9th Circuit Affirms, BurnLounge is a Pyramid Scheme – However…
… it’s what they defined as not being indicative of a pyramid scheme that is most interesting, and reason for celebration.
Back in 1994 a couple of distributors filed a class action lawsuit against Omnitrition claiming they were an illegal pyramid scheme. Omnitrition won by summary judgement, meaning the court felt there was such little chance the plaintiff’s could prevail there was no need to waste the court’s time. The plaintiff’s appealed to the 9th Circuit Court and won. However, unlike how many MLM critics like to portray this victory, all it did was overturn the lower court’s summary judgement and send it back for trail – it did not find Omnitrition guilty of operating a pyramid scheme, evidenced by the fact that Omnitrition, now 20 years later, is still in business. There was eventually a private settlement, and thus there was never a trial.
But here’s where it got sticky. In the 9th Circuit’s decision they didn’t simply declare the summary judgement overturned, they included what’s called dicta. That is, extra commentary. In this extraneous text it was declared that only those products retailed to non-participants in the income opportunity should be commissioned. That is, reps should not be considered “end user” customers, thus those products personally consumed by reps should not be commissioned. In spite of the fact that dicta is defined as “Opinions of a judge that do not embody the resolution or determination of the specific case before the court. Expressions in a court’s opinion that go beyond the facts before the court and therefore are individual views of the author of the opinion and not binding in subsequent cases as legal precedent”, MLM critics, and future plaintiffs in cases against MLM companies, absolutely adored this supposed “legal precedent” that “outlawed” paying commissions on distributor’s personally consumed product.
It appears the 9th Circuit Court has changed their mind.
In their declaration of affirmation that BurnLounge was an illegal pyramid scheme, under the section where they discuss the meaning of “ultimate user” they state: “In Koscot, the FTC found a cosmetics MLM business was a pyramid scheme because it focused on recruiting new participants, rather than encouraging retail sales to consumers, and new participants had to buy large amounts of inventory, ostensibly for resale. When participants in Koscot bought inventory, they could have used some of it personally, arguably making them ‘ultimate users.’ In Amway, though some internal consumption of inventory was common, Amway was not found to be an illegal pyramid scheme.” In other words, not only are they now completely omitting the concept of not counting any personally consumed products from the legality equation, they are basically describing two cases where one company didn’t have enough of it to be legal (Koscot), where as another (Amway) did! Once again, much like the FTC’s guidance letter to the DSA in 2004, they are focusing on the motive for buying the products, not who buys it. In fact, they even quoted from this FTC letter where they stated: “Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues that primarily support the commissions paid to all participants are generated from purchases of goods and services that are not simply incidental to the purchase of the right to participate in a money-making venture.”
Perhaps now the infamous language within 9th Circuit Court’s Webster v. Omnitrition decision that forbade commissioning products consumed by distributors can go where it should have gone a long, long time ago. Away.
Unlike my previous Empower Network review, which was 51 pages and took almost six months, this one was only 37 pages and took about six weeks. One of the major differences is that Empower Network wouldn’t stop disclosing tons of internal data, and willingly allowed me to grill them for over six hours of interviews. Other than a couple of helpful links about their comp plan sent by their VP of Sales, Wake Up Now (WUN) has refused all requests to participate in my investigation.
The last time this happened was back in 2002 when Prepaid Legal (now LegalShield) refused to assist me in my efforts to get my facts straight. After I published the review I received a letter from their attorney suggesting that I should “get my facts straight”. I asked for a list of specific facts I didn’t get straight, which I would have gladly gotten straight. Not only did I never hear from them again, over the next six months most of the aspects I criticized were corrected or improved.
I said after my Empower Network review that is was the last one I was going to write, for free. EN received literally several thousand dollars worth of compliance consulting as a result of that review, at no charge. Since then I’ve been hired by companies who’ve asked that I turn my magnifying glass on them, but the WUN review was the first where a company, or in this case a group of companies, hired me to do a review of a competitor. I informed them that there was no guarantee the review would be negative, and that I would not deliberately slant it that way. I was instructed to “call it like you see it”. And that’s exactly what I did.
