Regulating MLMs

"Buy 1 for yourself and get the chance to sell your friends and family 5 and get your downline started!" We examine the multi-level marketing industry, where only the people who come up with the ideas make any money, and everybody else is left unhappy, broke, and tired of reading scripts and selling overpriced vitamins and similarly worthless products. Includes Global Prosperity, Pinnacle Quest International, IRS Codebusters, Stratia, and other new Global Prosperity scams.

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Number Six
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Regulating MLMs

Post by Number Six » Mon Mar 22, 2010 5:14 pm

There is an article on MLMs today at the Zero Hedge site, calling for regulation of them as pyramid schemes:

I thought the diagram and research by a professor I studied with was illuminating. Why not just charge for the product or service and then reinvest the profits back into the business? Then it wouldn't be a multi-level marketing plan....
'There are two kinds of injustice: the first is found in those who do an injury, the second in those who fail to protect another from injury when they can.' (Roman. Cicero, De Off. I. vii)

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Re: Regulating MLMs

Post by Emet » Sun Jun 13, 2010 4:24 pm

I believe the FTC's so called "biz op rule" has been effectively stopped/ delayed by the DSA (presumably, but I can find no links), MLM attorneys, and certain MLMs. While I can find no recent articles, I did find these:

"MLM attorney Gerald Nehra and the FTC’s proposed Business Opportunity Rule" ... nity-rule/

"Another reason for Gerald Nehra to dislike the FTC Business Opportunity Rule: Lots of companies will have to comply!" ... to-comply/

"Mary Kay's Opposition to the Biz Op Rule" ... &Itemid=63

These articles are older than your link, and I can't say for sure exactly what happened, or what may be currently pending. But considering both the political influence and money behind the large MLMs, I doubt anything radical is going to change.

Meanwhile, in the article you cited, I have read all of Reggie Middleton's articles on Pre-Paid Legal Services. The SEC and FTC inquiries are still pending, last time I checked.
Last edited by Emet on Mon Jun 14, 2010 11:10 pm, edited 1 time in total.

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Re: Regulating MLMs

Post by wserra » Sun Jun 13, 2010 10:58 pm

Emet wrote:I believe the FTC's so called "biz op rule" has been effectively stopped/ delayed by the DSA (presumably, but I can find no links)
Yes, that's what happened so far as its application to MLMs. According to the FTC, the initial proposed biz opp rule received "more than 17,000 comments, the overwhelming majority of which came from the multi-level marketing ("MLM'') industry". They then backed off, and the final rule excluded MLMs.

Moral: a small but determined, vocal and well-financed minority can and frequently does prevail over the public interest. It's damn hard to see how disclosure is bad - unless, of course, you're selling a scam and disclosure would hurt sales.
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