YRAMID

CHEMES

Saving the network marketing industry bydefining the gray

byKevin Thompsonkevin@theadvocategroup.net

II.

YRAMID

CHEMES

The FTC has recently admitted it is very difficult to distinguish between a legitimatenetwork marketing company and an illegal pyramid scheme. In theirproposed businessopportunity rulepublished in late 2007, the FTC made the comment, “[W]hile there is asignificant concern that some pyramid schemes masquerade as legitimate MLMs,assessing the incidence of such practices is difficult.”

The FTC further states, “Whileeconomic analysis can reveal if an individual company clearly is operating legitimatelyor if it clearly is a pyramid scheme,

it is difficult to draw an appropriateline in the gray area

.”

Unfortunately, the FTC’s failure to develop a bright-

line standard distinguishing legitimate companies from illegal pyramids is enablingpyramid promoters to declare open season on consumers, which negatively affects thereputation of the entire industry. The FTC has stated they wish to continue pursuingpyramid schemes on a case-by-case basis.

In an industry with hundreds of network marketing companies launching each year, the case-by-case approach might proveineffective at curbing inappropriate marketing tactics.

Due to the size of this“gray area,” it’s as if the majority of network marketingcompanies are a herd of gazelles running from the regulatory lionswith each company trying to outrun the slowest.