The Moolenaar Amendment: Why is the DSA pushing pro-pyramid law?
Personally I think MLM regulation in the US is in a pretty good place.
Other than the host of affiliate autoship recruitment scams that still need to be cleaned up (nutrition niche, I’m looking at you), there hasn’t been any major Ponzi or pyramid scheme launches in the US since the Vemma and Herbalife busts.
With 50% or more retail sales volume the cornerstone of current regulatory enforcement (other than outright securities fraud on the Ponzi side of things), all the FTC and SEC need to do is enforce the law.
Not so according to the DSA, who for some reason believe the industry desperately needs to kill off any retail sales volume requirements.
While I don’t personally take the DSA very seriously (far too many nutrition niche autoship recruitment schemes in their member-base), it’s undeniable they have political clout.
Among others, the DSA website lists Repulican Congressman John Moolenaar as a “Direct Selling Caucus Member”. That means he can be counted on to push the DSA’s agenda as required.
As I mentioned earlier, the DSA’s current agenda is to put into law that MLM companies don’t have to generate retail sales.
And so we have the “Moolenaar Amendement”, quietly tacked onto the House Financial Services and General Government Appropriations bill.
What does the MLM industry have to do with financial services and government appropriations?
Nothing. That legislation has to be passed though, and the idea is that by attaching the Moolenaar amendment to it, a pro-pyramid scheme law might fly under the radar.
Moolenaar’s amendment ‘proposes that direct selling does not require selling products primarily to people who are not distributors‘.
That is to say an MLM company could generate 100% of sales revenue from recruited affiliates and ignore retail sales altogether.
This is problematic for what should be obvious reasons. Pyramid schemes and Ponzi schemes that utilize pyramid recruitment, by design have little to no retail activity taking place.
There is no distinction between a pyramid scheme and an MLM company without retail sales taking place and generating commissionable revenue.
In an attempt to justify their support of the Moolenaar amendment, DSA President Jospeh Mariano framed his response as a defense of the MLM industry as a whole.
“Direct selling is no pyramid scheme” writes Mariano, who then proceeds to sell you on why the US needs to legalize pyramid schemes.
Everyone who engages in or is considering engaging in direct selling, be they consumer or business builder, needs better protection from the reputational and financial harm caused by pyramid schemes that masquerade as legitimate businesses.
An amendment proposed by Rep. John Moolenaar (R-MI) to the FY 2018 Financial Services and General Government Appropriations bill, July 13, would define a pyramid scheme under federal statute for the first time and make clear that direct sellers buying products for their own personal use is a legitimate business practice.
Everyone wants pyramid schemes prosecuted to the fullest extent of the law, but nowhere in federal statute is it clear to consumers or anyone else what constitutes a scheme.
I don’t know where Mariano has been, but the FTC’s busts of Vemma and Herbalife defined what a pyramid scheme is just fine.
No retail sales? You’re running a pyramid scheme. It’s that simple.
Perhaps not so coincidentally, both Herbalife and Vemma are DSA members.
Here we go…
While the bulk of Mariano’s justification wastes your time with a general defense of the MLM industry nobody asked for, the real problem for the DSA is they’re aware most of their member companies don’t generate significant retail sales activity.
I can’t support this claim with evidence, as no MLM company I’m aware of publishes retail sales volume data (funny that).
But Vemma and Herbalife were not small companies, and if they permitted to retain DSA membership and operate as pyramid schemes – it follows that regulatory investigation into other DSA member companies would lead to enforcement actions.
And so, instead of acknowledging some of their members are running pyramid schemes, the DSA, company membership fees in hand and politicians by their side, are now lobbying to legalize the pyramid scheme business model.
Make no mistake, having to ignore a lack of retail sales would have thwarted regulation of Zeek Rewards ($850 million dollar Ponzi scheme), TelexFree ($3 billion dollar Ponzi scheme), Vemma ($200 million dollar pyramid scheme) and Herbalife (billion dollar company fined $200 million for being a pyramid scheme).
With potentially billions of dollars in losses by the general public at stake, the Moolenaar Amendment cannot stand.
As someone who covers the MLM industry day in and day out, without doubt the biggest threat the industry faces is the emergence of cryptocurrency scams utilizing MLM business models.
Probably 70% of new MLM companies I review these days are in the cryptocurrency niche or utilize cryptocurrency as a method of payment. Yet you wont find anything about cryptocurrency scams on the DSA’s website or in their lobbying efforts.
Not a peep. They’re far too busy trying to legalize pyramid schemes through sneaky dead of the night amendments.
Just imagine, MLM companies operating with little to no retail sales activity with full impunity from the law.
That’s a disgraceful enough proposal on its own. That the Direct Selling Association is advocating it?
How about the DSA stop representing the interests of dodgy company owners paying their bills and try representing the best interests of the industry for a change?
And if that’s not sustainable, maybe it’s time to do away with the DSA altogether.
I’ve been writing about the MLM industry for over seven years. During that time I don’t recall even one instance the DSA has had a meaningful impact worth covering.
Yes, if the DSA can’t do their job right, like their supposed to… get rid of it altogether.
I’ve said that since 2014. Seems it’s time to write an update.
It doesn’t mean anything, they said.
and self-consumption is perfectly legal.
Both interpretations are problematic at best, totally illogical at worst.
They are pushing it so they can keep all the income coming in from the MLM companies justifying their existence. This shows the MLM industry that they have their backs like they claim they do.
They aren’t interested in policing the industry. Heck they didn’t even remove their members when they were shut down by the authorities. They were still showing them in good standing (meaning they paid their dues).
It’s simple, it’s all about the money and ONLY about the money.
The DSA was set up by the MLM companies and their boards in the UK and USA are made up of people from within the MLM industry.
