[nabentre] Business Opportunity

Mon Jun 21 11:30:31 UTC 2010

Hi Brian,
The Federal Trade Commission explains the differences between MLM, which they say is legal, and a pyramid scheme, which they say is not. Please see the following.

Adapted From
PREPARED STATEMENT OF
DEBRA A. VALENTINE, GENERAL COUNSEL FOR
THE U.S. FEDERAL TRADE COMMISSION
on
"PYRAMID SCHEMES"
presented at the
INTERNATIONAL MONETARY FUND'S
SEMINAR ON CURRENT LEGAL ISSUES AFFECTING CENTRAL BANKS
Washington, D.C.
May 13, 1998

What is a Pyramid Scheme and What is Legitimate Marketing?
Pyramid schemes
promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment
or real sale of goods to the public.

There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory
loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs
throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to
market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red
flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur
only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.

Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing. Multilevel marketing programs are known as MLM's,
and unlike pyramid or Ponzi schemes, MLM's have a real product to sell. More importantly, MLM's actually sell their product to members of the general public,
without requiring these consumers to pay anything extra or to join the MLM system. MLM's may pay commissions to a long string of distributors, but these
commissions are paid for real retail sales, not for new recruits.

FTC Precedent from the 1970's

The Commission took its first concerted action against pyramid schemes in the 1970's during a boom in home-based business and MLM or direct selling.
One of the Commission's first cases was In re Koscot Interplanetary, Inc.,
which involved a company that offered the opportunity to become a "Beauty Advisor" and sell cosmetics. The company's incentive structure really did not
encourage retail sales. Instead, it encouraged people to pay $2000 for the title of "Supervisor" and purchase $5400 in Koscot cosmetics, and then to earn
bonuses by recruiting others to make the same investments.
The Commission found that Koscot operated an illegal "entrepreneurial chain" and articulated a definition of illegal pyramiding that our agency and the
federal courts continue to rely on.
The Commission found that pyramid schemes force participants to pay money in return for two things. First is "the right to sell a product", second is "the
right to receive, in return for recruiting other participants into the program, rewards which are unrelated to sale of the product to ultimate users.

The Commission explained that paying bonuses for recruiting:

. . . will encourage both a company and its distributors to pursue that side of the business, to the neglect or exclusion of retail selling. The short-term
result may be high recruiting profits for the company and select distributors, but the ultimate outcome will be neglect of market development, earnings
misrepresentations, and insufficient sales for the insupportably large number of distributors whose recruitment the system encourages."

In In re Amway Corp.,
another landmark decision from the 1970's, the FTC distinguished an illegal pyramid from a legitimate multilevel marketing program. At the time, Amway
manufactured and sold cleaning supplies and other household products. Under the Amway Plan, each distributor purchased household products at wholesale
from the person who recruited or "sponsored" her. The top distributors purchased from Amway itself. A distributor earned money from retail sales by pocketing
the difference between the wholesale price at which she purchased the product, and the retail price at which she sold it. She also received a monthly bonus
based on the total amount of Amway products that she purchased for resale to both consumers and to her sponsored distributors.

Since distributors were compensated both for selling products to consumers and to newly-recruited distributors, there was some question as to whether this
was a legitimate multilevel marketing program or an illegal pyramid scheme. The Commission held that, although Amway had made false and misleading earnings
claims when recruiting new distributors,
the company's sales plan was not an illegal pyramid scheme. Amway differed in several ways from pyramid schemes that the Commission had challenged. It
did not charge an up-front "head hunting" or large investment fee from new recruits, nor did it promote "inventory loading" by requiring distributors to
buy large volumes of nonreturnable inventory. Instead, Amway only required distributors to buy a relatively inexpensive sales kit.

Moreover, Amway had
three different policies to encourage distributors to actually sell the company's soaps, cleaners, and household products to real end users. First, Amway
required distributors to buy back any unused and marketable products from their recruits upon request. Second, Amway required each distributor to sell
at wholesale or retail at least 70 percent of its purchased inventory each month -- a policy known as the 70% rule. Finally, Amway required each sponsoring
distributor to make at least one retail sale to each of 10 different customers each month, known as the 10 customer rule.

The Commission found that these three policies prevented distributors from buying or forcing others to buy unneeded inventory just to earn bonuses. Thus,
Amway did not fit the Koscot definition: Amway participants were not purchasing the right to earn profits unrelated to the sale of products to consumers "by recruiting other participants,
who themselves are interested in recruitment fees rather than the sale of products."

Pyramid Schemes in the 1990's

The 1990's first brought an important refinement in the law. As the Commission pursued new pyramid cases, many defendants proclaimed their innocence, stating
that they had adopted the same safeguards -- the inventory buy-back policy, the 70% rule, and the 10 customer rule -- that were found acceptable in Amway.
However, an appellate court decision called Webster v. Omnitrition Int'l, Inc.,
pointed out that the Amway safeguards do not immunize every marketing program. The court noted that the "70% rule" and "10 customer rule" are meaningless
if commissions are paid based on a distributor's wholesale sales (which are only sales to new recruits), and not based on actual retail sales.
The court also noted that an inventory buy-back policy is an effective safeguard only if it is actually enforced.