Since the review did end up being generally negative I’ve been accused for being a “hired gun”, and manufacturing a negative review just to suit the agenda of my clients. However, no one has yet to offer a rebuttal to any negative point I made in the review. In fact, WUN supporters have tried their best to divert attention away from the facts, opinions and conclusions I presented, and instead have focused on who the companies are that hired me, and how my same criticisms may apply to them. My response is, what if my clients were Fortune HiTech Marketing, BurnLounge, and Zeek Rewards? While that may certainly be ironic, how does it in any way diminish the veracity of my actual review? Either my criticisms of WUN are accurate and well reasoned, or they are not.
If you feel I did get anything wrong, please specify in the comments section below the article.
Perhaps I’m just rationalizing, but I look at it this way: Attorney’s are hired to write negative reports, called Complaints, all the time. And they, in fact, are hired to deliberately make their reports as negative as possible. Or, as positive as possible if they’re hired by the defendant – even if they don’t personally believe what they are writing. And no one cares, no should they. A prosecuting, or plaintiff’s, attorney is legally, ethically and professionally obligated to aggressively present their case against someone in the most negative, damaging way that is appropriate for the circumstances. That’s their job. I, on the other hand, was hired to make a case for what ever it was that I found, good or bad, nothing more, nothing less. Even if the review was glowingly positive, I still get paid. That’s why, if I were inclined to deliberately fudge the review one way or the other, it was actually to my advantage to make it positive. I still get my fee, and gain tons of credibility.
My fear is that my WUN review made no one happy. Although I did cite some serious financial and legal concerns, it still may not be negative enough to make those who funded the review happy, but was surely negative enough to make WUN unhappy. So I might have just made everyone unhappy.
Oh well. I called it like I saw it.
New Online Radio Show: MLM After Hours
Check out this great new program sponsored by the MLMIA and co-hosted by Peter Mingles and MLMIA founder Doris Wood. On each one hour show a regular panel of industry authorities (including myself) discuss and debate various hot topics related to our industry. The show is live on the first, third, and fifth (if there is one) Monday of each month, and airs at 7:00 pm PST, 10:00 pm EST. The next show will be June 16th.
Last Monday’s show focused on the “independent contractor” issue, and the question of how much control should a company have over an independent distributor’s business?
Randy, Cathy and I (mostly I), make our final points regarding Vemma’s alleged departure from MLM and more towards “affiliate marketing”. We (mostly me) also deconstruct my recent interview with Vemma Founder and CEO B.K. Boreyko.
And seriously, it will be the last word on the subject. Everything that needs to be said has been said.
Barry Minkow: Where is he Now?
Those of you who were around way back in 2007-08 (in MLM years, that’s a long time ago) will probably remember Barry Minkow. He was the guy who blazed the trail for unethical short sellers like Bill Ackman to bash public MLM companies so as to profit from the resulting drop in their stock price. Barry tried this on USANA, Medifast, Pre-Paid Legal (now the privately held Legal Shield) and, yes, Herbalife. When he tried the same extortion scheme on Lennar (the second largest home builder in the U.S.) he was found guilty of stock fraud and sent back to prison – for the second time (he also perpetrated a massive stock fraud back in the 80s).
So where is he now? Back in prison – for the third time.
The Inside Network Marketing show includes an recurring segment called “The Kitchen”. As in, if you can’t stand the heat, stay out of. Past Kitchen guests include Randy Gage, Kevin Lehmann, and Empower Network co-founder Dave Wood. I started doing this segment after listing to so many “hard hitting, no hold barred” interviews of various MLM personalities where the interviewer did little more than toss softballs and blow love kisses.
And if you’ve heard any of the series of other interviews Vemma founder BK Boreyko has done recently you’ll see that nothing has changed.*
For the record, I like BK, a lot. He’s a good guy, and I’ve always been a fan of his companies (full disclosure: I consulted on the original New Vision compensation plan). And he’s always been a fan of the MLM space. He claims he still is – even though he seems to be going to great lengths to now distance himself from it.
I’m not going to spell out my, and others, concerns and objections here, as they are clearly stated in the interview. However, based on the rampant and perpetual mischaracterizations of them elsewhere (e.g. Mel Atwood’s desperate attempt to voice many of the concerns we share on Facebook, which I reference during the interview). I will emphasize again that this has nothing whatsoever to do with semantics, or simply what BK wishes to call his company. It’s much deeper than that.
