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www.theadvocategroup.net

www.facebook.com/mlmlaw

As an attorney in the network marketing industry, I’m most often asked the question“What in the world is anMLM attorney?” After doing my best to answer thatquestion, and oftentimes feeling like I’ve just spoken in tongues, the next question isalways “Is this XYZ business I’m in an illegal pyramid scheme?” The answer isalways the same.

It depends

The analysis is always fact-driven, meaning a number of factors need to beconsidered. Although there is a cheat-sheet / mathematical formula available to helpmeasure the legality of a business, it unfortunately requires sensitive data from acompany that is never publicly available. So if you really need a concrete answer, youneed to sue the company, get the data via discovery requests and depositions, hire aprofessional expert at $500 an hour to plug in the numbers, and then, $100,000 later (ifyou're lucky), you’ll have your answer.The Federal Trade Commission has recently admitted to the challenge ofdistinguishing between legitimate companies and pyramid schemes. They said:

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While there is a significant concern that some pyramid schemes masquerade aslegitimate MLMs, assessing the incidence of such practices is difficult...While economicanalysis can reveal if an individual company is operating legitimately or if it clearly isa pyramid scheme,

it is difficult to draw an appropriate line in the gray area

In 2009, I published an ebook titled “Pyramid Schemes: Saving the network marketingby defining the gray”that calls for regulators and legislators to “define the gray”between legitimate MLMs and pyramid schemes masquerading as MLMs. But untilthe gray gets defined, we’ve got to follow our gut instincts.

Federal Register, Revised Proposed Business Opportunity Rule, 16 C.F.R. 437, p. 36 (proposed March18, 2008),

available at

http://www.ftc.gov/os/2008/03/R511993business.pdf