Legitimate MLM Company or an Illegal Pyramid Scheme

By:  Scott Warren, David Van Sambeek, Scott Wellman*

There has been a recent surge of enforcement actions by governmental agencies claiming that that certain network marketing companies are illegal pyramid schemes.  The most notorious of these recent actions is the action filed by the U.S. Federal Trade Commission (FTC) against Vemma.  But this is just one of the actions and investigations brought by both the FTC and the U.S. Securities and Exchange Commission in recent time.  In order for your MLM company to avoid the same fate and regulatory scrutiny, it is essential that you (1) gain an understanding of the crucial role retail sales play in the determination of what is a legitimate MLM company versus what will be considered to be an illegal pyramid scheme, and (2) implement any needed changes immediately.

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