BK’s claim that Vemma is no longer a multilevel marketing company because their business model is now “more like affiliate marketing”, and “less like Amway, more like Amazon”, is not a matter of subjective opinion. Very clear definitions, both legal and advisory, apply to what defines an MLM operation. As long as Vemma is still using the same binary compensation plan they’ve always used – which they are – their business model will still involve multiple levels of people marketing.
Those aspects that BK is claiming causes Vemma to depart from the MLM model are, for the most part, not particularly unique to MLM. For example, while it is true that the majority of MLMs charge retail customers more than reps, there are several that don’t (e.g. Melaleuca and USANA). Nor is having no sign up fee. Yes, the large majority of MLMs do require such, but one could argue (and I could easily be the one), that this is a good thing. I’ve heard it claimed recently that franchises have a “97% success rate” (it’s closer to 65%**, but either way, it’s higher than non-franchises), and that MLM, with all of it’s advantages, should have just as high a rate. Except there’s one glaring difference. When people invest $1.5 million into a Taco Bell franchise they have a huge incentive to work hard, and for as long as it takes to get to profitability. When someone risks nothing they have practically no incentive to do anything. It’s actually healthy for an MLM to have at least some barrier to entry. Forgoing a $25 distributor kit fee in lieu of a free enrollment only gains you one class of participant – those that would not have joined if the cost to start their business was $25, but will if it’s free. In other words, even more people getting into your business that have no business getting into business (of any kind).
Vemma now also claims that now “everyone must first join as a customer”, and you can upgrade to a distributor (which Vemma now calls Affiliates) by either enrolling another customer or buying the $499 Affiliate pack. However, you can buy the Affiliate pack and become an Affiliate right after you went through the online enrollment process. So, technically, I guess it’s true. Most who now join Vemma as an Affiliate will be, at least for a few seconds, a customer.
My strongest concern is that now, when the industy is under attack based on a false premise (and if you think this is just an Herbalife issue, you’re so very wrong), and when we need the strongest, most admirable and respected representatives of the space to stand up and help us defend it, one decides to cloak its true identity to avoid the negative stigma that these high profile attacks have created, and are creating – all in the name of “greater transparency”.
But I’m starting to do exactly what I said I wasn’t going to do. I’ll be discussing this in much more detail on the next INM show. I can say in five minutes what takes me an hour to type. For now, here’s the interview…
It’s only room temperature in The Kitchen for about the first 15 minutes. The heat does rise over the last 45.
These MLM denier companies, like Melaleuca, Mary Kay, and now, unfortunately, Vemma, are all bound to MLM by an unseverable chain. If this ship we call multilevel marketing ever sinks, they’re going to the bottom right along with it. And we do seem to be taking on a little water. I would strongly suggest that rather than trying to saw through the chain, they might want to grab a bucket.
* Although Tom Chenault at least tried to push back a little on his show, but was limited by time.
I know it’s been a while since my last Alert, but I can now reveal the second major project that has kept me busy (the other being my Empower Network encyclopedia).
I’m sure you are aware of the various “Best of” polls that are promoted around the industry, which really reveal little more than which distributor group can best promote the poll. There are certainly a number of more reputable and prestigious awards distributed annually, but they are limited either to those who are members of the awarder’s organization, clients of their firm, or a resident of a certain city or state (or, in some cases, to only those willing to attend the awards ceremony). Even among those very few exceptions the awards are selected by an elite panel of internal judges, not an academy of industry leaders, authorities and experienced veterans.
TAMM currently has over 100 voting members who will participate in the nomination, and ultimate awarding, of what I’m sure will inevitably be called “Tammys”.
The categories to be awarded for 2013 are:
COMPANY OF THE YEAR
CEO OF THE YEAR
PRODUCT OF THE YEAR
BEST NEW START UP
DISTRIBUTOR OF THE YEAR
TRAINER OF THE YEAR
SUPPORT COMPANY OF THE YEAR
HUMANITARIAN OF THE YEAR
INDUSTRY ADVOCATE OF THE YEAR
HALL OF FAME INDUCTEE
Over 40% of Academy members are industry authorities who have no direct MLM company affiliations, and the others are respected leaders who have pledged, and we trust, will be objective and fair in their voting. Of course, the larger and more diversified the voting pool the more accurate – and credible – the results (per the “The Wisdom of Crowds” concept). So if you would like to nominate other knowledgeable, objective leaders to be an Academy member, or volunteer your own services, please do so by applying HERE. However, no more than 3% of all Academy members can have a direct affiliation with the same company, so we will need to know what affiliations, if any, that you have. This information, and your Academy membership, will be strictly confidential. Members will be provided a professionally produced graphic image to display online that distinguishes them as an Academy member, but members are under no obligation to use it.
