How to choose a Network Marketing company to work with

This is a serious article and is not a spoof or a trick. It is not an attempt to get you to sign up to anything.

This article gives pointers to people who are in Network Marketing and are looking for a new company. I am not against the individuals who are in these schemes. This site is aimed at facts and exposing the realities of Multi Level Marketing.

I am forever seeing people go from one company to another and making dreadful mistakes along the way. Some of you have been led into illegal schemes or tricked into doing illegal things yourself. Many of you will have had your reputation affected and gone through a lot of trauma.

A bit of research before joining a company could save you a lot of trouble.

 

Products

What are the products? Don’t be swayed by the level of commission or an assurance that the products will ‘sell themselves’. Products do not sell themselves, you have to sell them. If you don’t wear make up, don’t sell make up. If you aren’t into sports, don’t sell sports products. You will have no credibility if you try and pretend you know about these things.

You could run the risk of looking like an idiot if you are selling something you know nothing about. It is not enough that the company provides training in the products. People will see through you. People with a real interest in the market will spot you a mile off.

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Is there a market for the product?

Will people actually buy the product for what it is? Is the price reasonable? Do you know of people that will buy it because they want it? If they saw it in a shop, would they buy it? You need real customers, do not rely on friends and family who you think will support you. They may initially order from you to be supportive, but you do not want pity purchases. Pity purchases dry up, and can cause resentment between you and people you care about. Friendships are more important than selling a lipstick. Ideally, you would want repeat customers who like the product and ask you for it, instead of you chasing them for orders.

Do you want to sell to customers or will you have to beg?

Is the company registered at Companies House?

It doesn’t take long to check a company is registered and their accounts can be looked at. Go to their website and type in the company name in the search box. You can find out when the company was incorporated, who runs it, all sorts of information. Take a bit of time to look into the details that you find out.

It isn’t enough to be told by someone you work with that a company is legitimate. Find out for yourself. It really doesn’t take long. If you are investing your time and money into a scheme, you really should be doing these background checks. Google the names you come up with. Have any of them been in trouble with the law? If there is no information on them anywhere, this might not be good. You would think that someone who has set up a business that is going to be really successful would have experience and leave a footprint all over the internet on their previous activities.

Compensation plan

Have a look at the compensation plan. Do not be distracted by people or figures that show you can earn a lot of money at the top. Have a look at what you think you are likely to earn.

If you need to host parties, how many do you realistically think you will do? It may be suggested that you do 2 parties a week to earn a certain amount of money. How realistic is this? How many people do you know that will be happy to host parties for you? How far away will you have to travel? How much time and cost will be involved? Two parties a week does not sound much, but could you keep it up for long?

Don’t get carried away with what could be possible. Work out what you can realistically achieve. Look at the details. Work out a plan properly. If someone says it is easy to set up parties, ask them for the details on how they do it. If someone tells you it is simple and no effort, they are likely not being honest with you. Especially if they are trying to persuade you to join their team.

Are there minimum amounts of money that you need to bring into the company every month? Companies have different amounts that you are expected to bring into the company in order to remain active and to earn bonuses. Find out what this is. Will you be expected to make up the amounts with your own purchases? Wold you be buying these products anyway at these prices or would you end up spending money you would otherwise have spent on bills? People think they will just make up the amounts on their own purchases for a bit, and then their businesses will take off and they won’t need to anymore. This is not a good tactic. You will be wasting your money and you could end up being your own customer.

Advertising and marketing

Check what type of product you will be selling and what the selling points are. You will need to find out what claims are allowed and which ones are illegal. When you put claims on social media, you are as responsible for the advertising as a standard company is when they advertise on the TV or in magazines. Officially in the eyes of the law, you are responsible for your claims.

If a company sells coffee and you market it as weight loss coffee, you could get into a lot of trouble if you break advertising rules. Have a look at the CAP rules for the UK. This page tells you nice and simply some of the main advertising rules you need to adhere to, like what you can and can’t say. It covers weight loss rules, before and after pictures, testimonials, health claims etc. If you are told to sell a product by claiming it can do something like increase metabolism, cure diabetes, lose weight, help with depression, you need to check this is actually allowed.

Link to weight loss rules at the Advertising Standards Association.

Have a look at this index from the ASA that covers all the advertising rules you’ll need. There’s sections on competitions, environment, customer data, health claims.

If you are satisfied that the product claims can be advertised by you legally, you will be in a good position. The last thing you want is the ASA telling you to remove content or Trading Standards turning up at your door. You will not be able to blame the company for your claims, it is you that is responsible for it.

It is not acceptable for you to say that you were told to make the claims or that you just copied an advert. Make sure you carry out your responsibilities seriously.

