Here's what I found that I have a problem with. I'm sure you'll agree.



    The underlined part is inaccurate.

    It gives one the distinct impression that if you were in my MLM business as a wholesale customer, I shouldn't earn any commissions on any of that wholesale volume, as it's NOT 'retail sales' volume!?

    That's just wrong.

    Here's the link;

    Click Here...

    Kerry
    wholesale
    Noun
    1. the business of selling goods in large quantities and at lower prices to retailers for resale
    2. relating to such business: wholesale prices
    3. extensive or indiscriminate: the wholesale destruction of forests

    So are you saying that in MLM you are buying wholesale as a retailer to then sell the product to the end consumer?

  8. #8
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    21,906

    Re: MLM and Pyramid Schemes

    I agree Kerry, it should make clearer that whether a sale is retail or wholesale is not the issue, the issue is that no commissions should be paid on the joining fee of a new distributor.
    "People are not interested in your product or your business; they are interested in solving their own problems." -- James Dillehay, Entrepreneur and Author

  9. #9
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    Re: MLM and Pyramid Schemes

    Skeptic Al, quite simply in MLM you have the option as a distributor, to buy at wholesale both for your own consumption, thereby saving money, or by selling at a higher retail price and making a profit on the difference. Good isn't it? :)
    "People are not interested in your product or your business; they are interested in solving their own problems." -- James Dillehay, Entrepreneur and Author

  10. #10
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    Re: MLM and Pyramid Schemes

    if you product is an overpriced energy drink, it doesn't matter. you could buy similar for your own use, lower price, at 7-11. the MLM trick is that people are willing to overpay for products because they expect to make money selling to others. of course, that can never happen after you subtract the cost of meetings, seminars, books, the real cost of your time, which right now, can't be less than $7.25.

    if some of you were paid $7.25 for all the time you spend here defending MLM, would be more than you make in MLM.

  11. #11
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    Re: MLM and Pyramid Schemes

    Then again mumbles your MLM company could produce an energy drink that is HALF THE PRICE of most of the other drinks on the Market and it could have minimal sugar and calories in it. And it could be in a powder sachet that could be carried round anywhere in your pocket and is ideal for sampling. What a business opportunity that would be!
    "People are not interested in your product or your business; they are interested in solving their own problems." -- James Dillehay, Entrepreneur and Author

  12. #12
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by Skeptic Al View Post
    wholesale
    Noun
    1. the business of selling goods in large quantities and at lower prices to retailers for resale
    2. relating to such business: wholesale prices
    3. extensive or indiscriminate: the wholesale destruction of forests

    So are you saying that in MLM you are buying wholesale as a retailer to then sell the product to the end consumer?
    I'm very skeptical, Al. I don't think you even have a clue what you asked, so I don't have a clue either!:crazy1:

    Your post makes no sense to me at all.

    Try it again, Al.
    As long as it is acceptable for a person to beLIEve that he knows how god wants everyone on Earth to live, we will continue to murder one another on account of our myths. ~ Sam Harris, 'The End Of Faith'
    ~~~~~
    Christianity demands the crucifixion of the intellect.
    ~ Susan Kierkegaard

  13. #13
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by mumbles View Post
    if you product is an overpriced energy drink, it doesn't matter. you could buy similar for your own use, lower price, at 7-11. the MLM trick is that people are willing to overpay for products because they expect to make money selling to others. of course, that can never happen after you subtract the cost of meetings, seminars, books, the real cost of your time, which right now, can't be less than $7.25.

    if some of you were paid $7.25 for all the time you spend here defending MLM, would be more than you make in MLM.
    Why doesn't everyone in the US buy their sundries at the Dollar stores like Cal does? I don't get why anyone would shop anywhere else, when they can get all their 'stuff' for a dollar!:crazy1:

    What gives!?
    As long as it is acceptable for a person to beLIEve that he knows how god wants everyone on Earth to live, we will continue to murder one another on account of our myths. ~ Sam Harris, 'The End Of Faith'
    ~~~~~
    Christianity demands the crucifixion of the intellect.
    ~ Susan Kierkegaard

  14. #14
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by ohein56 View Post
    Why doesn't everyone in the US buy their sundries at the Dollar stores like Cal does? I don't get why anyone would shop anywhere else, when they can get all their 'stuff' for a dollar!:crazy1:
    Why doesn't everyone buy their bail bonds where Kerry buys his bonds after being arrested every month? Why doesn't everyone steal money from blind people on the street like Kerry does?

    Those statements are based on as much truth as yours.

    Back to the topic: The FTC is probably very specific to use the term "retail sales" as commissions shouldn't be paid until the product has been purchased by the end user, whether that's a distributor using for personal consumption or an external customer. Otherwise, you could have massive commissions being paid, yet not one single sale ever made to someone that will actually use the product. It's there to make pyramid schemes with baseless "place holder" products harder to come to fruitition.

    That's a good thing.

    Yes, you should be paid as a "wholesaler" (which you really aren't if the product isn't moving through you, you would be a referrer), but not if the product isn't ever resold or consumed.

  15. #15
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by calvinandhobbes View Post
    Why doesn't everyone buy their bail bonds where Kerry buys his bonds after being arrested every month? Why doesn't everyone steal money from blind people on the street like Kerry does?

    Those statements are based on as much truth as yours.

    Back to the topic: The FTC is probably very specific to use the term "retail sales" as commissions shouldn't be paid until the product has been purchased by the end user, whether that's a distributor using for personal consumption or an external customer. Otherwise, you could have massive commissions being paid, yet not one single sale ever made to someone that will actually use the product. It's there to make pyramid schemes with baseless "place holder" products harder to come to fruitition.

    That's a good thing.

    Yes, you should be paid as a "wholesaler" (which you really aren't if the product isn't moving through you, you would be a referrer), but not if the product isn't ever resold or consumed.
    Kerry, now that wasn't so hard to figure out was it? I guess you can't think and slurp at the same time!

    What's with this Nancy Grace bullshit, friend??

  16. #16
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    Re: MLM and Pyramid Schemes

    Quote Originally Posted by mumbles View Post

    if some of you were paid $7.25 for all the time you spend here defending MLM, would be more than you make in MLM.
    :yelcutelaughA: lol

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