In this article, we take a look at claims made by some of the "experts" in the industry who believe that most MLM/network marketing companies operate as endless chain or pyramid schemes. We wanted to look into this and see what is behind it. If true, does apply "carte blanche" to the MLM/network marketing industry or just some companies in particular?

In one notable example, Robert Fitzpatrick, author of "False Profits" has recently accused various companies of operating based on the "endless chain" recruiting vs. product sales mode, including Pre-Paid Legal, USANA, ACN and Herbalife. MlmWatchdog.com investigators have revealed that Fitzpatrick works closely with Barry Minkow's Fraud Discovery Institute, which has a history of short selling companies under their "investigations." Perhaps this is just an example of stock manipulation, or is it bonafide investigative work? MlmWatchdog.com also points out that Minkow is a convicted felon who has served jail time for past fraudulent activities.

What does the law say about it? State law seems to govern primarily in this area, although the FTC and SEC have had significant involvement. In leading decisions, there have been a range of abuses targeted as potentially illegal:

1. Products with no "real world" marketplace
2. Products which are sold at inflated prices
3. Mandatory purchases of company product
4. Plans which cause distributors to load inventory
5. Large cash investment upfront
6. Plans in which products are totally or substantially ordered by distributors
7. Plans in which bonuses are paid to distributors for headhunting
8. Plans in which commissions are not based on retail product sales
9. Plans which contain elements of a lottery; rewarding based on chance

State laws differ on key points, including, most importantly, the question of whether distributor personal product usage counts as "retail sales." Three states view personal distributor use as legitimate "retail sales:" Oklahoma, Texas and Louisiana.

When evaluating the bottom line whether a particular company is legitimate may be a down-to-earth question: If there were not an income opportunity attached, would the typical person honestly buy the product anyway? Understand that your answer may be "colored" by a common tendency to "justify" an emotional buying decision. If the answer is "yes," you've found the right company.

Article Directory : http://www.articlecube.com