Legal

Regulators want to dismantle all multi-level marketing companies

By:  David Bland

The paper indicates that the FTC views all companies with a multi-level compensation plan structure as dangerous to the public, and it recommends removing the levels as the best course of action.

The FTC authors suggest three actions that could prevent the risk of pyramid operations.

First, they state that an obvious option would be to end the recruitment aspect of the business. 

Second, they suggest that changes to recruitment incentives could “reduce an operator's ability to induce or allow participation in a transfer scheme.”

Third, they argue that if sellers were not required to make purchases in order to qualify for recruitment rewards, the company would no longer be able to convince the seller to accept retail losses in hopes of gaining back profits with future recruitment.

Until recently, any company in the direct selling channel with viable products and consumer demand for those products could consider themselves operating under Federal Trade Commission (FTC) favor. However, the agency appears to be changing its mind about practices it previously accepted, as indicated first by AdvoCare’s surprising abandonment of its multi-level compensation plan a year ago under FTC pressure.