So of course they are going to look to protect their income, however way, it is made.
They are NOT the consumer champion.
Seems pretty clear to me that the DSA recognizes that a retail majority “can’t” and “won’t” happen in MLM. They are literally fighting for their life. This is the life of a 50 year old pyramid scheme that has caused much harm and loss to those who have followed the “plan”.
The “plan” has made money for the shady founders, tools scheme participants, professional recruiters, and the most recent Visalus distributor/owner underhanded Amazon selling scheme debacle. That’s the real MLM. Why? Because it is what it is.
Ockham’s Razor – The simplest answer is usually correct. The DSA knows that answer. The math doesn’t lie.
“There is no distinction between a pyramid scheme and an MLM company without retail sales taking place and generating commissionable revenue.”
The DSA are nothing more than alcoholics advocating to legalize drunk driving.
a whole host of consumer bodies have written in to the house of representatives to halt this moolenar amendment.
even though the house has a republican majority with powerful MLM supporters in its ranks, it doesn’t seem to me [courtesy CNN :)]that republicans are blindly supportive of all of trumps agendas.
what the FTC has to say in this matter will be of prime importance.recently it was rumored that Sean Reyes, Utah Attorney General, who is an avid supporter of MLM, was in the running for FTC chairperson. if this happens it will tilt the scales in favor of the moolenar amendment.
vemma was relatively small and was shut down, herbalife used political connections to avoid shut down and scrape by alive, and this is demonstrative of the lobbying power they had.
at the end of the day, policy/law/amendments are all reliant on the politics of the day.
somehow, i dont see MLM occupying the mindspace of the general population enough for them to drum up big resistance to this amendment.
personally i feel 25%-30% retail of MLM products is sufficient to demonstrate their retailability, i’m not hung up on retail being the ‘primary’ income source.
but zero retail is unacceptable, and zero retail MLM’s are nothing but pyramid schemes.
this is the letter written by various consumer protection groups to the house of representatives:
[ps: oz, search bar and preview of comment not available]
Live preview should be working again (might take 10 mins to show up). Search bar working here (logged out).
hmmm, whyfore are eminent MLM attorneys like jeff babener and kevin thompson not commenting on this moolenar amendment?
i’m sure the industry would like to hear their views on this subject.
moolenar seems like a hush hush under the cover of night operation! 🙂
I only found about it literally the day I covered it (2 readers wrote in).
Very hush hush…
john moolenar represents the fourth congressional district of michigan in the US house of representatives.
michigan is the home state of amway and the devos family, which is firmly entrenched in michigan political life.
at her recent confirmation hearing for the post of secretary of education in the trump administration, betsy devos admitted it’s possible her amway family has contributed over 200 million dollars to the republican party over the years.
yeah right, 200 million dollars.
i guess the republicans via moolenar are returning the favor now, by quietly trying to transform the definition of MLM in the US via this hush hush moolenar amendment.
strangely, a quick peruse of moolenars FB page from june 2017 onwards, shows him proudly announcing all the initiatives he’s taking politically on a host of isssues, but not a whisper about this MLM amendment he has filed under his own name!
the proposed moolenar amendment not only pushes for legitimizing pyramid schemes with 100% internal consumption, but also restricts regulators from going after these pyramid schemes by cutting regulatory spending!
betsy devos is really trying to construct a WALL around pyramid scheme MLM’s, impenetrable by regulators.
unlike trump who’s expecting mexico to pay for his dream Wall, betsy devos has gracefully paid over 200 million dollars herself for her Wall!
the title of this bill is :
it’s progress can be tracked here:
this bill was passed by the committee and introduced to the house [of representatives] on 18th july, 2017.
in may, 2016, republican representative from tennessee, marsha blackburn had introduced HR 5230 – Anti-Pyramid Promotional Scheme Act of 2016.
this bill got some tiddly piddly support of around 30 reps or so, and died a quiet death as it was not passed in the 2016-2017 session of the house.
well, blackburn is back again with the same bill with the same name with just a date change:
in an article published on thehill.com dated aug 28th, 2017, blackburn waffles about lots of stuff regarding MLM without mentioning retail sales to outside customers even once.
her differentiation between pyramid schemes and legal MLM is that legal MLM will not force you to use or sell products in large quantities and will have buyback of upto 90% of the product cost.
so, we now have a two pronged attack on the house of representatives by the MLM industry : the moolenaar amendment and blackburn’s anti pyramid bill.
MLM attorney kevin thompson has posted blackburn’s article on his FB page, but has unfortunately not shared his own views on either moolenaar’s amendment or blackburn’s regurgitated bill. we want his opinion not mere reportage from him!
is controlling inventory loading and having buyback enough for establishing a legal MLM? what establishes the value of the product?
[oz, pls help with the blockquoting. cant see the quote button or comment preview]
the title of this bill is:
the bill has 7 cosponsors:
Rep. Veasey, Marc A. [D-TX-33]
Rep. Lance, Leonard [R-NJ-7]
Rep. Thompson, Bennie G. [D-MS-2]
Rep. Bishop, Rob [R-UT-1]
Rep. Beatty, Joyce [D-OH-3]
Rep. Bishop, Mike [R-MI-8]
Rep. Johnson, Eddie Bernice [D-TX-30]
Not sure what was causing it but I noticed the comment preview was broken the other day when I was testing something.
Worked sometimes but other times just caused server load without showing preview. The quote button should be working though, it’s always been “(Q)”.
As far as this new bill goes, if it’s the same nonsense I’m tempted to say it’s just an attempt to ram it through given the current political climate.
