1. The point in the first paragraph of Ms. Ramirez’ letter to the DSA that most MLMs do not operate lawfully is well founded, as practically every MLM the FTC has publicly and formally reviewed has resulted in either an outright shutdown or severe penalties. Recent examples of the former include FHTM and BurnLounge, and of the latter Vemma and Herbalife. As you probably know, the DSA is essentially a lobbyist/mouthpiece for large MLMs like Amway and Herbalife. My research has shown virtually every MLM operates similar to the above MLMs. It is akin to shooting fish in a barrel, as virtually every MLM has very few non-distributor customers, which was addressed in most MLM FTC cases, and many of them have tool scams, which has never, to the best of my knowledge been addressed, and is discussed later;
The result of unlawful operations is that 10s of millions of people in the USA alone have been scammed for the past several decades for upwards of $100s of billions. Currently, minorities such as Hispanics, Orientals, and other minority groups are the main targets of MLMs, the reasons are because these groups generally cannot afford, and therefore do not have as much access to the internet to find out that most MLMs are scams, can’t read or speak English if they do have internet access, and like other ethnic groups that have entered the USA for the past few centuries, tend to stick together for at least one generation because of common language, heritage, food choices, and overall trust factors, to name a few. The lesser economic standing means these vulnerable groups are hurt more severely when they are scammed by an MLM and are therefore a larger burden on our society, so it is no surprise Ms. Ramirez was rightly laser-focused on MLMs during her tenure;
2. The second paragraph discusses whether additional guidance will be forthcoming. What we really need is additional enforcement. The reason for this is MLMs currently have two options:
A. Abide by the existing guidance, or
B. Hope the FTC only picks off an MLM here or there, as has been the case for several decades, and they will be the lucky ones that can continue to swim around, to use my earlier analogy.
If an MLM decides to abide by the existing guidance, they will be at a distinct competitive disadvantage, as mentioned earlier in Ms. Ramirez’ letter. It is hard to fathom that an MLM would voluntarily put themselves in this position, especially given the fact that there are numerous other MLMs the distributors can join that do not abide by these constraints. As there are literally hundreds, perhaps thousands, of MLMs in the USA alone, it is much more logical the MLM will take its chances and continue to swim around in the MLM barrel and hope they are not targeted by one of the limited number of bullets the FTC appears to use in a given timeframe.
I suggest the FTC use a “shotgun” approach and require all MLMs to produce retail sales figures to non-distributors on an annual basis, and then audit some of them for accuracy. Targeting larger MLMs, such as Amway and Avon (although not a member of the DSA, Avon is an MLM and under the FTC’s regulatory authority) will produce a larger benefit and get the attention of the MLM industry to help them pick option “A,” above.
In particular, Amway is not only one of the oldest and the largest and the most abusive MLM in this country and around the world, Amway is viewed as the industry standard, owing to the 1979 court decision. Sending a clear message to the MLM industry in this manner would be a wise use of limited FTC resources. A recent lawsuit against Amway claimed, by exposing a confidential study that Amway conducted, a mere 3.4% of sales were to non-distributors.
My 16 years experience in Amway from 1993-2009, and communicating with everyone I possibly could since 2005 indicates this is not only a fair number, it is an exaggeration, as there are various methods used to inflate the actual sales to non-distributors. This and many other issues are discussed on my two websites: www.StopTheAmwayToolScam.wordpress.com
. I would be happy to guide you and others at the FTC through these websites to make your time more productive and efficient. I have spent significant time since 2005, on a daily basis, 7 days a week, to research, analyze, develop hypotheses and theories, and record them, on my websites and other websites, in an effort to educate others about MLM scams. I have been in contact with the FTC since 2006, when the business opportunity rule was being considered for modification. I consider myself to be THE expert on MLM scams and would gladly have any of my ideas challenged by anybody. In fact, I consider challenges to my facts and conclusions to be a method of refining and confirming my theories regarding MLM scams.
