Official FTC Advice on Multi-Level Marketing Plans
The Federal Trade Commission cannot tell you whether a particular multilevel
marketing plan is legal. However, the FTC suggests that you use common sense,
and consider these seven tips when you make your decision:
1. Avoid any plan that includes commissions for recruiting additional
distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive inventory.
These plans can collapse quickly - and also may be thinly-disguised pyramids.
3. Be cautious of plans that claim you will make
money through continued growth of your "downline" - the commissions
on sales made by new distributors you recruit - rather than through sales
of products you make yourself.
4. Beware of plans that claim to sell miracle products or promise enormous
earnings. Just because a promoter of a plan makes a claim doesn't mean it's
true! Ask the promoter of the plan to substantiate claims with hard evidence.
5. Beware of shills - "decoy" references
paid by a plan's promoter to describe their fictional success in earning
money through the plan.
6. Don't pay or sign any contracts in an "opportunity
meeting" or any other high-pressure situation. Insist on taking your
time to think over a decision to join. Talk it over with your spouse, a
knowledgeable friend, an accountant or lawyer.
7. Do your homework! Check with your local Better Business Bureau and
state Attorney General about any plan you're considering - especially
when the claims about the product or your potential earnings seem too good
to be true.
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