International Law

MLM Same As Any Other Sales Organization?

Image via Wikipedia

Allisa makes a brave claim about MLM compensation on her website:

"Many companies have devised a variety of MLM compensation plans over the decades. They feature two types of distributors - - managers and non - managers - - and three types of pay: Baseshop overrides are overrides( commissions) paid to managers by their subordinate non - managers, collectively called a baseshop.

Generational overrides are overrides of managers from the baseshop of managers who were previously their subordinate. - this is the same as any other sales organization.

Most plans compensate at least three generations of such managers. For example, 2% of the total company sales revenue may go to a bonus pool that is shared monthly pro rata to managers who exceed$ 10, 000 in that month. Executive bonuses are commissions for managers who exceed a sales quota."

"A very reputable MLM company which was recently listed in the Inc500 magazine as the 37th fastest growing business in the US is GDI or Global Domains International.

If participants are paid primarily from money received from new recruits, or if they are required to buy more product than they are likely to sell, then the company is a pyramid or Ponzi scheme, which is illegal in most countries. - their product is website hosting which only costs$ 100 a month, and the first seven days are free.

The very small $100 a month investment countered by the huge money making potential of GDI makes it a business that anyone can start and succeed in.

There are many members earning a 6 figure residual income plus bonuses with GDI. Even people in very poor third world countries are making money with GDI."

First, the commission structure of a legitimate sales job doesn't require the individual to pay for the opportunity to sell - many the MLM distributors pay a great deal in support materials because they cannot sell the materials. Second, with respect to GDI, the payment of more than $500 in six months would likely trigger the fee element in the FTC Rule, and if GDI doesn't a franchise disclosure document, then it may be operating in violation of the FTC Franchise Rule.

Full post as published by Misleading Advertising Law on October 17, 2008 (boomark / email).