UPDATE #3: If it wasn’t already obvious, the DSA (Don’t Sell Anything) lobby group supports this legislation, and probably wrote it: http://www.dsa.org/news/individual-press-release/direct-selling-association-announces-support-for-critical-consumer-protection-legislation-to-combat-pyramid-schemes
UPDATE TO UPDATE: Now another MLM CEO has put in his two cents: http://thehill.com/blogs/congress-blog/politics/349537-anti-pyramid-measure-is-a-step-in-the-wrong-direction-for However, note how Frank hammers on inventory, and not retail sales. In fact, inventory is not an issue, as the bill allows for inventory as long as a return policy is in place, something that is much easier for MLM scams to implement compared to retail sales. Also, while inventory is still an issue for some MLM scams, it is much less of an issue with direct shipments that many MLM scams have implemented in recent years.
And if the bill becomes law, it’s not just a step in the wrong direction, it’s a step off the cliff when it comes to MLMs having the ability to scam people: https://www.youtube.com/watch?v=Gq_bjaI0NTo
UPDATE – Now Marsha Blackburn has put in her 2 cents: http://thehill.com/blogs/congress-blog/politics/348218-protecting-consumers-and-promoting-entrepreneurship#comment-3492994723
In a repeat of what was attempted last year with HR5230 (see several brilliant stories regarding this proposed scam bill that fortunately didn’t go very far here: http://allmlmfacts.org/?s=5230), a slimy politician tried to slip in a similar law into, of all things, a financial services bill and got caught red-handed: http://www.nclnet.org/moolenaar_amendment I do NOT think it is a coincidence he’s from Michigan, home of the largest and most abusive MLM scam on the planet, Amway. Here’s the bill: https://www.congress.gov/bill/115th-congress/house-bill/3280/actions?q=%7B%22search%22%3A%5B%22pyramid%22%5D%7D&r=2
This created a torrent of thehill.com articles, the first salvo entitled “Direct selling is no pyramid scheme” by Joe Mariano, head of the MLM scam lobbyist organization, the DSA (Direct Selling Organization), which paradoxically does not want distributors to have to sell the products to real customers: http://thehill.com/blogs/pundits-blog/economy-budget/343508-protecting-legitimate-businesses-in-todays-economy#bottom-story-socials Note the link doesn’t match the article title, Joe probably changed it after recalling the FTC said Herbalife would have to start operating legitimately in last July’s settlement agreement.
I have a message for Joe – Yes, most “direct selling,” aka MLMs, ARE pyramid schemes, which is backed up by decades of several court cases, settlements, and even the plain language on the FTC website: https://www.ftc.gov/tips-advice/business-center/guidance/multilevel-marketing, which states, in part, “If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not.”
This DSA behavior nothing new, and the DSA, while being the head MLM scam lobbyist, is being turned by the neck of the large MLM scams, such as Amway and Herbalife, and these companies literally pay the DSA employee salaries. This is the same Herbalife that agreed last July to paying the FTC a $200 million fine, eliminating lifestyle and income claims, agreeing to have significant retail sales in order for their distributors to earn a bonus, and be under an auditing regime for 7 years, paid for by Herbalife. Note that large MLMs have left the DSA in recent years because of the large scams controling the “no retail sales” (and tool scam) narrative, including Avon, Tupperware, and Legal Shield: http://allmlmfacts.org/2016/03/legalshield-dumps-dsa/. The recently resigned head of the FTC, Edith Ramirez, also dressed down the DSA at a DSA meeting last October: https://www.ftc.gov/system/files/documents/public_statements/993473/ramirez_-_dsa_speech_10-25-16.pdf
A couple of days later, Marsha Blackburn, the same Representative who submitted HR5230 in the last Congressional session, submitted HR4309, this year’s version of the same tripe: https://www.congress.gov/bill/115th-congress/house-bill/3409/cosponsors, although she only has 7 cosponsors this time around, probably explained by Congress taking another month-long vacation, the only saving grace of not getting more support. Here’s the official title of the bill, it’s so wordy that it must be coming from Congress: “To amend the Federal Trade Commission Act to prohibit pyramid promotional schemes and to ensure that compensation is not based upon recruitment of participants into a plan or operation, but on sales to individuals who use and consume the products or services sold, and for other purposes.” Of course, paying for the mere act of recruitment is an obvious and decades-old illegal pyramid technique that is rarely practiced today, nor has it been for decades, so this is merely an attempt to legalize illegal pyramids. Marsha, Marsha, Marsha!!! https://www.youtube.com/watch?v=-yZHveWFvqM Marsha was in a direct selling company that sold to actual customers, not the downline: http://directsellingnews.com/index.php/view/qa_rep._blackburn_on_backing_direct_sellers_in_congress#.WYZOjojys1J I hope she wasn’t in the summer Tennessee heat too long to know the difference between internal (downline distributors) and external (non-distributor customers) sales.
