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Home » Marketing » Multilevel Marketing

FTC FACTS

Source: www.ftc.gov
Topic: Multilevel Marketing

Sort Desciption: Multilevel marketing plans usually promise to pay commissions ... against pyramiding say that a multilevel marketing plan should only pay ...

Content Inside: for Consumers FTC FACTS 1-877-FTC-HELP F EDERAL T RADE C OMMISSION F OR T HE C ONSUMER www.ftc.gov M ULTILEVEL M ARKETING P LANS M ultilevel marketing plans also known as network or matrix marketing are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor you will receive commissions for both your sales of the plans goods or services and those of other people you recruit to join the distributors. Multilevel marketing plans usually promise to pay commissions through two or more levels of recruits known as the distributors downline. If a plan offers to pay commissions for recruiting new distributors watch out! Most states outlaw this practice which is known as pyramiding. State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services not for recruiting new distributors. Why is pyramiding prohibited? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses most people except perhaps those at the very top of the pyramid lose their money. Federal Trade Commission Bureau of Consumer Protection Office of Consumer and Business Education Produced in cooperation with the North American Securities Administrators Association November 1996 F C EDERAL RADE OMMISSION T F T C OR HE ONSUMER 1-877-FTC-HELP www.ftc.gov Facts for Consumers The Federal Trade Commission cannot tell you whether a particular multilevel marketing plan is legal. Nor can it give you advice about whether to join such a plan. You must make that decision yourself. 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 inv ...

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