Hopefully we get an MLM bust soon that puts the notion that a Trump administration = MLM pyramid scheme free-for-all to rest.
with the SEC and FTC having important posts vacant, i dont see the possibility of major enforcement actions.
if at all there is action, it will be against a 100% ponzi/pyramid and not one which has some face saving overpriced shitty product sold via recruitment.
when the SEC and FTC do get fully staffed they’re going to be choc a bloc with trump appointees who may very well run around doing his bidding. the SEC and FTC are too politicized IMO.
one piece of good news though, is that carl icahn has stepped down from his unofficial post as the unofficial advisor to trump on regulatory matters.
seeing that icahn owns herbalife, this means one less MLM pyramid scheme trumpet blasting directly in trumps ears.
in a recent interview with somebody called ray higdon, kevin thompson said customers are very important in MLM and the product should have value. he didn’t specify any affiliate/customer ratio though.
guess this^^ means he’s not a supporter of either the moolenaar amendment or blackburn’s bill.
KT doesn’t believe in a fixed ratio. I’ve engaged a couple times with him and we couldn’t come to an agreement, but he in general agrees that w/o customers (i.e. ultimate users) MLM is a pyramid scheme in all but name.
He advised a previous bill, I believe, in Tennessee, but DSA lobbied against it.
I think there’s a blogpost he had on the matter on his website.
well, you wouldn’t have thunk it, but herbalife is opposing the moolenaar amendment and asking congress – ‘to tack added consumer protections to the bill’. [the kind that Herbalife will be forced to implement whether Amway’s bill passes or not]
the moolenaar amendment if passed, will leave herbalife in its FTC settlement dugout for 7 years, while the MLM industry runs far ahead with pyramid wings on their feet! amway will win, herbalife will lose!
DSA president Joseph Mariano doesn’t seem too pleased with herbalife’s ‘i’m going to pull y’all down’ stance and stated:
it seems the sponsor of this amendment, john moolenaar, is a direct beneficiary of the devos [amway] family’s political contribution to the tune of 8000$.
of course, it goes without saying that this ‘amendment’ is due to the millions the devos family has contributed to the republicans, and not because of a piddly 8000$.
carl icahn of herbalife is no longer trumps regulatory adviser, but betsy devos of amway is still in his govt, so which way will the moolenaar amendment go?
Yeah I saw that. Makes you wonder how much longer Herbalife will keep paying their DSA fees.
Ditto any other DSA members who aren’t keen on keeping the *winkwink*pyramidschemeautoshiprecruitment*winkwink* business model going…
according to an article by Chris Morran of the Consumerist dated 19th sept, 2017, blackburns bill Version2 is floundering:
on sept 13, 2017, representatives of 17 DSA member companies met with Members of Congress during the Direct Selling Association’s (DSA) fourth annual Direct Selling Day on Capitol Hill:
with blackburn seemingly failing Again, all bets are now on the success of the ‘stealth’ Operation Moolenaar!! :
the DSA, whose board has at least four amway corporate officers, is currently slavishly batting for betsy devos, who is obviously behind both blackburn and moolenaar. in fact the DSA is so intricately involved in these bills that:
Fingers crossed Moolenaar fails too.
another republican senator from indiana, Mark B. Messmer, has published his support for blackburn’s HR 3409. his wife and daughters are mary kay affiliates.
earlier this year he introduced a similar anti pyramid promotional bill in indiana, which was approved, making indiana the 21st US state to adopt such a bill:
so, what is the ‘2004 Council of State Governments (CSG) Suggested State Legislation’ which states are passing anti pyramid laws on?
it seems in 2004, an anti pyramid legislation outline [defining a pyramid scheme] was suggested for all US states to follow and adopt. it seems MLM attorney kevin thompson helped draft this legislation suggestion.
as i remember, 2004 was also the year in which the FTC wrote an advisory to the DSA, recognizing ‘discount buying’ [self consumption] by affiliates as commissionable sales equivalent to retail sales, and differentiating such MLM from pyramid schemes.
the 2004 CSG’s suggested model legislation for states also says the same thing, that sales to and consumption by participants of the scheme, does not make it a pyramid scheme. there is no mention of any sales ‘required’ to non participants.
the 2004 CSG’s suggested model legislation is on scribd and non copiable can be read here:
last i checked, there were some 10 or 12 US states that had statutes/laws recognizing self consumption as retail, now its 21 states?!
it seems the DSA is working stealthily but effectively, getting ‘product based pyramid’ bills passed state by state.
with a republican govt in office now, there’s a push to get this version of anti pyramid law onto the federal stage. says messmer:
not surprisingly, but worth noting, is that rebublican john moolenaar signed up as a co sponsor of blackburns HR 3409 on 25th sept, 2017:
in 2016 when blackburn had initially proposed HR 3409, kevin thompson published a largely supportive article about it on his lawfirm website.
he thinks demanding 51% retail is ridiculous [i agree with this]:
to ease the standoff between supporters of 100% self consumption product pyramids and 51% retail enthusiasts, he suggests a compromise:
getting rid of autoship would be great, leaving MLM companies that can show 20%- 30% retail alone, would also be acceptable to my viewpoint.
thompson quotes president obama as saying:
perfection or perfect percentages cannot be a realistic goal and if there is an opportunity to resolve the industry’s long standing problems, a meeting in the middleground would be wise.
If you replace retail volume requirement with affiliate volume not counting toward commission qualification, what do you do about scams that do away with monthly PV requirements?
Without retail volume requirements scammers rock up to court and be like:
FTC: This is totally a pyramid scheme, everyone was getting paid on recruitment.
Scammer: Yeah but we didn’t have monthly volume requirements and thanks to KT and anjali there’s no MLM retail requirement, squee!
Judge: Case dismissed!
correction: thanks to anjali if there’s no 51% retail requirement.
