From BehindMLM: SEC Reiterate Need For Retail Sales In MLM

SEC reiterate need for retail sales in MLM

Oct.19, 2013 in MLM

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As part of my writing here at BehindMLM I find myself sifting through mountains of MLM related information on a daily basis. One topic I find that pops up on a consistent basis is the debate over the importance (or lack thereof) of retail sales by an MLM company.

By using the term “retail sales” in MLM one is of course referring to sales of a product or service (not a third-party offering) by an MLM company to non-affiliates. Non-affiliates can be referred to as non-participants or any other name that denotes them as not participating in the compensation plan and earn commissions.

Some MLM companies attempt to muddy the clear definition of a retail customer by claiming that affiliates who do not recruit are retail customers. It is important to note that the failure to recruit new affiliates does not preclude an affiliate from generating commissions (typically by selling the company’s products), and as such they simply cannot be defined as retail customers (who simply cannot generate commissions no matter what they do or don’t do).

Here at BehindMLM it’s no secret the vital important I place on retail sales in my company reviews. The existence of retail sales and its viability is one of the key indicators I use in my analysis of an MLM company’s compensation plan and business model.

Adopting a common-sense approach to retail sales in MLM, I use a benchmark of around 50%, figuring that if a company can demonstrate that at least 50% of its revenue is from retail sales then they’re well-clear of being a pyramid scheme.

I mean, selling products to retail customers is what MLM is supposed to be about right? So is expecting a company to be at least 50% engaged in this unreasonable?

According to some MLM proponents, very much so.

One common assertion I see used time and time again is the insistence that US regulators do not care if products are being sold to retail customers or affiliates.

A product sale is a product sale and so long it is being purchased on the merit of the value of the product itself and not just to generate commissions‘, or some derivative is the common reasoning used.

The problem with that is of course that you then wind up companies operating in a loophole, ignoring retail altogether and focusing on generating recruitment commissions via product sales, with an inflation in product cost masking what would otherwise be a blatant recruitment incentive.

That however is conveniently ignored.

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SEC Investor Alert: Beware Of Pyramid Schemes Posing As MLM!

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Investor Alert: Beware of Pyramid Schemes Posing as Multi-Level Marketing Programs

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn individual investors about pyramid schemes, a type of investment scam that fraudsters often pitch as a legitimate business opportunity in the form of multi-level marketing programs.

Have you ever been tempted by an advertisement or offer to make “easy money” or “online income” out of your own home? Multi-level marketing (“MLM”) programs are promoted through Internet advertising, company websites, social media, presentations, group meetings, conference calls, and brochures. In an MLM program, you typically get paid for products or services that you and the distributors in your “downline” (i.e., participants you recruit and their recruits) sell to others. However, some MLM programs are actually pyramid schemes — a type of fraud in which participants profit almost exclusively through recruiting other people to participate in the program.

Pyramid schemes masquerading as MLM programs often violate the federal securities laws, such as laws prohibiting fraud and requiring the registration of securities offerings and broker-dealers. In a pyramid scheme, money from new participants is used to pay recruiting commissions (that may take any form, including the form of securities) to earlier participants just like how, in classic Ponzi schemes, money from new investors is used to pay fake “profits” to earlier investors. Recently, the SEC has sued the alleged operators of large-scale pyramid schemes for violating the federal securities laws through the guise of MLM programs.

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From BehindMLM: ZTeamBiz vow to “bring back” Zeek Ponzi excitement

ZTeamBiz vow to “bring back” Zeek Ponzi excitement

Oct.19, 2013 in Zeek Rewards 3 Comments

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Despite the hundreds of millions of dollars lost by affiliate investors in the Zeek Rewards Ponzi scheme, fourteen months after the SEC shut it down there are still those running around professing its legitimacy.

One such group is Robert Craddock’s ZTeamBiz who, in addition to swearing Zeek Rewards wasn’t a Ponzi scheme, look set to spearhead attempts to reintroduce the MLM industry to the Ponzi points revenue sharing model.

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