Two days later, our intrepid MLM “experts” Bill Keep and Peter Vander Nat, write a retort to the above Joe and Marsha stories entitled “Pyramid schemes want immunity from the feds — here’s why”: http://thehill.com/blogs/pundits-blog/economy-budget/344373-why-pyramid-schemes-are-angling-to-make-themselves-immune Of course, our caped-crusader duo never gets around to explaining the answer to the headline “why” question, but who cares, they wrote a hieroglyphic pyramid paper years ago, so they’re experts, right? Look, I’m no genius, but I do have an Electrical Engineering degree and operated nuclear power plants, and this paper is so complex you must have to be either an economist or business professor to understand it, which creates quite a small audience: http://www.dsef.org/wp-content/uploads/2012/01/Marketing_fraud_An_approach_for_differentiating_multilevel_m.pdf The answer is quite easy: http://allmlmfacts.org/2016/05/h-r-5230-and-the-fallacy-of-mlm/ See in particular the section entitled “Why Is Having All/Mostly Internal Sales An Illegal Pyramid?” In summary, MLMs must make, as an absolute minimum, at least half of their gross profit from retail sales to non-distributor customers, which includes the corporate entity and the upper level distributors, so included in gross profit is signup and renewal fees, internal consumption, and tool profit.
Also, MLMs aren’t looking for immunity, they are looking to CHANGING the law, akin to Congress declaring it’s now legal to rob a bank. No immunity is needed when the law says it’s okay! Other than that, it’s a great article.
If this wasn’t enough, a lawyer clown (the word “clown” is integral to my lawsuit with Amway, email me at email@example.com if you want to discuss the details) comes along a few days later with this “masterpiece,” entitled “Congress would be right to define ‘pyramid schemes’ at the federal level”: http://thehill.com/blogs/pundits-blog/finance/344665-congress-would-be-right-to-define-pyramid-schemes-at-the-federal While I agree with Dave’s title, I am exactly 180 degrees out on the answer. We DO need to define pyramid schemes at the federal level, and that definition needs to include at least half the profit coming from external customers.
The final (so far) story in this saga was a re-re-re-retort from half of the FTC commissioners, that would be Terrell McSweeny, scheduled to step down later this year. I say “half of the FTC commissioners because there are only 2 of the 5 currently appointed, which has to hamstring the FTC. Here’s her article, entitled “Congress should crack down on predatory ‘pyramid schemes,’ not look away”: http://thehill.com/blogs/pundits-blog/finance/345073-congress-should-crack-down-on-predatory-pyramid-schemes-not-look
While she makes valid points and the FTC has shut down a handful of MLM scams, it’s not nearly aggressive enough. This should be similar to shooting fish in a barrel that is chock full of fish, and all the FTC has done is taken out a few over the past several decades. Amway is, by far, the largest MLM and most abusive MLM and the FTC needs to shut them down. NOW would be a good time, Ms. McSweeny. Or at least when you get back into the office Monday morning.
Also, call your Senators and Representative in Congress, as well as these numbskulls: http://www.dsa.org/advocacy/caucus, https://www.congress.gov/congressional-report/115th-congress/house-report/234 (see section 633, believed to be the “Moolinaar amendment mentioned above, and fortunately a couple of Representatives have spoken against this change, Reps. Nita Lowey and Mike Quigley), and http://www.dsa.org/advocacy/caucus.