MLM grows in affinity groups where people have similar financial status/career opportunities/challenges etc.
since genuine MLM companies have a small refundable fees to join and offer product refunds of up to an year, prospects will choose to use the product as affiliates rather than just retail customers, because they’re getting More as affiliates[cheaper product + financial opportunity]
in such a scenario expecting 51% pure retail customers is impractical. 51% may be the mathematical, logical, correct answer to remedy MLM but is not a practically viable one, IMO.
logic is good for science, but common sense is better for human science.
I’m struggling to follow why it’s impractical. Because pyramid schemes would have to shut down? Because the manufacturers of useless weight-loss coffee would find it harder to flog their products? Oh dear. What a shame. Never mind.
One of the main reasons is because the “51%” rule doesn’t exist.
It’s an invention of the contrarians who use it to confuse the issue by replacing the current understanding that the “majority” or greater proportion”of MLM sales should come from sales to retail customers to a specific figure i.e. 51%, then ridiculing the notion of applying such an exact figure.
There’s no need for additional legislation.
If the largest part i.e. over 50% of MLM sales come from non members, nobody is going to be, or has been, prosecuted.
once more just for you:
people join MLM companies because they have some financial challenges and are looking for some supplemental income. they try to earn an MLM income by selling the product/opportunity within their immediate circle of influence ie relatives, friends, neighbors, co-workers etc.
it is very probable that their circle is constituted of people who are more or less in the same boat as them financially. when confronted with the choice of buying the product at retail or buying the product as an affiliate, it is very probable that they make the same choice as the person selling to them – ie become an affiliate. after all, the joining fee is refundable and the product is returnable – they have a big safety net.
it’s just more enticing to buy the product+opportunity package than just the product at full retail! that’s just how human nature is!
so, an affiliate might find it difficult to find 50% prospects who are willing to forsake a cheap safe income opportunity and choose only to buy the product.
of course the product should be retailable and should demonstrate that retail, but 51% is too high to be practical, IMO.
Who is talking about introducing a rule governing what percentage of retail sales must be made by some hypothetical group of financially challenged members ???
Attempted strawman argument at its’ worst / finest
We’re not talking about “genuine companies”, we’re talking specifically about pyramid schemes.
Right. Because that worked so well in Vemma/Herbalife/et al.
Think of all the product-based non-MLM companies who generate 100% of revenue from retail customers.
If an MLM company can’t even compete at 51%, then it itself isn’t viable and I have no problems with them going out of business.
That is the problem in and of itself.
Not everyone is looking for a business yet for the most part people willing to buy a product – WILL BUY A GREAT PRODUCT – thus RETAIL sales can be made.
The whole idea that EVERYONE YOU MEET HAS OR WILL JOIN YOUR BUSINESS is a MYTH.
This is the whole reason MLM in and of itself IS FLAWED.
“cult culture” of sellers always recruiting sellers – instead of customers for customers sake.
Talk to anyone in any “MLM BUSINESS” ask them how they are selling “THE PRODUCT” they near instinctively will start selling you on the business and the income opportunity.
WHY – the money is in the commissions – not selling the products.
Until MLM can make SELLING PRODUCTS ATTRACTIVE it will always suffer.
IF a person wants CHEAP product they can always seek and find those.
So saying they have to JOIN A BUSINESS to get them your logic is already flawed.
The “JOE” on the street isn’t looking to join the “flavor of the month” just to buy lotion and vitamins for cheap.
MLM by design isn’t setup to reward RETAIL it has always been set up for BUILDING TEAMS TO BUY PRODUCTS MONTHLY so commissions can be moved up the chain.
IF it was all about retail with MLM any company can just setup a WEBSITE and offer FREE AFFILIATE Signup and let the Affilate drive the retail sales by sending traffic to the online website.
So its not all about 51% its about RETAIL SALES OF ALL KINDS.
IF the member can’t be proven to generating any and its all about recruiting TEAM members then the MLM COMPANY needs to cut and punish that member for his activity is just recruiting period.
IF everyone was business owners – who would make the products and create the services.
Those in mlm think its and unlimited supply of business owners – when in reality their really isn’t.
Far more consumer “customers” which is why RETAIL should be the focus.
We all buy things daily and for the most part are not part of any MLM to do it.
Why is it that a person that has joined his FAVE MLM – wants everyone in 3 feet of him to join and do his business?
Its not 1960 – People are more informed about how to find products and how they shop. You better have a decent product at retail without the hype of having to join some “cult” to get access to it.
If people are looking for supplemental income they do some overtime, get another job, sell stuff on eBay, or cut expenditure. People join MLM companies because they want to get rich quick. By exploting their friends/relatives/fellow churchgoers.
If you are “financially challenged” then you aren’t going to spend what little money you have on overpriced MLM products that have to factor in the price of administering the Byzantine commission structure – you will buy a better-value product from a conventional business. Unless, of course, you have no interest in the goods and it’s purely in the hope of earning more commission from other members of the scheme.
but to weed out pyramid schemes we cannot overly punish genuine MLM companies with genuine products by overburdening them with impractical, difficult to achieve, 51% retail requirements.
besides, pyramid schemes are hardly going to offer refundable joining fees or products and will have close to zero retail.
it didn’t work with vemma and herbalife, but didn’t become a law either.
the door is still open for either a 51% rule to become law or a moolenaar/blackburn product based pyramid version to become law.
before something stupid happens, why cannot a more reasonable practical solution be adopted which the regulators and industry can both concede to? this combative stance is really not helping anybody.
c’mon, that’s a whole different ball game from MLM, requiring bigger investments or store fronts and advertising etc.
