Pyramid Marketing Companies and Possible Fraud Tarnish Multi Level Marketing

Multi-Level Marketing and Pyramid Marketing Companies and Possible Fraud

Multi-Level Marketing is alive and well in the United States and millions of Americans are involved in these businesses which they run from their home and even buy the products from them selves and for them selves.

Unfortunately all too often a multi-level marketer will embellish their own financial success in the business, as well as the reality of the attrition rates when building their down lines in sales presentations. In fact the Federal Trade Commission (FTC) has identified this as one area where consumers have encountered fraud and misrepresentation.

In an official report from the FTC on proposed rule changes for business opportunities, multi-level marketing companies and Franchises the FTC states;

"Indeed, complaints against pyramid marketing companies consistently ranked among the top 20 injury categories reported in consumer fraud complaints to the Commission.91 For example, during the period 1997 through 2005, pyramid marketing schemes ranked among the top 20 injury levels each year, except in 2003, as follows: State regulators report similar data. For example, a Florida business opportunity regulator noted that in his office, 60% of the written complaints received pertain to pyramid marketing companies. "They last about six months and they're gone." James, 20Nov97 Tr at 115-26. The State of Washington also reported a large number of pyramid marketing scheme complaints. See WA Securities, ANPR 117 at 2."

YEAR RANK INJURY

1997 9th $352,769

1998 5th $1,858,787

1999 10th $2,011,012

2000 4th $12,632,132

2001 10th $10,685,083

2002 18th $9,685,722

2003 (not in top 20)

2004 18th $2,264,112

2005 17th $3,347,443

Well we can certainly see why authorities are worried about MLM Multi-level marketing companies and home based pyramid-marketing schemes. These new proposed rule changes may in fact address these issues, but no one is certain that the misrepresentation will stop. If you own an MLM business perhaps you might wish to comment at the FTC about this upcoming proposed rule change? Consider all this in 2006.

Lance Winslow

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