If a company just sells weight loss coffee but you know you cannot sell it as weight loss coffee without breaking the law, could you sell it just as coffee? If not, you might want to find another company.

The DSA

Some people will tell you their business is legitimate if it is registered with the DSA. However, this does not provide you with any protection at all. Some companies have been with the DSA and been shut down by the authorities for being a pyramid scheme. The DSA is made up of people that run Network Marketing companies. They act to protect the companies, not the individuals signing up as reps. People who have complained to the DSA have found their complaints just passed onto the company.

Beware the hype

I’ve seen the hyped up videos, you probably have too. You know, the ones where someone is screeching  about the amazing opportunity they have just stumbled upon. Join now, it’s amazing, they’ve looked into it and it’s perfect. DO NOT TAKE THEIR WORD FOR IT! You may like them and trust them and want to join their team. You may even have worked under them before.

Signing up to a new company should be a big decision and not taken lightly. Do your own research. You don’t need to tell the person you don’t trust them. Check out what they are saying, follow the points in this article and decide for yourself if it is a good opportunity for you. If you decide it is legitimate and you think it is for you, join up. If it isn’t for you, find something else instead.

If you decide not to join and you are put under pressure, remember you are in charge of what you do and which company you chose. You should not be working with someone who tries to pressure you into their team. That’s not how professional people behave, that’s what bullies do.

How will you get paid?

Being paid isn’t as simple as being paid straight into your bank account. Most MLMs pay into a third party account. You might be charged for withdrawing money or there might be minimum balances needed before you can access it. Some companies pay bonuses in the form of stock or discounts on their products. Is it important to you how you get paid?

Is it an illegal pyramid scheme?

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This can be a tricky subject and I have seen may different interpretations on what a pyramid scheme is. It is usually the people who are recruiting that give the loosest definition. You should be familiar with pyramid scheme laws so that you can avoid one. Here is an article I wrote that brings together the relevant rules for England and Wales. Have a look. There are links to the actual law so you can see with your own eyes what the law is.

In summary, the big rules (In England and Wales) are-

You cannot be your only customer

There has to be a product or service that is sold

You cannot spend more than £200 in the first month in a scheme

You have to display the statutory wealth warning on recruiting adverts

There are some irrelevant ‘facts’ that you might hear to explain pyramid schemes like- “corporations are pyramid schemes, if people can overtake you in the pyramid it is not a pyramid scheme, it is registered with the government so it must be ok, I have earned money so it must be ok…” No doubt you will hear all sorts of rubbish. Listen to what people say by all means, but check out what the actual law says. After all, it could be you that is breaking the law if you are not careful.

In the US, you need to look at the FTC’s rules. Have a look at what they said about Herbalife.

 

Extra costs

What sort of training is available? Some companies provide training manuals or online modules as part of the joining fee. Some will charge you for it. Some will charge you for training courses. Some will expect you to travel long distances at your own cost and pay for your own hotel.

Are there events that you are expected to go to? Herbalife have recently been in trouble and are being sued for their events. They told people they would make money if they attended all the events. These events turned out to be a money making exercise and did not help anyone make any money.

Have a look at postage and packaging fees. Will you have to pay for it if you order for a customer? Younique presenters and LuLaRoe end up paying a lot for postage. Is there a minimum amount per order?

Will you have to pay a fee for having a back office or for being paid? Will you have to pay a fee to your upline to be in groups ( I have heard of this happening).

If the person trying to recruit you tries to fob you off and not answer your questions properly, or tries to tell you not to be so negative, take this as a warning sign. It is perfectly acceptable to work out what your running costs are going to be before you invest your time, money and reputation in a company.

 

Look for criticisms

Other people may have been in this company and had problems. What problems did they have? It will be useful for you to know how others have done. You may be told not to look for ‘negativity’ and to stay as positive as you can. This is not helpful when you are assessing a business opportunity.

Imagine you looked up a company and found a criticism about the product availability. Maybe there is never anything in stock or there is a three week wait for stock. This would be useful to know. What if people are never paid the correct money or ex members complain about hidden costs? You need to know this.

Make your own mind up over what you are going to do with this information. You may want to dismiss it as the ramblings of a bitter ex-rep. You may decide that the problems are going to be a problem to you to.

Deciding to ignore any criticism and any problems could backfire on you. If you have a friend who has concerns about the opportunity, do not dismiss them. They may have a valid concern. Listen to what they say and then make up your own mind about it. There is no need to fall out with them or cut them out of your life. It is a very special thing to have someone looking out for you and telling you what they think.

