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There really is no "general rule" as evidenced by the fact that companies accused of being MLMs have gone on as publicly traded companies for ages, while even b

There really is no "general rule" as evidenced by the fact that companies accused of being MLMs have gone on as publicly traded companies for ages, while even billionaires and hedge fund managers have feuded about whether it is a scam. See: Herbalife and Ackman vs. Icahn. Or AFLAC. (I'm not saying they are an MLM, but I've been personally approached for a "job" that seemed to be sales with no qualifications needed and I wondered)

aidenn0 5y ago
My general rule is paraphrased from the FTC website[1] There's more detailed information on a different page[2] including the following quote which I think supports the general rule I listed in my original comment: > ...[Amway's] sales plan was not an illegal pyramid scheme. Amway differed in several ways from pyramid schemes that the Commission had challenged. It did not charge an up-front "head hunting" or large investment fee from new recruits, nor did it promote "inventory loading" by requiring distributors to buy large volumes of nonreturnable inventory. Instead, Amway only required distributors to buy a relatively inexpensive sales kit. Moreover, Amway had three different policies to encourage distributors to actually sell the company's soaps, cleaners, and household products to real end users. First, Amway required distributors to buy back any unused and marketable products from their recruits upon request. Second, Amway required each distributor to sell at wholesale or retail at least 70 percent of its purchased inventory each month -- a policy known as the 70% rule. Finally, Amway required each sponsoring distributor to make at least one retail sale to each of 10 different customers each month, known as the 10 customer rule. Lastly, just because people disagree about the nuances of the rule, does not mean the rule doesn't exist. I feel very comfortable with my original statement, and those in favor of e.g. Herbalife would vigorously argue that meet my definition of MLM, while those who think its a scam would argue that they don't meet it. 1: https://www.consumer.ftc.gov/articles/multi-level-marketing-businesses-and-pyramid-schemes#pyramid https://www.consumer.ftc.gov/articles/multi-level-marketing-... 2: https://www.ftc.gov/public-statements/1998/05/pyramid-schemes https://www.ftc.gov/public-statements/1998/05/pyramid-scheme...
- perl4ever 5y ago
  Herbalife was fined $200 million by the FTC a few years ago. Bill Ackman declared: 'Herbalife has actually been shut down by the FTC, they just haven't realized it yet' But Herbalife management, and Carl Icahn, said that the FTC had determined it was not a pyramid scheme despite the $200M fine. The chair of the FTC denied that they determined it was not a pyramid scheme - but at the same time, they carefully didn't say it was. I'm just saying you can't really treat the FTC as the ultimate authority, because even they don't know.

aidenn0 5y ago

My general rule is paraphrased from the FTC website[1] There's more detailed information on a different page[2] including the following quote which I think supports the general rule I listed in my original comment: > ...[Amway's] sales plan was not an illegal pyramid scheme. Amway differed in several ways from pyramid schemes that the Commission had challenged. It did not charge an up-front "head hunting" or large investment fee from new recruits, nor did it promote "inventory loading" by requiring distributors to buy large volumes of nonreturnable inventory. Instead, Amway only required distributors to buy a relatively inexpensive sales kit. Moreover, Amway had three different policies to encourage distributors to actually sell the company's soaps, cleaners, and household products to real end users. First, Amway required distributors to buy back any unused and marketable products from their recruits upon request. Second, Amway required each distributor to sell at wholesale or retail at least 70 percent of its purchased inventory each month -- a policy known as the 70% rule. Finally, Amway required each sponsoring distributor to make at least one retail sale to each of 10 different customers each month, known as the 10 customer rule. Lastly, just because people disagree about the nuances of the rule, does not mean the rule doesn't exist. I feel very comfortable with my original statement, and those in favor of e.g. Herbalife would vigorously argue that meet my definition of MLM, while those who think its a scam would argue that they don't meet it. 1: https://www.consumer.ftc.gov/articles/multi-level-marketing-businesses-and-pyramid-schemes#pyramid https://www.consumer.ftc.gov/articles/multi-level-marketing-... 2: https://www.ftc.gov/public-statements/1998/05/pyramid-schemes https://www.ftc.gov/public-statements/1998/05/pyramid-scheme...

perl4ever 5y ago
Herbalife was fined $200 million by the FTC a few years ago. Bill Ackman declared: 'Herbalife has actually been shut down by the FTC, they just haven't realized it yet' But Herbalife management, and Carl Icahn, said that the FTC had determined it was not a pyramid scheme despite the $200M fine. The chair of the FTC denied that they determined it was not a pyramid scheme - but at the same time, they carefully didn't say it was. I'm just saying you can't really treat the FTC as the ultimate authority, because even they don't know.