We have also formed a TAMM Board of Directors who have helped to developed this concept, and who will oversee, audit and certify the nomination and voting process. They are (alphabetically): Mel Atwood, Len Clements, Kevin Grimes, Dr. Charles King, Bret Matheny, Michele McDonough, Kevin Thompson, Lisa Wilber, and Doris Wood.
TAMM has already raised over $10,000 in sponsorships from various industry company’s vendors and individual leaders, so our awards will be world class, with each category nominee receiving a beautiful, engraved plaque, and winners receiving an all Chrystal trophy like the one in our logo. You’ll see a lot of diamond shapes in our imagery and awards, which represented the true shape of an MLM organization.Sponsors will be acknowledged at all TAMM events and will be prominently recognized on the TAMM website. If you are interested in sponsoring TAMM please let us know.
To be clear, we have absolutely no intention of TAMM becoming an industry trade association. We have enough of those already. This is simply a group of like minded industry leaders who wish to provide, for the first time, the most coveted, valued commodity an MLM company or service provider could possibly attain…
Real, well earned, credibility.
Credibility based on value and merit – not who drives the most traffic to a particular website, offers the most valuable reciprocation, or is simply the hottest or fastest growing.
Speaking of those “best of” polls that are for “entertainment purposes only”, the vote for 2013 is nearing an end, so get in there and support your company!
Also, for only $9.95 a month (or $99.95 annually) you can have your exclusive contact information (only yourinfo is listed) appear if anyone clicks on your company name on the Favorite Company Vote list. Many of these spots usually get grabbed up quickly after the New Year so now is the time to secure the contact listing for your company. Check it out here:
This is a free webinar produced by my friend Zazz Daniel which I will also be participating in. Zazz and I have a very different philosophy when it comes to M.L.M. training than most. For one thing (out of many), we tend to place a little more emphasize on ethics and integrity. For example, we’ll never advise you to call your college roommate after 20 years and pretend like you suddenly became interested in how they are doing, or troll the online job seeker sites to bait and switch them onto attending an opportunity presentation. Also, Zazz is one of the very few trainers I know who understands that hype not only doesn’t work, but a truthful, evenanti-hype approach to prospecting works best!
The webinar will be held this Thursday, December 19th, at 11:00 am PST (2:00 pm EST).
Check out this personal video invitation from Zazz HERE.
Please support this training. If enough leaders embrace these concepts and philosophies we can actually turn the hypie, utterly inaccurate but common claim that “M.L.M. is gaining respect and credibility” into anactual fact.
The Most Interesting MLM Program I’ve Ever Reviewed
A Rare, Honest, Objective Review of Empower Network
Over the last five months I have been focused on two major projects (besides my regular consulting activities) that became a bit more overwhelming that I had anticipated. One is still a secret, so can’t say much more than NO, I’m not starting an M.L.M. company. But it is something that is much needed, and I think will create quite a buzz throughout the industry, The most time devouring of the two projects was my Empower Network review. I explain why in the latest edition of my Inside Network Marketing video blog:
This review started out to be like most others I have done. That is, a couple of weeks of research and 10-15 pages of writing. It didn’t end that way. About six months of research and 51 pages of writing later I can honestly say this was one of the most fascinating company reviews I have ever undertaken. EN is controversial and has been the subject of a lot of criticism, and for the most part, for good reason. This review did turn more towards the positive the deeper I dug (I usually find more dirt) but didn’t quite make it all the way to the green side of the meter. But call them what you will, just don’t call them evasive. Their willingness to provide me with even the most intimate financial details of their operation was astounding, and The Davids (co-founders Wood and Sharpe) have no skeletons in their closet. Not that they don’t have skeletons. They’re just not in their closet. In fact, they pretty much drag them right out on stage with them at every live event or video they produce (especially Sharpe). And if you think I’m verbose (I prefer prolific) due to my numerous tangents and tendency to over-explain, wait until you hear the interview. Dave Wood makes me seem pithy. The result of all this is a 51 page review, but one that early feedback suggests is a surprisingly easy and interesting read, even for those not particularly interested in Empower Network itself. I hope you agree.
