The FTC On MLM

As you travel cyberspace it’s likely you’ve already encountered many possible ideas, products, programs, and suggestions on ways to make money using your internet connection. Most are too good to be true and it’s your job to weed fact from fiction. However, the FTC does have a few tips to help you determine “is it for real?”

In fact, during a trip to our local library yesterday, I picked up a handy single page guide from the Federal Trade Commission. This tiny guide discusses multi-level marketing. MLM, which is also called network marketing or matrix marketing, is a “way of selling goods and services through distributors.” The term “downline” is associated with MLM and is typically two or more tiers of individuals under one person.

You do need to know what the laws are within your own state (United States) or even country. When a business is built solidly around your need to recruit others to make the major portion of your income (versus the “product or service”) that’s when you step into the murky waters of “pyramiding.”

The pitfall of pyramids is that the business you join may solely be based on your ability to recruit others. When you are paid commissions to recruit other individuals there is that point at which the entire structure collapses. Think about it. The people at the top do amazingly well while those entering these types of MLM programs toward the middle or bottom never seem to be able to make any money. At that point, the program falls in on itself – and most likely the person or persons behind it run off to start yet another version of it.

So here are 7 suggestions the FTC advises you use when exploring your money making options online (paraphrased of course):

1. A plan that appears to be heavily based on recruiting others is most likely an illegal pyramid scam.

2. If you must purchase products on a continuous basis, and these products are expensive (over priced), often these programs collapse quickly. In fact, the FTC views these types of programs as “thinly-disguised pyramids.”

3. When a program places more emphasis on recruiting others versus selling the product, there’s another warning sign.

4. Miracles may happen, but let’s face it… they are few and far between. Miracle products or promises of enormous earnings may very likely be but a figment of the originators imagination. Asking for, and receiving, additional substantiated claims should be your next move. You should be expecting solid proof (and yes even those wonderful earnings charts on these types of websites can be faked so dig further first before jumping onboard).

5. Watch for “shills.” Online these can be testimonials from the famous “Gina G. of Seattle” (just a made up example to make my point). If the web site you are reading is loaded with glowing feedback (testimonials) follow up to see if that person really exists. Refer back to #4 above. In other words, get references and recommendations, contact information, etc. Bogus programs plant decoys. Decoys are often paid by the program owner to gush on and on. Decoys can be fake individuals or (sorry but it’s true) gurus getting a huge chunk of change (a percentage of the take) just for linking their name (and reputation) up to any given product. A percentage of these types of testimonies come from individuals who have never used, and do not plan on using, the product. Be wary.

6. Never, ever feel you have got to “do it now!” or you will lose out forever. High pressure sales is a tactic we have all encountered – from the guy at our front door, to phone calls, to the internet. As a good friend of mind once told me, “If it’s that good, it will still be viable two years from now.” And yes, he does wait before joining and promoting anything.

7. Common sense and homework! Check with your Better Business Bureau and even your state Attorney General’s office “especially when the claims about the product or your potential earnings seem too good to be true.”

The long and short of this lesson is that ultimately you are responsible for what you get involved in doing and promoting online. There are good, solid programs out there that have stood the test of time, have real and useful products and/or information. There are also the get-rich-quick schemes. Desperate times should not make you even more desperate! Building a business online takes time – years in many instances. Overnight riches are dreams we would like to believe in, but reality should slap us in the face… and hard!

My advice to you is to be sure that the product (be it physical, virtual, or service related) is one that you would be happy to share with your friends, family, and associates online. Innovative ideas, coaching, training, products, services that are helpful and work.

Get involved in a program that you can be proud to offer others. In other words, promote the product! When others also discover how wonderful it is, it should virtually sell itself. Then, and only then, will you be on the right road to build a solid, sustainable business online.

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ABOUT THE AUTHOR

Theresa Cahill is the owner/operator of My Wizard Ads, an ezine advertising co-op. Her other businesses and interests include helping others start a blog and providing a wide range of information at ImWebNiches and Online Internet Marketing Strategies.

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