Jim

Jim Homme,
Usability Services,
Phone: 412-544-1810. Skype: jim.homme
Internal recipients,  Read my accessibility blog. Discuss accessibility here. Accessibility Wiki: Breaking news and accessibility advice

-----Original Message-----
From: nabentre-bounces at nfbnet.org [mailto:nabentre-bounces at nfbnet.org] On Behalf Of Bryan Schulz
Sent: Saturday, June 19, 2010 10:08 AM
To: NFBnet NAB Entrepreneurs Mailing List
Subject: Re: [nabentre] Business Opportunity

the diff is legit businesses pay their employees directly and in
mlm/pyramids the employee/sucker only gets paid if they build a string of
suckers under them!

Bryan Schulz

----- Original Message -----
From: "Albert J Rizzi" <albert at myblindspot.org>
To: "'NFBnet NAB Entrepreneurs Mailing List'" <nabentre at nfbnet.org>
Sent: Saturday, June 19, 2010 7:54 AM
Subject: Re: [nabentre] Business Opportunity

> How is that really any different then the systems we already have in
> place.
> The lowest paid employees get paid the least the higher up the ladder one
> goes the more money they make and if we really look at it in the reverse
> the
> highest paid usually pay the least amount of taxes in proportion to what
> they earn. What system do you profess to be the one that works best for
> you?
>
> Albert J. Rizzi, M.Ed.
> CEO/Founder
> My Blind Spot, Inc.
> 90 Broad Street - 18th Fl.
> New York, New York  10004
> www.myblindspot.org
> PH: 917-553-0347
> Fax: 212-858-5759
> "The person who says it cannot be done, shouldn't interrupt the one who is
> doing it."
>
>
> Visit us on Facebook LinkedIn
>
>
>
> -----Original Message-----
> From: nabentre-bounces at nfbnet.org [mailto:nabentre-bounces at nfbnet.org] On
> Behalf Of Bryan Schulz
> Sent: Friday, June 18, 2010 4:30 PM
> To: NFBnet NAB Entrepreneurs Mailing List
> Subject: Re: [nabentre] Business Opportunity
>
> hi,
>
> call it what you want but mlm is code for pyramid when you don't make much
> profit unless you suck off of those you get to follow, work for you and
> give
>
> you some of what they worked for and the person at the top also takes much
> of your profit
>
> Bryan Schulz
>
> ----- Original Message -----
> From: "Homme, James" <james.homme at highmark.com>
> To: "NFBnet NAB Entrepreneurs Mailing List" <nabentre at nfbnet.org>
> Sent: Friday, June 18, 2010 1:31 PM
> Subject: Re: [nabentre] Business Opportunity
>
>
>> Hi Brian,
>> Pyramid seems to be a hot button with you. What meaning are you attaching
>> to that word?
>>
>> Jim
>>
>> Jim Homme,
>> Usability Services,
>> Phone: 412-544-1810. Skype: jim.homme
>> Internal recipients,  Read my accessibility blog. Discuss accessibility
>> here. Accessibility Wiki: Breaking news and accessibility advice
>>
>>
>> -----Original Message-----
>> From: nabentre-bounces at nfbnet.org [mailto:nabentre-bounces at nfbnet.org] On
>> Behalf Of Bryan Schulz
>> Sent: Friday, June 18, 2010 10:34 AM
>> To: NFBnet NAB Entrepreneurs Mailing List
>> Subject: Re: [nabentre] Business Opportunity
>>
>> i know a guy who got sucked into the noni juice.
>> there are different levels such as pearl, gold, diamond and you get more
>> percent as you move up.
>> you don't move up without getting more people to sign up for the program
>> under your name.
>> you have to personally buy 1 case for $160 each  month to be a
>> distributor.
>> this is called mlm, multi level marking and if you think it is not a form
>> of
>> pyramid you are dumber than a box of rocks.
>>
>> Bryan Schulz
>>
>> ----- Original Message -----
>> From: "Loren Wakefield" <isaiah5719 at mchsi.com>
>> To: "NFBnet NAB Entrepreneurs Mailing List" <nabentre at nfbnet.org>
>> Sent: Thursday, June 17, 2010 11:08 PM
>> Subject: Re: [nabentre] Business Opportunity
>>
>>
>>> We had this discussion before.  Pyramid schemes or quite against the
>>> law.
>>> MLM is quite legal, and a very legitimate way to run a business.  And
>>> whether you wish to avail yourself of a company's products is simply up
>>> to
>>> you.
>>> Loren Wakefield
>>>
>>> "The best way to predict your future is to create it."  Dr. Forrest C.
>>> Shaklee
>>>
>>> www.shaklee.net/ultimatehealthwithtlc
>>>
>>> 319-433-0145 866-433-3969
>>>
>>>
>>> ----- Original Message -----
>>> From: "Bob Clark" <bobclark4 at gmail.com>
>>> To: <steve at comproom.co.uk>; "NFBnet NAB Entrepreneurs Mailing List"
>>> <nabentre at nfbnet.org>
>>> Sent: Thursday, June 17, 2010 12:35 PM
>>> Subject: Re: [nabentre] Business Opportunity
>>>
>>>
>>>> Hello Steve:
>>>>
>>>> In response to your comment, the name of the company is Wealth Masters