MLM is different because of the unique combination of the product and opportunity, the overlap of the user and the seller, and if it is designed as a very safe opportunity with small investments and refunds, then getting 51% pure retail can be a challenge.
you cannot build a nice safe enticing playground and then ask the children to stand outside…
if you want 51% retail then make being an affiliate more difficult. require higher investments and no easy refunds. then prospects will think long and hard about joining as affiliates and just buy product at retail.
i buy tomato sauce at retail because getting a distributorship of kissan sauce is a complex heavy investment business. if i could get a kissan sausce distributorship for a refundable rs 1000 and my fav sauce at a discount…..hmmmm
if you cared to read kevin thompson’s article i linked to in comment#26 he says:
the FTC itself, via burnlounge, vemma and herbalife has been pushing for the 51% [or ‘majority’ or ‘greater proportion’] retail rule.
so, people and regulators have been/are talking about the 51% retail rule even while you were resting under your rock.
See that ????
Not some mythical group of (in your own words)
Equating the requirements of an MLM company with those of potential members of said company is exactly why your strawman arguments continue to fail.
Oh, and, once again, they’re NOT talking about a “51% rule”.
Only you and pyramid scheme apologists like you have interpreted MAJORITY as meaning 51%.
No one who has had anywhere near a MINIMUM of 51% of sales from retail has ever been prosecuted.
I think that’s a paradox right there…
If a majority of company’s “sales” is sold to its own affiliates instead of the general public, it’s not really sales, is it?
Really, the only time that’s really done in history was a company was in total control of the economy, like the old mining or factory towns with its own stores that belonged to the company, so all of the employee’s salaries went right back to the employer. That’s considered EXPLOITATION back then.
Yet MLM companies want it to be considered an employee RIGHT.
How the world has changed.
“genuine MLM companies” with insignificant retail sales (51% or otherwise) is an oxymoron.
Two of the biggest MLM companies (at the time) accepted they were operating as pyramid schemes and settled.
They could have gone Paul Burks and taken the matter to court but we all know how that would have turned out.
I have no problem with that. Getting into any business should be a carefully considered move.
People shouldn’t be signing up to MLM companies on a whim because they spent five seconds reading a Facebook plug.
Yep. But then as Anjali pointed out and I agree, it’s impractical to see 51% retail in MLM. Thus, “Genuine MLM” is actually the oxymoron.
51% addresses the symptom of the “terminal” disease. I’d like to see some conversation about the root of the problem – as in the founders’ intentions. I’ll start:
-Founders prefer recruiting affiliates who buy over a dead end retail sale that they make no extra profit from anyway.
Think about it.
Haven’t we been barking up the wrong tree exposing the affiliate’s requirement vs. what the company wants and needs to survive?
uh MLM COMPANIES don’t generate retail by waving some magical wand. they dont retail directly.
they rely on their group of affiliates to generate retail and if 51% retail is the requirement, then it is this group of people and not the COMPANY that has to generate it on the ground.
i’m saying that legitimate MLM is so easy and safe to join, that generating 51% retail on the ground in affinity groups will be a challenge.
uh duh what.
colloquially speaking anything over half is termed Majority. majority starts at anything over 50% whether it is 50.000001% or 100%.
so, saying 51% just means over half ie majority. it doesn’t mean an MLM needs exactly 51% retail, it just means a minimum of 51% retail.
maybe in the metaphysical world under your rock, majority has some other philosophical meaning, and you can enjoy it all by yourself.
affiliates are consumers too and their personal consumption is sales too.
retail sales are required to establish that the product has value and is competitively priced. IMO, you dont necessarily need 51% retail to demonstrate that.
without being fixated on percentages an MLM can be investigated holistically, is there retail going on? are the products overpriced, what are the buying patterns of the affiliates?
what do you mean by ‘insignificant retail sales (51% or otherwise)’? if you mean less than 50%, then there is no law that says legitimate MLM needs to have over 50% retail.
the FTC had the chance with vemma and herbalife to build that caselaw …but they didnt.
saying ‘insignificant’ is a matter of perspective, either stick a number on it, or it’s not an oxymoron to say that an MLM with say 30% retail is genuine.
the very essence of MLM is that it is an easy to do home based business that anyone can do.
if you make affiliateship difficult by raising investments or refusing refunds or giving high sales targets etc, then it will be more like a regular distributorship rather than peer to peer selling like MLM is expected to be.
losses to affiliates will also be much more because everybody thinks they can do business, but most cant.
it is in public interest to keep MLM safe and easy to join, to minimize losses. if it means sacrificing the logical perfection of 51% retail, then so be it. a more holistic approach can be adopted to check if the MLM is selling value or not.
i think char, mathusian and terrence equate MLM with pyramid schemes.
that is not a fact.
MLM is legal, pyramid schemes are not.
the dialogue surrounding the MLM industry is how exactly to differentiate between MLM and pyramid schemes, as they have similarities.
the FTC, the DSA, industry watchers all have different perspectives on this and hopefully this issue will be resolved at some point . i hope for consensus with all sides doing some give and take.
If retail sales are less than revenue from recruited affiliates in an individual downline, that’s a pyramid scheme.
The specific percentage is something for the FTC to work out. I’m happy with 51% as baseline.
Well somewhere along that line that turned into home-based pyramid scheme and here we are cleaning up the mess.
Any attempt to “give an inch” by changing the issue from “is recruitment the core of the business?” to “herp derp value” just gives pyramid schemes more grey to operate in.
By definition an MLM company with significant retail activity is providing value to its retail customers. A pyramid scheme isn’t (otherwise they’d have significant retail customers).
The business I work with in the United Kingdom sees over 90% of its sales made to people who are not distributors.
BTW the company is not a member of the DSA, since the regulation followed is higher than set by the DSA.
It is Government regulation – so set in law.
well, name your company. you want us to beg?
Correct, in the same way as I equate 2+2 with 4.
There is not a single consumer good anywhere in the world that can only be purchased from an MLM company. Every product sold by an MLM company has a cheaper or better alternative sold by a conventional company.
