I just learned of your posting my comments - and appreciate your courage in doing so.

I also read what you said about the registration of domain names that should have been reserved for Pyramid Scheme Alert: “So, in the interest of not letting this red herring get in the way of a focus on the issues, consider this an open invitation to the owner of pyramidschemealert.org to request transfer of the domains to their control. If they are truly concerned about an identity question, I will expect such a request shortly.”

This post has been passed on to Robert Fitzpatrick and I expect he will act on it.

Jon M. Taylor, MBA, Ph.D.

Trying to give any bad company legitimacy by claiming that it hasn’t been shut down by the FTC yet is an old and very flawed argument. Wasn’t a former Amway lawyer appointed to head up the FTC?

Seems to me that the FTC is an incredible waste of tax payer’s money. They may shut down a small fish company from time to time, but they aren’t going to harm the goose that lays golden eggs.

Just because a MLM is technically legal doesn’t make it a good deal. Money extracting schemes and cons have always gone on and will probably always continue. Thinking people will just have to protect themselves from these bad cons and avoid them altogether.

The direct selling industry is great for the owner/operators, not so great for everyone else. People dreaming of success usually get the bad end of the deal. Enthusiasm for a con makes the enthusiastic the yearly losers that con men target with their worthless training propaganda to keep the cash coming in.

To allow a business that operates exactly like the mafia to operate says something bad about the state of affairs in our country. Oh, I believe the mafia is still operating in this country, so why not allow any con dream selling business to operate also? One thing for sure, if anyone believes the Better Business Bureau will protect anyone from bad direct selling businesses, they are badly mistaken. Buyer Better Beware is the only protection consumers have against con-like schemes, scams and criminals pawning themselves off as independent business men.

Having said that, I would agree with the previous post that the FTC does have an enforcement mechanism that it uses when appropriate. In fact, recently the FTC reaffirmed this mechanism when it issued a revised notice of Proposed Rulemaking on the Business Opportunity Rule, excluding MLMs from that Rule in favor of utilizing the enforcement mechanism already in place.

There are an enormous number of people who have generated significant incomes from MLM and other direct selling opportunities, including Quixtar. In Quixtar alone in the last 2 years nearly 1400 *new* people have qualified at the Platinum level (average income nearly $50K/yr). By any measure that’s a great income for a part-time business.

As for the distributor/customer issue, if someone did not buy “tools” or go to meetings, did not “show the plan”, did not “retail” - they did nothing but just buy the products, because that’s pretty much what they wanted to do - why don’t you consider them a customer just like any other customer? What makes them “illegitimate” in your mind?

I really don’t care whether the FTC believes it is a pyramid scam or not. They basically have not been enforcing the laws for a few years now. I am not calling for any MLM company to be shut down. If someone wants to get fleeced by one of these recruit and dupe scams, by all means they should have the right to do it.

I also respect your right and this blog’s administrator to express your views. Potential recruits should be exposed to both the pro and con arguments before deciding if MLM is truly a good opportunity.

Your observations about there not being a recruitment fee paid to the recruiter is a valid one. Also, I have a tendency to agree that it is not all that bad for distributors to be the company’s primary customer. It is ingenious to make newly recruited distributors new customers. From the standpoint of the company, who makes all sales to the distributors anyway, it is profitable and a good thing. It is the distributor (er customer) who buys the products, rally tickets and the propaganda that passes as training materials.

There are two groups in MLM who generally make all the money: those that own and sell the product, and those who have the right to market tools. There may be the few smart distributors who retail, but many do not. For these, they get what they pay for. Many strive toward the dream that may or may not be there at the end. Folks who believe in any MLM have every right to follow it where-ever it leads.

I believe that if prospects would carefully consider both the pro and con arguments, they would use their intelligence and common sense and avoid them all together. Obviously, there are plenty of people who jump into a MLM business after only being exposed to the distributor’s overly optimistic spin on things.

… product based pyramid scheme in which nearly all company sales are made to distributors. Retail selling to non-distributors is required, but seldom enforced.

Sales to non-distributors are *not* required to make something not a pyramid. Even if 100% of sales are made to a companies registered distributors, that does not make it a pyramid. A “product based pyramid scheme” is one in which the products are essentially worthless and non-consumables. The only way to earn an income is to recruit other people who make one off (or close to it) purchases of the worthless products, making it a defacto payment for recruiting. Payment for recruiting is the sine qua non of a pyramid scheme - “without which it is not”. Unless there is a payment for recruiting a new participant, it’s not a pyramid scheme, simple as that.

Now that doesn’t mean it might not be some other sort of illegal scheme, but the fact is that the FTC has very clearly stated, on more than one occasion, that “the level of internal consumption” does not determine whether something is a pyramid scheme or not.