>>>> International.  They are a premiere seller of wealth creation, wealth
>>>> education, and asset protection products.  For further information,
>>>> feel
>>>> free to contact me.
>>>>
>>>> Have a great day.
>>>>
>>>> -----Original Message-----
>>>> From: Steve Nutt <steve at comproom.co.uk>
>>>> Sent: Thursday, June 17, 2010 12:06 PM
>>>> To: 'NFBnet NAB Entrepreneurs Mailing List' <nabentre at nfbnet.org>
>>>> Subject: Re: [nabentre] Business Opportunity
>>>>
>>>> Hi Brian,
>>>>
>>>> Great isn't it.  They don't even tell you what they are selling.
>>>>
>>>> All the best
>>>>
>>>> Steve
>>>>
>>>> -----Original Message-----
>>>> From: nabentre-bounces at nfbnet.org [mailto:nabentre-bounces at nfbnet.org]
>>>> On
>>>> Behalf Of Bryan Schulz
>>>> Sent: Thursday 17 June 2010 16:31
>>>> To: NFBnet NAB Entrepreneurs Mailing List
>>>> Subject: Re: [nabentre] Business Opportunity
>>>>
>>>> walk like an egyptian...
>>>> no, run from pyramid schemes!
>>>> Bryan
>>>>
>>>> ----- Original Message -----
>>>> From: "Bob Clark" <bobclark4 at gmail.com>
>>>> To: <nabentre at nfbnet.org>
>>>> Sent: Thursday, June 17, 2010 8:26 AM
>>>> Subject: [nabentre] Business Opportunity
>>>>
>>>>
>>>>> Greetings:
>>>>>
>>>>> My name is Bob Clark.  I am a totally blind entrepreneur that has
>>>>> owned
>>>>> several businesses including an information technology consulting
>>>>> firm,
>>>>> an
>>>>> automobile service facility, a Montessori school, and a clerical
>>>>> staffing
>>>>> company.  Although I understand that many visually impaired
>>>>> individuals
>>>>> are
>>>>> gainfully employed, I also know that the unemployment rate within the
>>>>> blindness community is ridiculously high.  Therefore, I would like to
>>>>> invite
>>>>> you to consider a win/win situation for both of us.
>>>>>
>>>>> After reviewing numerous network and internet marketing opportunities,
>>>>> I
>>>>> have identified an opportunity that I believe can offer you a
>>>>> significant
>>>>> income opportunity as well as the freedom to enjoy the lifestyle that
>>>>> you
>>>>> definitely desire and deserve.  The most pressing issue for many
>>>>> people
>>>>> in
>>>>> this economy today is the initial investment that is required to start
>>>>> a
>>>>> home-based business or for that matter, a brick and mortar business.
>>>>> I
>>>>> have
>>>>> established three alternatives that will allow you to join my team
>>>>> with
>>>>> absolutely no investment or a reasonable investment if you are totally
>>>>> committed to the program:
>>>>>   Option 1. Join my team as a direct sales member.  You will be
>>>>> working
>>>>> directly with me.  I will pay you a 20% commission on all commissions
>>>>> paid
>>>>> to me based upon your individual sales.  This option requires
>>>>> absolutely
>>>>> no
>>>>> monetary investment on your part.  Once you begin to experience a
>>>>> level
>>>>> of
>>>>> success, I'm sure that you will want to move to option 2 or 3.
>>>>>   Option 2. Join my team as a referring salesperson.  This will
>>>>> require
>>>>> an
>>>>> investment of $99.  If you elect this option, you will receive no
>>>>> commission
>>>>> for the first sale and 10% commission for sales 2 through 5.  The
>>>>> primary
>>>>> advantage of this option is that you will receive the specific product
>>>>> level
>>>>> package for which you made 5 sales at no additional cost to you.  At
>>>>> that
>>>>> point forward, you will receive 100% of the commission for the product
>>>>> levels for which you have qualified.  I.e. After selling 5 m1
>>>>> products,
>>>>> you
>>>>> will receive at no additional cost to you a m1 product package.
>>>>>   Option 3. Join my team as a consultant.  The investment required for
>>>>> this
>>>>> option is based upon the product level that you elect to purchase.
>>>>> This
>>>>> option pays you 100% of the commission for the product level for which
>>>>> you
>>>>> have qualified.
>>>>>
>>>>> For further information, please call me at 561-699-8072 or email me
>>>>> offline
>>>>> at buildyourownwealth at gmail.com.  You can also visit my Website at
>>>>> www.makeithappen4u2.com.
>>>>>
>>>>> No matter which option you select, you will receive comprehensive
>>>>> coaching/training by me and/or one of my team members.  So, come Join
>>>>> me
>>>>> and
>>>>> make it happen for you too.
>>>>>
>>>>>          To your success,
>>>>>          Bob Clark
>>>>>          Member Id: 18697
>>>>> _______________________________________________
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>>>> al.net
>>>>
>>>>
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