This is a logical inevitability, because the administration of the Byzantine commission structure has a cost, and this cost must be born by the end customer (unless there isn’t one and the cost is borne by the participants, which makes it an open pyramid scheme and not a closet pyramid scheme).
Nobody buys from an MLM scheme unless they anticipate making more money back in commission or they have been talked into “helping out” a friend/relative/churchgoer who is in the scheme. Nobody.
The fact that some pyramids have built enough critical mass to buy off politicians (as we are seeing with this US bill) and have so far escaped legal attention is not relevant.
An actual law against pyramid schemes would be very simple: no-one who is employed as a recruiter may be paid for selling products, and no product salesperson may be paid for recruiting – beyond say $1,000 a year to allow legitimate internal recruitment incentives.
Either you are employed to sell products or you are employed as a recruitment consultant. Bam – no more pyramid schemes.
Show me these magical MLM companies that are really paying decent income with retail that matters?
Please don’t just bring up AMWAY. We all know many people in AMWAY that can’t earn a dime from trying to convert their household spending over to Amway and its not profitable at all.
IT all a becomes about recruiting people into thinking they have a business.
Where it isn’t profitable for anyone that can’t recruit.
Which also exposes the intent of the founders. And I reiterate:
Is this not a critical point?
once again you’re expressing your dislike for MLM and that you think it’s an unviable business model and a pyramid scheme.
that’s fine, you’re entitled to your opinion, and its not my business to convince you otherwise. whether a person likes/dislikes MLM is of no interest to me.
as i see it, MLM is a legal business model in the USA [and most of the world AFAIK].
in the US the courts treat MLM as legal and separate from pyramid schemes, so does the FTC, and so do all 50 states which regulate MLM as a legitimate industry.
if something is legal, then people can pursue it if they want to and i have no problem with that.
while MLM is legal in the US, there is no bright line definition differentiating it from pyramid schemes, and till date no court or federal law has made a clear distinction.
the FTC says majority retail is the bright line, the DSA would probably be happy with zero retail, and i’m chipping in with my ‘opinion’ that 20-30% retail should be enough to show product value.
as things stand, MLM is legal, whether we like it or not, and the discussion now is how to define it better so as to regulate it better.
you can either join the discussion on how to better define MLM or you can start a movement to outlaw MLM. it is your choice and your right and you are entitled to it.
personally, i have a problem with pyramid schemes not MLM. MLM’s have valuable products and visible retail.
i have purchased MLM nailpolish and stuff from my grocers wife, my electricians wife is currently trying some unicity weight loss product to lose her post pregnancy weight. he came home the other day carrying nails in a unicity product jar, so i questioned him about it, and he clarified his wife bought the product as a retail customer and had not joined as an affiliate [he had no idea about mlm, i had to explain what retail customer/affiliate meant!]. so, there is real retail going on in MLM, though i’m not sure it will definitely cross the 50% mark.
it would help to have a legal definition for MLM in the US for clarity, but not the definition proposed by moolenaar or blackburn in it’s current avatar.
Name me one product available from an MLM company which does not have a better or cheaper rival available from a conventional business which doesn’t have to price in the commission structure.
There’s a reason weight loss products are so popular in MLM schemes – they’re worthless. Placebos if you’re lucky, toxic if you’re not. Which means you don’t have to worry so much about the threat posed by non-MLM rivals.
The people who want them are naturally predisposed to believe in the get-rich-quick package of MLM. They want to get thin but don’t want to eat less or do more exercise, they want more money but they don’t want to work more or get a qualification.
Let me guess, they must work because your sparky’s wife is thinner than when she’d just had the baby. No shit! She’d just had a baby.
There is no difference. That’s why.
And just because something is legal doesn’t mean it’s good. Buying a bump stock is legal and 59 people were massacred.
lets take a common product like nailpolish:
Wet n Wild [non MLM]: approx 2.5 $
revlon [non MLM]: approx 5$
avon [MLM}: 8$ [on sale for approx 6$]
lo’real essie [non MLM]: approx 9$
azature [premium brand] has an affordable version for stores [non MLM]: 25$
is avon overpriced out of the market? no, it falls within the market price range. all these brands have a market and so does avon.
btw you can buy nailpolish for like 25000 $ a bottle too if you like. there’s a market for that too!
there’s plenty of non MLM companies selling weight loss supplements [just checked the walgreens website] so there’s a market for it even if you dislike them and think they’re placebos or toxic.
maybe weight loss products are popular in MLM because they go well with personalized support and encouragement?
yeah yeah, people come with all kind of mindsets and lifestyles and opinions. and they have the Choice to live their lives at their will, just like you, as long as they don’t cross legal lines. so, get off your little soapbox.
the courts and the FTC clearly hold that MLM is legal and separate from pyramid schemes. congress has not outlawed MLM.
there is no clear distinction yet, because the question has not come up in court, there is lack of political will and lack of consensus between the FTC and the MLM industry.
yes! i know! eating meat is legal but you should hear these vegans go on and on about how bad it is! some think vaccines are legal but bad, some think banks are legal but evil and the list is endless.
so, to avoid anarchy, we rely on either courts to decide what is allowed, or a democratic vote via parliament to rule on the legality/illegality of issues.
right now, your opinion that MLM is not good/bad, seems to be the minority view.keep voicing your view and who knows one day you may have the majority voice. best of luck!
you think bumpstock weapons are legal but bad, i think not only bumpstock but even guns for public consumption are legal but bad. so even while we both agree weapons are legal but bad, there seems to be a difference in the degree we think which weapons are bad. that’s how the world is, full of opinions about good/bad!
good/bad are just based on our personal perceptions, that’s why we need laws to make the determination on what is acceptable for society at a particular time.
currently, law says MLM is legal and separate from pyramid schemes.