It’s also the last such review I will ever write. At least for free.
Frankly, I’m tired of providing at no cost what M.L.M. companies are paying compliance, marketing, and compensation plan consultants thousands of dollars for. I’ve done enough of these reviews to demonstrate the level of fairness, accuracy, and research I employ, and if anyone wants their M.L.M. program subjected to this level of analysis and scrutiny by all means, let me know. But this will be the last such review I will publicly provide, at least in writing. This Empower Network review was the primary reason you have not seen a single video blog, podcast, or Alert coming from MarketWave in over five months. It’s just too time consuming, and I’ve got too much else to say.
So do expect to see a lot more activity here at “Inside Network Marketing” in the weeks ahead.
Favorite Company Vote – Exclusive Contact Listing
Also, for those of you who were waiting for things to heat up here (and traffic to increase) before grabbing your company’s exclusive contact listing within the Favorite Company Vote list, now’s the time. For only $9.95 a month (or $99.95 annually) you can have your exclusive contact information (only your info is listed) appear if anyone clicks on your company name on the Favorite Company Vote list. Check it out here:
This analysis of corporate hype includes a series of real world examples and offers a number of ways to detect such deceptions and how to get to the truth. There are also two case studies at the end related to a couple of companies that claim to be experiencing massive growth. Are they? You decide.
I’ve found that when I record video blogs entries I seem to enter some alternate universe where for every minute I think I’m speaking three minutes actually pass. This segment is 31 minutes long, but I swear it felt like 10 minutes when I recorded it. But hey, that’s the beauty of recorded video and audio blogs. You can always stop it and come back to listen to the rest later.
For the record, all this applies to a minority of M.L.M. companies – but still way too many.
Inside Network Marketing Podcast is Back
The first edition of the new INM podcast reboot is a little rough. I’m not pleased with the sound quality (I’ll fix that before the next one, I promise), and I’d like my new co-host, Cathy, to show off her intellect and sense of humor a little more. I asked her to allow me to do most of the talking and she mistakenly did as I asked (the irony of that will be clear when you listen to the show). The topic was M.L.M. products. Not so much about product claims, but more from the standpoint of how goofy and absurd a lot of what we offer, as an industry, can be. We (mostly I) rip on Amega’s magic wand, of course, but also products like canned air, sour milk perfume, soap formulated by God, and what will likely the the most controversial… homeopathy.
This isn’t as simple a topic as you might expect, so this one’s a little long (37 minutes). What ever you have to do to get through it, do it. When ever there’s a lull in legal actions sparked by income claims we, as an industry, seem to get lulled into a false sense of security. Income claims start to become bolder, more blatant, and much more common – and that seems to be exactly what’s happening now. It’s just a matter of time until someone is made an example of. Please have your team watch this so, hopefully, it won’t be you.
INM Podcast is Back – With a Twist
I don’t intend to make a habit of doing 37 minute video blogs (my goal is to keep them all under 15 minutes – so far I’m 3 for 7), but most subjects really require a long form discussion to completely cover. That’s where the INM audio podcast comes in. But this time around we’re spicing things up a bit.
There are two major changes to the INM podcast format. First, I’ve added a co-host. There were essentially four requirements I was looking for in a co-host: 1) Had to be smart; 2) Had to have a sense of humor; 3) Had to have two X chromosomes. Oh, and she had to agree with everything I say. Cathy Wilcox only met three out of four of these criteria – you’ll learn early on in the first show which one she lacked – but I hired her anyway. Her only condition was that we spend no more than 5 minutes each show discussing Dancing With The Stars. Reluctantly, I agreed.
Okay. Not so reluctantly. Hey, it’s a recorded podcast. Just fast forward.
Also, there’s going to be a segment called “The Kitchen” – as in, if you can’t stand the heat stay out of. Every interview subject will know going in not to expect a lot of softball questions or air kisses being blown there way. I did try this once before, a couple years ago, but, big surprise, had a hard time finding willing interview subjects. But now, there are some individuals who, allegedly, have the courage to face the heat.
The first edition of the new INM podcast will be online this weekend. I’ll Tweet it’s posting.