I recently communicated methods of falsifying retail sales information, and other information, to Ms. Janet Ammerman at the FTC for her use during the 7 years of auditing that Herbalife agreed to in their recent settlement agreement. Ms. Ammerman contacted me last month in response to an email I sent to the FTC Herbalife-involved attorneys in August 2016, offering my expertise in assisting with the auditing process. We spoke for an hour, she had another commitment and wanted to discuss various issues more, so we spoke for another two hours two days later. However, the principles of what we discussed are applicable to all MLMs, and she was clear she was currently involved only in enforcing the Herbalife settlement agreement;
3. The third and fourth paragraphs emphasize the importance of retail sales to non-distributors. Despite the recent and decades-long court decisions emphasizing this issue, the DSA wrote and obtained dozens of Congressional Representatives to sponsor a bill in the 114th session, HR5230, that would essentially legalize illegal pyramids:
. To the best of my knowledge, a similar bill has not been submitted in the current 115th session, although the year is young. For your information, I am a conservative, registered Republican, and am concerned that past and current ties to MLMs by President Trump, Secretary of Education DeVos, and Housing and Urban Develpment nominee Carson may result in political pressure to not investigate and take action against MLMs for the next 4 to 8 years, so this is not some Democrat Party ploy to criticize the current administration without basis. This makes me the very best person to be the messenger, as it is obvious I have no ulterior motives other than keeping other people from being scammed by MLMs for their precious time and money as I and millions of others have been over the past several decades;
4. The fifth paragraph discusses the need for earnings claims to be “…truthful and non-deceptive or misleading.” A major source of such inaccurate earnings claims is what I call the Tool Scam, and specific to Amway, the Amway Tool Scam, or ATS. The term “tools” is more formally known as Business Support Materials, or BSM. This includes tickets for various types of meetings, books, CDs and MP3s, voice mail, website access, lead generation, etc., usually sold by the high level distributors and sometimes the MLM corporation.
I have never seen the FTC even refer to this issue, and when present, it radically changes the business model to the extent it makes lack of retail sales a negligible factor. For example, I have documented former Amway distributors stating they made 10 times or more from the tools compared to their Amway profit. Keep in mind the tool scams are kept as secret as possible and is not common knowledge, with the exception of my websites and a small handful of others. Ignoring over 90% of a distributor’s profit is obviously not going to result in a legitimate analysis or conclusion, and nothing could be less truthful and more deceptive and misleading than a tool scam. In fact, fixing the retail issue and ignoring the tool scam issue would result in little change to a lower level distributor, which represents over 99% of distributors, business model. In fact, I have every confidence the upper level distributors would simply raise the prices slightly to scoop up the meager retail sales profit and put this additional money in their bank accounts.
The Herbalife CEO knew about their upper level distributors charging about $120 for a single name and telephone number for lead generation, which often was a poor lead, since at least 2005, but did nothing about it until Bill Ackman’s December 2012 presentation and $1 billion short position. Several high-level Herbalife distributors left for other MLMs so they could continue their lead generation scams, and another, John Peterson, who apparently couldn’t find a path forward, literally put a bullet through his head and committed suicide. Thus, the MLM industry takes the tool scam very seriously, and deserves to be considered by the FTC for every single MLM it examines, and I have communicated facts showing Herbalife has not discontinued parts of their tool scam, which is in violation of a corporate 2014 directive. Now that Herbalife must only pay bonuses paid on legitimate retail sales under the settlement agreement, there will be heightened incentive to withdraw or ignore the letter to allow adequate profit to be made from a smaller number of downline and discourage the upper level distributors from leaving to a different MLM where the [tool scam] grass is [cash profit] greener; and
5. The last paragraph discusses the availability of FTC information about MLM scams. It appears to be related to “push” information that applies to all FTC issues, not just MLM related issues, and is not measuring “pull” information that relates to broad intake of available MLM-related information. Consider that 4-5 million people turn 18 years old in the USA alone every year, and multiply that number by 20 for worldwide figures. Considering the 10 years between 18 and 27, which are both the highly MLM-targeted ages and most vulnerable owing to lack of having business and other life experiences (not a coincidence), there are about 40-50 million people, and the likelihood of people in this age group even having the thought of referring to FTC available material is highly questionable. I believe MLMs know this, which is why focusing on low-resource intensive retail sales figures and tool profits would be much more productive for the FTC and protective to the citizens of the USA and the rest of the world population.
I am available to have additional discussions with you or anyone at the FTC, and can be texted/called at [xxx-xxx-xxxx] or via return email, to set up a mutually available day/time. My mission is to ensure others do not lose the money, and more important to me, the time, that these MLM scams steal from good and decent people. Thank you for your consideration in this matter.