Sorry to disagree, but here in the UK, the business I work with offers a range of services exclusive to the company and that includes FREE LEDs lightbulbs for customers taking the full range of services.
When launched the take up was around 10%, now 60% of customers take up this offer.
The company also has one of the cheapest fixed rate energy deals in the country too.
A range of broadband and mobile deals, plus CashBack from shopping both online and in the high street.
The key point here: this is service based, rather than product based, so there is more flexibility on pricing.
looks like the DSA and rep marsha blackburn [with amway’s betsy devos in the background] are upping the ante, getting Forbes to publish a positive opinion piece on HR 3409 a few days ago.
the article by Anne T. Coughlan [Coughlan is a professor of marketing at the Kellogg School of Management at Northwestern University] says:
big media can tilt public opinion, so the other side better wake up for a balanced debate.
The one question that leaves any attempt to legitimize pyramid schemes dead in the water:
What’s the difference between what HR 3409 would legalize and a product-based pyramid scheme?
professor william keep has published an article against HR3409 on oct 19th, 2017 on seekingalpha :
the current FTC commissioner who has written to congress against moolenaars amendment is terrence mcsweeny, a democrat appointee who is allegedly close to top honcho alan hoffman of herbalife. herbalife has voiced it’s opposition to this amendment and mcsweeney may be toeing their line:
a bipartisan group of ex FTC commissioners have also written to congress voicing their concerns about the moolenaar amendment:
looks like a good fight over moolenaar and HR 3409!
there are now 24 cosponsors of the HR 3409, 17 republican and 7 democrats.
legalshield an MLM company selling legal insurance products left the DSA earlier this year.
they have now retained the services of a law firm to combat HR 3409 and moolenaars amendment.
i don’t know how this works. is the law firm going to write its opposition to HR 3409 to congress, or file a federal case to stop the bill? worth keeping an eye on!
I’ve got a loose eye on Moolenaar.
When they decide something (hopefully can) I’ll publish.
Read the email, it’s quite clear you haven’t done your homework buddy.
Seeing as the FTC went out of their way not to use the words “pyramid scheme” in the settlement, I don’t know what that article is based on.
There’s no mention of an “email” in that article either, so I also don’t have any idea what you’re talking about. Certainly not the actual FTC Herbalife settlement.
If Herbalife wasn’t a pyramid scheme they wouldn’t have settled for hundreds of millions, agreed to start tracking retail and stop paying recruitment commissions.
the republican trump administration removed edith ramirez and installed maureen ohlhausen as the acting commissioner of the FTC.
with this move, the attitude of the FTC towards the MLM industry is seeing a sharp shift in it’s favor.
at the November 2017 DSA Regulatory Conference, ohlhausen practically walked back on edith ramirez’s final speech to the MLM industry, which asked the industry to follow the the new rules as outlined in the vemma/herbalife settlements [over 50% retail requirements].
to cut a long story short, it’s seems a new era of friendship and cooperation has begun between the FTC and the MLM industry, who will work together on HR 3409:
at this point, unless trump gets impeached for colluding with russia, looks like the FTC will will gift wrap HR 3409 and hand it to the MLM industry.
Calling it now. We’re not going to see any MLM regulation from the FTC over the next three years (at least).
At least the SEC haven’t been neutered, although MLM crypto regulation is obviously taking far too long.
MLM attorney kevin thompson has published an article titled: What is Going to Happen in 2018.
among his predictions he states:
i may be misinterpreting it, but if HR 3409 is going to pass why will MLM companies run around looking for retail customers? they will focus on recruitment. i see a contradiction in thompson’s predictions here!
the whole article can be read here:
kevin thompson predicts the SEC will come down hard on crypto MLM/ponzi’s:
I’ll be here covering SEC MLM crypto regulation when it happens. I too think it’s going to go down in the next six months.
It’d be a disaster if HR 3409 passes. We’d be going back 5-6 years regulation wise and yeah, the vast majority of MLM companies aren’t going to voluntarily focus on retail sales – that fantasy is what got us the Herbalife/Vemma settlements in the first place.
The Trump administration and Congress seem hell-bent on rolling back the 8 years prior to Trump’s inauguration in every aspect of government. So HR 3409 passing would be hardly surprising within a broader governing context.
Just another mess for someone else to clean up in 3/7 years.
Pseudo MLM involvement
Recipe for disaster
I’m struggling to think of two phrases more likely to have me and my money running for the hills than “outspoken libertarian” and “CEO of garbage penny share company”.
Meanwhile, I predict that at some point the US or another developed economy will introduce an actual anti-pyramid scheme law, one that
a) bans recruitment consultants from being paid commission on sales
b) bans sales consultants from being paid commission for recruiting – above $1,000 per tax year. (The $1,000 cap allows legitimate incentives to recommend friends to your employer, but you can’t earn a living from it.)
So employees are either recruitment consultants or salespeople. Or they’re in an illegal pyramid scheme.
