and Potions: The Bottom Line About Multilevel Marketing Plans
'Tis the season for consumers to be confronted
with a wide range of health, beauty and fitness products and promotions. Many of these
items aren't available on store shelves and are sold only through distributors.
What Are You Buying?
Many companies that market their products through distributors sell quality
items at competitive prices. But some offer goods that are overpriced, have questionable
merits or are downright unsafe to use.
The Federal Trade Commission warns consumers to apply a healthy dose of caution before
buying products advertised as having "miracle" ingredients or techniques and
guaranteed results. Many of these "quick cures" are unproven, fraudulently
marketed and useless or even dangerous.
Before using one of these products, the best prescription may be to check with a health
What Else Is For Sale?
Some distributors sell more than diet and exercise plans, vitamin supplements
or wonder creams. Many may sell "opportunities," too-a chance for you not only
to buy, but also to market, the products. In addition to describing the benefits of their
product or program, these distributors may encourage you to become a distributor.
If you sign up as a distributor, you may be promised commissions or other rewards-for
both your sales of the plan's goods or services and those of other people you
recruit to become distributors. These plans, often called "multilevel marketing
plans," sometimes promise commissions or rewards that never materialize. What's
worse, consumers are often urged to spend or "invest" money in order to make it.
Watch Out For Pyramids
Steer clear of multilevel marketing plans that pay commissions for recruiting
new distributors. They're actually illegal pyramid schemes.
Why is pyramiding dangerous? 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-end up
How to Evaluate a Plan
If you're thinking about joining what appears to be a legitimate multilevel
marketing plan, take time to learn about the plan before signing on.
What's the company's track record? What products does it sell? How does it back up
claims it makes about its product? Is the product competitively priced? Is it likely to
appeal to a large customer base? What up-front investment do you have to make to join the
plan? Are you committed to making a minimum level of sales each month? Will you be
required to recruit new distributors to be successful in the plan?
Use caution if a distributor tells you that for the price of a "start-up kit"
of inventory and sales literature -and sometimes a commitment to sell a specific amount of
the product or service each month-you'll be on the road to riches. No matter how good a
product and how solid a multilevel marketing plan may be, expect to invest sweat equity as
well as dollars for your investment to pay off.
If you decide to become a distributor, remember that you're legally
responsible for the claims you make about the company, its product and the business
opportunities it offers. That applies even if you're simply repeating claims you read in a
company brochure or advertising flyer.
When you promote the qualities of a product or service, you're obligated to present
those claims truthfully and to ensure there's enough solid evidence to back them up. The
Federal Trade Commission advises you to verify the research behind any claims about a
product's performance before repeating those claims to a potential customer.
Likewise, if you decide to solicit new distributors, be aware that you're responsible
for any claims you make about a distributor's earnings potential. Be sure to represent the
opportunity honestly and to avoid making unrealistic promises. If those promises fall
through, remember that you could be held liable.
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION
FOR THE CONSUMER