MLM attorney Kevin Thompson posts an open Letter to all MLM distributors about the Efusjon class action lawsuit, clearing up some misconceived notions on the impact on the Network Marketing profession.
Here are some highlights from Kevin’s letter which I find every important for all MLM distributors to understand.
At the bottom of this post I have added two links where you can read the whole open letter to distributors.
Class v. eFusjon – Industry Impact
Posted: 08 Dec 2009 08:32 PM PST
Re. Implications of the eFusjon lawsuit
“When I started The Advocate Group in March of 2009, I made a commitment to be part of the solution to the problem that’s plaguing the network marketing industry. Currently, the industry is littered with companies that “sell” token products and rely almost exclusively on recruitment and internal consumption from distributors. When distributors are unable to make customer sales due to product prices or a lack of legitimate demand, they will undoubtedly be encouraged to “buy for themselves” and endlessly recruit others to do the same. This is known as “opportunity driven demand” and it leads to people buying things they otherwise would never buy at prices they would never pay in quantities they would never consume.”
Kevin went on to write…
“When the only way to earn income in a MLM is through endless recruitment, various leaders will resort to hype, hyperbole and blatant misrepresentations in their efforts to sponsor the next distributor. “
“Most MLMs today have some form of a retail sales rule. Unfortunately, a lot of these rules are merely cosmetic with very little, if any, enforcement.”
“In eFusjon’s case, they’ve skipped the formality of having a cosmetic retail sales rule. You read that right. eFusjon has no retail sales rule. With eFusjon, there are absolutely zero requirements of outside sales before distributors can earn bonuses from downline volume.”
The lawsuit and its implications in the MLM industry
“The efusjon lawsuit will not cause a wave for legitimate companies. As President Obama often says, “Let me be clear.” The crux of the lawsuit is eFusjon’s lack of retail sales and their unprecedented pay plan that basically forces people to purchase products lest they lose their spot in the business.”
“I want to quell some concerns that we, plaintiffs’ counsel, do not agree with the practice of paying commissions on volume from distributor consumption. The law is clear in that product consumption from distributors is commissionable. The practice is perfectly fine. However, the law also requires some modicum of selling for the several reasons stated above. eFusjon has no such requirement. Not 10 customers, not 5 customers, not 1 customer. Nothing. It’s another reason that causes problems for eFusjon, both with our lawsuit and with regulators. It’s their greatest source of growth and it’s their greatest weakness.”
“I like our client here. We represent average people. We’re not representing a large leader that’s working on an exit. We’re simply representing misled distributors that purchased their cases, got their friends and family involved, bought into the hype and misrepresentations, stayed on autoship and were harmed as a result. Some lost some physical possessions while others lost a piece of their dignity. We fight for those people. I’ve seen the nasty effects a pernicious scheme can have on a family/community and I’m fully committed to keeping their interests top priority. It’s the purpose behind the www.classvefusjon.com website.”
“I’ll be transparent about my greatest worry with respect to this lawsuit. eFusjon will be shut down by a state regulator before they’re given the opportunity to fix their business and make the class whole. If they dig in their heels and try to defend their current model, it’ll spell trouble for both current and future distributors. The lawsuit will not create a vortex that will consume good companies. On the contrary, it should serve as a wake-up call to pyramid schemes disguised as legitimate MLMs that the days of exploiting unsuspecting distributors are over. Products need to be marketable and sales thresholds need to be met.”
You can download and read Kevin Thompson’s letter here.
You can subscribe and read Kevin’s posts on his blog Here.
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