I predict this will happen somewhere around the fourth of never as it’s far too simple and workable.
does this bill have anything to do with the US govt shutdown i’m hearing about on CNN?
i *think* this House Financial Services and General Government Appropriations bill is what keeps the US govt working from year to year.
according to wiki:
from what i understand, this annual funding bill has been held up this year [getting continuances] because the republicans and democrats are fighting over immigration, border walls etc.
today, the democrats have not allowed a further temporary continuance of govt funding, till they don’t settle the immigration issue, and so the US govt is in shutdown.
i guess the republicans and democrats will have to hurry to resolve their differences now because the govt cant be kept in shutdown for long, without political consequences for both parties.
once they reach a deal on immigration and border walls the funding bill will be passed quickly.
no one will even notice that the bill got passed with a moolenaar stuck in it’s butthole!
seeing that the Financial Services and General Government appropriations bill 2018 is going nowhere, there are now plans to tack the moolenaar amendment to an ‘omnibus spending bill’.
in response to this plan to secret moolenaar into law via an omnibus bill, a group of consumer advocates have written to paul ryan [house speaker] and nancy pelosi [democrat party leader] on march 9, 2018, stating:
paul ryan seems to reside upstairs in trump’s ass and nancy pelosi doesn’t have the majority vote, so what will happen next?
this moolenaar is becoming quite a nail biting suspense thriller quite contrary to the dreariness associated with govt work in general. a tiddly piddly amendment tucked away and sneaked from one bill to another could change MLM in the US!
and all CNN talks about is stormy daniels! 🙂
Thanks for the updates. As opposed to tracking lawsuits, I find tracking law proposals quite tedious. Way too much backwards and forwards.
the US congress has up until march 23, 2018, to pass this omnibus spending bill.
if they don’t pass this omnibus funding bill by march 23, congress will either have to have to pass a short term funding bill [few weeks long] or shut down the govt.
shutting down the govt seems improbable as it would be the third govt shut down in a year and neither political party wants to carry the burden of blame.
so, either omnibus 2018 gets passed or is readdressed in a few weeks from march 23rd.
amendments like the moolenaar amendment are called ‘policy riders’ and hundreds are tacked on to omnibus bills.
from what i understand, omnibus bills usually may have hundreds of policy riders tacked onto them, and many are discarded before the bill is passed. last year some 160 policy riders were discarded.
this year the focus seems to be on discarding policy riders dealing with environmental issues.
i wonder if a few sentences long moolenaar amendment addressing a relatively small MLM industry has been noticed by congress at all!
well, forward to march 23rd then.
ding ding! the omnibus bill 2018 has been unveiled and will most probably be on the floor for a vote in the US house and senate tomorrow and dayafter.
it seems many policy riders [the moolenaar amendment was tacked on as a policy rider] have been discarded:
i typed ‘moolenaar amendment’ into the search function of the over 2000 page bill, but no result turned up?
so, has the moolenaar amendment policy rider been discarded or renamed or something?
well, we’ll know in a day or two i suppose!
omnibus 2018 has been passed by the house voting 256-167 and the senate voting 65-32.
it has been sent to trump for his presidential sign [will he sign ‘david dennison’? 🙂 ]
haha joke ^^
i cannot find any press about the moolenaar amendment being/not being in the omnibus or whether it was accepted as a policy rider.
just wait, i guess.
Fingers crossed it got nuked.
since the press is not talking, i did some digging myself.
omnibus 2018 is a potpourri of the following bills:
now the Financial Services bill called HR 3280 says in section 633:
^^this is essentially the ‘moolenaar amendment’ which was approved by the HR 3280 committee and made a part of the financial services bill.
so section 633 is in HR 3280 which in turn is in the omnibus bill 2018.
if the DSA and betsy devos couldn’t pull it through, i cant imagine them finding a more conducive political environment like ever again.
Perhaps the FTC are one step ahead of the scammers.
The recent Digital Altitude shutdown case files wasn’t heavy on “pyramid scheme” terminology.
trump just twittered:
it will be such an anti-climax if trump ends up killing the moolenaar amendment.
the DSA and betsy devos must be piled onto trucks heading for the WH right now. they’re like – really, dude!
omg this is funny. so fun.
I believe Trump signed the omnibus bill earlier today.
So does that mean pyramid schemes are legal in the US now?
ya, after some huffing and puffing on twitter he signed the bill and took off for his private resort.
who knows! the mafia code of silence has been in full force around around this amendment.
if sec 633 of the financial services bill has been passed hidden in the omnibus, it will define MLM legally for the first time in US federal law. that is BIG.
but nobody is talking about it yet, so who knows what happened.
it seems the democrats managed to wrangle a good deal, and discarded around 100 policy riders.
maybe by monday we’ll have definitive news about the moolenaar amendment.
this is the full text of the moolenaar amendment which reads like the perfect dream wish list of the DSA:
^^that settles the definition of ‘ultimate users’ i guess!
if this has been passed i’ll be disappointed, but i’m not a fan of a heavy handed >50% retail rule either.
i would prefer a buddha-like middle path where MLM with fair priced products, buyback, no inventory loading and some retail would be left alone.
I’ll be sticking with common-sense “50% retail or scam”.
Was using it before the “ultimate users” BS and will continue using it even if crafty scammers slide into lawmaker’s DMs.
Considering every pyramid scheme has bullshit income claims in tow, at least the FTC has that to continue pursuing companies with little to no retail.
SEC regulation I imagine will remain unchanged. Using newly invested funds to pay existing investors can be proven without getting into retail sales.
Hopefully whoever’s in office next can undo some of the BS before MLM becomes a free-for-all scam swamp as a result of pro-pyramid legislation.
And if there wasn’t enough already, this is just more evidence of so much fail from the DSA.
Consumers? Fuck ’em… where our annual company membership fees at?
still no word on the moolenaar amendment buried in the omnibus bill 2018!
yesterday i messaged MLM attorney kevin thompson asking if he had any idea whether this amendment had made it through and here’s his reply:
i’m putting the chances that the amendment got passed at 75% now.
talk, press, TALK.
i contacted dr william keep [a vocal critic of product based pyramid schemes] about whether the moolenaar amendment had been passed via the omnibus bill 2018 and here’s his response:
so, mlm attorney kevin thompson who has access to top DSA brass ‘thinks’ it got passed and dr william keep who wrote to congress to against the amendment ‘believes’ it didn’t pass.
such an important piece of legislation affecting the MLM industry in the USA and it’s status is not clear yet! surprising!