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FTC, Compliance, Network Marketing, MLM

Is Your Company FTC Bullet Proof?

 

They come in without a warning. Monday your company is in business and by Tuesday morning the FTC (Federal Trade Commission, an US based organization) seizes the company assets and closes down the business while sending an email out to your wordwide customer database with one push of a button;

After the Federal Trade Commission filed a complaint against the company, the U.S. District Court issued a Temporary Restaining Order, a temporary receiver (a court appointed lawyer) will takes over control.

– It's a head-shot wound — maybe fatal, maybe the accused will survive, crippled at least..

Why? Because your company is in the Direct Selling Industry and therefore gets special attention by many regulators worldwide. One of the challenges in the Network Marketing / Multi Level Marketing industry is the Retail Sales versus Distributor Sales, internal consumption, what ever you want to call, products bought by distributors and by customers.

Many companies have distributors that are so eager to show their business is interesting to many people worldwide that they inflated their distributor numbers. The result is that you get this kind of number:

We have 100,000+ distributors and 300,00 customers.

However every network marketing professional knows that only a very small part out of that 100,000 distributors will build a business. Most of them just sign up to do a friend a pleasure, to get a discount, or for an other reason.They act as a customer, have no intention to build a business and just order a product.

Maybe 1% (1,000) will build a business, and 50% will put enough effort in to earn a commission, so 500.

For the outside world now it looks that only 0.5% is making money, giving the Direct Selling industry a poor name, while there is nothing wrong. The anti-mlm lobby is always bringing up that 0.5% argument, as often neutral business people who after a short analyse say: Changes I will make money are not so big

And then regulators look to your company, say: lets investigate it to see if it is a legit company or not, not so many distributors make money, maybe it is a product driven recruitment scheme, a Ponzi or a Pyramid.

In the past it did not care so much that a company did not pay to attention to their numbers, however the playing field has changed significantly since the FTC 'shot' Vemma. In my humble opinion, not many Direct Selling companies are bullet proof in the USA, by pumping up their distributor numbers.

It is time to change who you call a distributor because just putting everybody in a genealogy without a very strict separation of customers and distributors will trigger regulators worldwide to come in at night — sneaky and deadly. Innocent or not.

For me a distributor is somebody who earns a commission, if not, it is just a customer 🙂

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