THE WORLD SCINARIO - THE
Let us not
globalize it
Pyramid schemes are global phenomena, the
1.
Every
state has adopted laws regulating MLM companies in addition to the Federal Law
enforcing through Federal Trade Commission, Security and Exchange Commission
and US Postal Service. State Officials
independently file cases in State Court often under special state laws that
prohibit pyramids. Most state regulation
of MLM companies comes under the auspicious of pyramid statues or endless chain
scheme statues or illegal lotteries or criminal acts of deception direct
against property or framework that regulates business opportunities and
Multilevel Marketing.
The
Federal Trace Commission under the broad category of unfair or deceptive acts
or practices in or affecting commerce prosecutes pyramid schemes and Multilevel
Marketing schemes. In the landmark case
of FTC Vs Amway in 1979 it was held that it will be a legitimate Multilevel
Marketing if it fulfils the following:
1) Amway
required distributors to buy back any unused marketable products from their
recruits upon requests called the inventory buy back policy.
2) Amway
required each distributor to sell at wholesale or retail at least 70% of its
purchase inventory each month – a policy known as the 70% rule
3) Amway
required each sponsoring distributor to make at least 1 retail sale to each of
10 different customers each month known as the 10% customer rule.
The following is official advice of the
Federal Trade Commission 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 tat 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 commission on sales made y new
distributors you recruit – rather tan through sales of products you make
yourself.
4. Beware
of shills – “decoy” references paid by a plan’s promoter to describe teir fictional success in earning money through the plan.
5. 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.
6. Don’t
pay or sign any contracts in n “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 knowledge 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 seems to good to be true.
2.
3.
In
order to protect the rights of the consumers, to promote fair competitions and
to promote the economic order after market and social stability, says that the
directive issued in 1998 by the State Council, direct selling operation
activities are banned. Previously
approved direct selling companies have to stop without exception, direct
selling operation activities (translation of the state council directive quoted
in “Network Marketing – Recruitment and Training and Industrial ban in
The
State Council directive indicated that direct selling had caused serious harm
to
Since
1998 the Chinese State Council office and State Industry and Commerce
Administration, Public Security Ministry and other department had issued over
10 individual or co-sponsored regulations successively to attack Network marketing;
however there was never a systematic, unified law, legislation or regulation
formulated. All the related departments
implement the guidelines issued by their own administration. The existing guidelines also lacked the
authority to essentially stop multilevel marketing schemes.
Shangxi province recently passed Chinas’ first law to
investigate and ban Multilevel marketing
activities. As reported in the Epoch
Times (http//English.epoch.com) quoting Beijinges’
4.
MLM
activities in
As
per the act it shall be unlawful for any person to promote or participate in a
multilevel Marketing scheme or arrangements or a pyramid selling scheme or
arrangement or to hold out that is promoting or participating in such a scheme
or arrangement. Any person who
contravene shall be guilty of offence and shall be liable on conviction to fine
not exceeding 2 lakh $ or to imprisonment for a term
not exceeding 5 years or to both.
5.
Over the last several years, Multilevel
Marketing companies have begun soliciting investors in
The
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