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After what seems like an eternity, the FTC has issued guidance to multilevel marketing (MLM) companies. As guidance, the document issued on January 4, 2018 does not carry the force of law, but is instead intended to help MLMs to “apply core consumer protection principles to their business practices.” The guidance itself is a series of questions followed by the FTC’s answers, purportedly designed to help MLM companies adhere to the said core consumer protection principles. To view the actual guidance document, click here.
Those who were hoping that this long-awaited guidance would provide objectively measurable guideposts to MLM companies will be sorely disappointed; and those who are familiar with the legal issues confronting MLMs will find much that there is really nothing new in the guidance. For example, in response to the ultimate question “How does the FTC distinguish between MLMs with lawful and unlawful compensation structures?”, the guidance pretty much tells us what we have always known:
Should company owners and managers hold genealogy positions? Here are seven reasons why it may not be wise:
- The financial benefit for owners to hold a genealogy position is a fallacy.
- Owners holding genealogy positions can inhibit an IPO.
- Minority shareholder rights may be violated.
- You may be unwittingly selling a security.
- Ownership of genealogy positions by owners can lead to an inequitable distribution of income.
- Ownership of genealogy positions can lead to conflicts of interest.
- Termination of a business relationship is made more difficult if management holds a genealogy position.
But the challenges associated with management holding a position in the genealogy can be overcome with proper planning and execution.
So if you are starting an MLM and are considering taking a position in the genealogy, read the latest addition to our MLM Startup Series that discusses these points and how to cope with them in more detail.
When you mention intellectual property, the odds are pretty good that you will be met with a blank stare. After all, our common perception of property is something that we can physically possess.
The law, however, has an entirely different concept of property. To the law, property is considered a bundle of rights, which include the right to use something, the right to possess that thing, the right to dispose of that thing, and the right to prevent other people from interfering with your rights respecting that thing.
Among the top reasons why MLM startups fail is clashes among the business partners. Did you put as much thought and planning into choosing the right business partners as you did working through the planning around your product line, your compensation plan, your marketing strategy, and the hundreds of other big and small decisions that you made along the way? Read more about the critical issues you should address before choosing your partners when you start an MLM in our MLM Startup Guide.