You can check out the INM podcast, in its previous format, here:
We’re still about two to three weeks away from a major industry altering announcement (no hyperbole) – so stay tuned. Also, Part 7 of the INM video series will deal with Corporate Claims. Look for that in the next few days as well.
Industry Trends Update
Special Offer for Alert Subscribers
Health Product Claims
The subject of Part 5 of my Inside Network Marketing video blog series deals with what we can and can’t say about dietary supplement products, and why. This is likely going to be upsetting to some, and shocking to most. Please remember, I’m just the messenger.
The tag line “If you go through you’re M.L.M. career with blinders on, sooner or later you’re going to get blind sided” never applied more than to this subject. If you’re marketing a dietary supplement, juice, or weight loss product you really need to get this information – because you’re likely not getting it from your company. There are some who know the rules but look the other way because all those crazy claims generate more sales. But most, I’ve found, honestly don’t know the rules, thus are unable to impart them accurately to their distributors. There’s a prominent company right now that claims they are allowed to use a third party study that suggests a substance in one of their products might prevent cancer. A top field leader for another company has been training reps for years that it is their “first amendment right” to make medicinal claims about their juice if it’s a personal testimonial. They’re both very, very wrong.
I’m not saying this is right, it’s just the way it is. Until someone changes the rules we’ve got to play by them, like them or not. But first, you have to know them!
Industry Trends Update
Once again the trends are a mixture of good and bad news. The “M.L.M. Index” (top 12 public M.L.M. companies by market cap) beat the S&P in March for the third straight month, rising 4.63% to the S&P’s 1.24%. For the past three months the M.L.M. Index has risen 17.83% while the S&P has increased 7.22%. Although the S&P beat the M.L.M. Index over the past 12 months, 10.49% to 1.87%, this period includes Herbalife’s 46.12% drop (induced by a bogus short seller attack), and Nu Skin’s 23.52% drop (due to a Wall Street perceived guilt-by-association). Thanks mainly to Mannatech (+76.34), Tupperware (+52.67%), Medifast (+31.34%), Primerica (+30.13%), and USANA (+28.41%), with a little help from LifeVantage (+6.65%), the overall trend was up. Keep in mind, stock market investors are primarily trend analysts who are voting on what companies they believe will be more valuable in the future, not based on their present value.
Google search results for the acronym “M.L.M.” (without the periods – I’m adding them only to avoid spam filters which don’t like to see M and L and M together), are not heading in the right direction. Of the top 100 results, 35 are pro-M.L.M., 7 are con. This is down from 69 pro-sites at the end of February. Over the last several years such a search routinely displayed at least 80 pro-sites. The drop to 35 is not due to an increase in the number of con-sites, which actually dropped from 13 to 7, but rather a recent, massive increase in the number of sites having nothing to do with our industry. For example, Martin Marietta Materials (which has the ticker symbol M and L and M), Metropolitan Lutheran Ministry, and MLM-Martin Architects.
Based on a propriety algorithm, the ratio of online pro-vs-con M.L.M terms and phrases has dropped slightly from 1.83 to 1.80, which continues a slow downward trend from it’s peak of 2.39 in September of 2010.
The number of visitors to the Wikipedia page for “[the industry that shall not be named]” continued its rapid accent to 92,128 in March (another record), up from 82,392 in February, and it’s all time low of 32,263 in January of 2008. Although this Wiki page has become somewhat more balanced in recent month, it’s still predominantly a con-site due to it’s largely disproportionate references to anti-M.L.M. critics and their portrayal of them as credible information sources.
This Monday, April 8th, John Fogg will begin an 8 part training series titled “The InterNetwork Marketing on Facebook Intensive”.
Facebook has been a popular tool for networkers, but is often abused. Facebook has strict rules about how their platform can be used by marketers, and what they define as right and wrong are sometimes separated by very fine lines. Even if you follow the rules it doesn’t mean you’ve mastered the rules of good marketing. For example, Facebook has no rule against being obnoxious.
John has had a lot of success marketing on Facebook and knows how to do it right.
As you can see HERE, this course is normally $397. That’s not an arbitrary “list price”, its the actual price that most participants are actually paying. However, John is offering a “$300 scholarship” to all MarketWave Alert subscribers! That means your cost is $97.
This could apply to any company, or more likely to distributor groups within a company. For example, company’s that offer “founder’s positions”, or “shares of the company”, or distributors who hype “spill over”, or promise they’ll “do all the work for you”, or will “build your downline” for you.