I know you visit many other sites on this topic, so I’m almost certain you’re aware of this, so I’m a little concerned that despite this awareness you persist in promoting the myth.

DSA owns a sizable number of domain names using relevant terms that we use to provide information about direct selling, identifying pyramid schemes, and consumer protection. Among that list is pyramidschemealert.com (and other extensions such as .biz and .net). The domains were freely available when they were purchased several years ago, and for a time contained relevant information people should know about the issue of pyramid schemes. There was never the appearance that the information was provided by anyone but DSA, and the term “pyramid scheme alert” is not trademarked to the best of my knowledge, so I do not think it created any confusion between our information and that provided on the site with the .org extension. If this were in fact a case of identity theft, I would have expected a request to transfer ownership of the domains to the owner of said identity. Having never received such a request, my guess is this they either: 1) realize it’s not really a case of identity theft and they would not win in a domain name dispute because the information that appeared on the site was clearly relevant to the domain name, and equally as clearly posted there by DSA (i.e. creating no confusion about the source of the information), or 2) they value the ability to use the identity theft assertion when they need something to distract their audience from the issues at hand. (Interestingly, Mr. Taylor likes to assert that the .com extension was never registered because of a requirement that non-profits use the .org extension. However, there is no reason the .com domain could not have been registered - they just didn’t do it.) If he and his associates were so concerned about the identity issue, I would have expected to have received a request that we relinquish ownership of the domains. That leads me to believe they find it more beneficial to make accusations than to assert any ownership rights to the domains.

So, in the interest of not letting this red herring get in the way of a focus on the issues, consider this an open invitation to the owner of pyramidschemealert.org to request transfer of the domains to their control. If they are truly concerned about an identity question, I will expect such a request shortly.

This does give me some food for thought, though – Mr. Taylor and his associates commonly refer to their organization as PSA – which is strikingly similar to DSA. Maybe there’s some identity theft going on there. No, wait, that’s just absurd!

I take the view that people have a right to be fleeced as suckers if they so choose. I a person believes all the hype and wants to be a part of the “plan” well, go for it.

I believe that valid points are made on both sides of the argument. Some of the few legit MLM direct selling businesses do not offset the many recruit and dupe types that also claim legitimacy. It is a BBB situation. A buyer better beware, use what is between ones ears before believing over exaggerated dream selling cons.

Amy, I am scratching my head over Jon Taylor’s accusations that you have participated in the equivalent of internet identity theft. You get the benefit of the doubt for now.

Meanwhile, soaring gas prices and staggering “brick and mortar” business layoffs across the board serve to only speed up this powerful, positive change.

Below are two web links that underscore this fact..

Direct selling is “breaking the sound barrier” and is going to become “THE” number one, 21st century business model.

A United Industry Makes Its Case: FTC Revises Proposed Rule
http://www.directsellingnews.com/article_app.php?articleid=312

Direct Selling Education Foundation
http://www.dsef.org/GetInvolved/HowToContribute.cfm

Dear direct selling friends, the future is now and it’s ours,

Bonnie in Redondo Beach

The problem is we don’t agree on the definition of a pyramid scheme.

Jon Taylor’s problem is that only he and a handful of other anti-mlmers, such as Robert FitzPatrick, whom he quotes, agree on his definition! Taylor has to quote FitzPatrick (who likewise likes to quote Taylor), since hundreds if not thousands of local and national governments around the world use remarkably similar definitions in their laws - and Jon Taylor’s definition doesn’t fit their laws.

What’s more, Taylor simply ignores reality and assumes that MLMs are illegal pyramids, then rails against the evils of MLMs as if they have the failings of illegal pyramids. They don’t! For a start John, MLMs don’t rely on “endless chains of recruitment” any more than any other product distribution business. That’s illegal pyramids that do that, John - and that’s one reason why they’re illegal.

Legitimate MLMs are based not on recruitment, but on product sales. Recruiting other sales folk is simply a strategy to increase those sales, just as “traditional” retail outlets might recruit staff to increase their sales volume.

Unfortunately the Internet Echo Chamber has repeated Taylor’s and FitzPatrick’s misinformation all of the ‘net, and other folk believe it.

Great to see the DSA finally fighting back - keep up the good work Amy!

I appreciate your willingness to keep this blog and website as open and transparent as possible. While ‘90% of most statistics can be made to appear another way 80% of the time or at least in 20% of some cases’, LOL, I think that ethics and integrity play as big a role as the numbers when presenting information. Thank you for doing that so cordially with an opposing opinion.

As Steven Hawking said, “All we need to do is make sure we keep talking.”

Safe traveling, Amy.

Tom in Atlanta