And there’s a lot of them.
Case Study: Zeek Rewards
Why Zeek rewards? Because they hit a triple. The trifecta. The hat trick. They were accused by the SEC of being all three – a pyramid scheme, a Ponzi scheme, and an illegal security.
Many people, including those within the media, often use the terms “pyramid scheme” and “Ponzi scheme” interchangeably. In fact, these terms are not synonymous. A Ponzi scheme is structurally, mathematically and legally quite different than a pyramid scheme.
In part one of my four part video series I describe what defines an illegal pyramid and how they differentiate from a legitimate M.L.M. program. However, even if your company passes this test it doesn’t exempt it from still being declared a Ponzi scheme (or the sale of an unregistered, thus illegal, security, which I’ll cover in part three).
I often recite the line “If you go through your M.L.M. career with blinders on, sooner or later you’re going to get blindsided.” This is a great example of how that can happen. By not fully understanding how all three of these illegal schemes are defined (pyramid, Ponzi and security) you are setting yourself up to be blindsided by a state or federal legal authority shutting down an opportunity you were sure was on the up and up – just like what happened to Zeek Rewards reps (which I’ll be using as a case study in part four).
The second installment, “What’s a Ponzi Scheme?” can be viewed now at:
Part three, “What’s an Illegal Security?” will be posted by the end of the week, so stay tuned.
Industry Trends Update
One of the most significant metrics I use in judging the general attitude within the overall population regarding M.L.M. is a propriety algorithm that searches the internet for a wide variety of terms and phrases that are distinctly pro-M.L.M. (i.e. “I love network marketing”) vs. those that are definitively anti-MLM (i.e. “I hate network marketing”). After the search is completed (it usually takes 8-10 minutes – that’s a long time for a 2.66 GHz Quad-Core Mac with 50+ MB download speed), I calculate the ratio of the two totals using an aged, single processor human brain with limited memory, assisted by an Office Max desk calculator.
The good news is that the total number of pro-terms always outnumbers the con-terms, usually by about two-to-one. The bad news is that this ratio has been slowly trending down since it’s all time peak of 2.32-to-one in June of 2010.
Pro-Con MLM Terms Ratio
The number of unique visitors to the Wikipedia page for “Multilevel Marketing” is another good indicator of public interest trends.
Although the number of people checking out this Wiki entry has almost tripled since the beginning of 2008, this is not necessarily a good thing. While this does indicate increased interest in our industry, the Wiki page itself has become a somewhat anti-M.L.M. site. It is now controlled by a small but diligent faction of anti-M.L.M. Wiki editors who give much credence and deference to other industry critics and their devoutly anti-M.L.M. websites, but will disallow any reference to most industry authorities, or their website, that might neutralize the critical content. As evidence, note the 48 footnotes, of which 14 direct the reader to a source supportive of M.L.M., 13 are neutral or balanced, and 21 point to anti-industry sources, including the websites of Robert FitzPatrick, Jon Taylor, Tracy Coenen, and even the 19 year old, utterly discredited article “What’s Wrong With Multilevel Marketing” by Dean VanDruff. FitzPatrick and Taylor are cited twice. However, when ever I have made any attempt to make the Wiki page fairer, more accurate, and more balanced by revising, rebutting or removing unjustified, misinterpreted, or outright wrong information, with footnoted references to authoritative advocate sites (not just my own), the edited sections are promptly reverted back to their original text. The explanation is usually that these sites are not credible because they are biased. And FitzPatrick’s, Taylor’s, Coenen’s and VanDruff’s are not?To be fair, the Wiki page is not nearly as biased towards the negative as it was just a few years ago, when there were only two footnotes referencing pro-M.L.M. sources.
Here’s a homework assignment for all of our industry trade associations (all four of them): Create a fair, balanced, objective, well sourced, and verifiably accurate, M.L.M. Wiki page, then have 1% of the 1% most active networkers (that’s still well more than 1,000 people) each spend just a few minutes, once or twice a week, making sure the fair, accurate and balanced version stays intact. I’m guessing the four or five anti-M.L.M. Wiki editors won’t be able to keep up, and will eventually give up.
Then, if another 82,392 people visit this Wiki page (which was last months total – March is on pace to hit a record 90,000), they’ll get both sides of the story.