Of course, there is a difference between someone who dislikes you and makes mean comments, and someone who is worried you will make a mistake. Please dismiss the nasty people, but listen carefully to worried people that love you. You don’t have to do what your loved one says, but it is hurtful and unnecessary to cut caring people out your life who have not done anything wrong.

 

Understand what FDA accreditation means

Quite often, you hear the claim that a product has some sort of FDA backing. Is it certified, registered, certificated? Do you know what these terms mean? Do you know which applies to the products being sold? Have a look at this website that clearly sets out what they mean and how you shouldn’t be misled by the phrases. Don’t be impressed by the claims until you know what it means.

Your attitude

I get that you need to be positive, I really do. You deserve to do well, I want people to be successful. Boosting your self esteem and believing in yourself are good things. These can give you confidence and push you to try new things. These are healthy attitudes and help in everyday life.

I do not want to knock anyone’s confidence, or belief that everything will work out OK. What I do object to though, is the attitude that you can have anything you want, just because you want it hard enough. Your desires may give you the push to be more adventurous and give you a purpose in life. This is good.

What is not so helpful are the people who persuade you to ignore your rational thinking and natural curiosity and just do what they tell you to do, based on the belief that just wanting it is good enough. You need more than that. You deserve more than that, you really do.

If you want to be taken seriously as a business person, do your research. Don’t just hope it will all work out alright because your friend said it would. Think for yourself.

 

I hope you find the above advice useful. Remember the following points

You are responsible for your actions

Don’t take people’s word, find evidence

Don’t break the law

Listen to criticism, is there any truth in it?

The Legal Bit

 

This page is currently under construction but has been published early because it could be useful to people now, before it is complete.

I am not qualified to give legal advice and this page should not be taken as such.

I have gathered together some of the common laws that are relevant to trading schemes in the UK.

Timeline of UK Pyramid laws.

1973 Fair Trading Act 1973, section XI Pyramid selling and similar schemes is passed.

1973 Pyramid selling regulations were produced, based on the Fair Trading Act.

1989 Pyramid selling schemes regulations 1989 and amendments 1990 revoked the 1973 Pyramid selling scheme regulations 1973.

Trading schemes Act 1996 is passed which produces the Trading schemes regulations 1997. They revoked the regulations from 1989.

So now we have the Fair Trading Act 1973 (section XI), with some changes and the Trading scheme regulations 1997. Hopefully in the near future these regulation will be updated again to counter all the dodgy goings on that we see now.

 

 

What is a pyramid scheme?

In the UK, the term ‘Pyramid scheme’ is used interchangeably with ‘direct selling’ and ‘Multi Level Marketing’. MLMs tell you that pyramid schemes are illegal but their scheme is legal. This is not true. All these schemes are subject to the same rules and they are deemed to be legitimate if they adhere to the relevant laws. Here is an extract from the government research paper that describes the changes and development of the Trading Scheme Regulations Act. The paper describes how Amway tried to have the term ‘pyramid scheme’ designated to mean an illegal scheme. They were unsuccessful. We just have legitimate or non-legitimate pyramid schemes.

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Joining fees.

Regulation 10 The Trading Schemes regulations 1997 You cannot pay more than £200 in the first 7 days of joining a scheme.

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Cancelling a membership.

Also from the Trading Schemes Regs 1997.

Regulation 5 (e) you can cancel your membership within 14 days and get your money back.

You can return goods you purchased to a UK address and get a refund.

The scheme is not allowed to charge you for returning the products.

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Returning stockpiled goods.

Regulation 6. You can return goods you purchased upto 90 days before leaving. The scheme has to refund you but can deduct a handling charge. This is because often people in these schemes end up stockpiling products because of the pressure to purchase and the difficulty in selling.

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Members have to sell a product or service to others.

This is from The Trading Schemes Act 1996 section 1

A scheme is illegal if people are purchasing goods for themselves only or if there are no goods or services.2017-05-03 (26)

Translation in simpler language-

a) People in MLMs have to supply products or services.

b) These products or services

(i) are to be sold to customers by the people in MLMs or

(ii) Are to be used for helping the member make sales. For example-  samples                  for helping the member demonstrate products to customers.

Either way, products cannot be sold to members just for their personal use. There has to be involvement of customers.

 

Advertising MLM schemes

Any advert trying to encourage people to join an MLM must satisfy certain criteria under The Trading Schemes Regulations 1997, namely

The name and address of the company should be mentioned.

The goods or services should be mentioned.

The ‘statutory wealth warning’ (see next section) must be included and not be a smaller font than the rest of the advert, and must not be hidden away.

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Any written advert (e.g. Facebook post etc) that describes a brilliant opportunity that can earn you money, join me now, I need more people on my team etc should satisfy the above criteria. Many scheme participants choose to hide the name of their company or omit the warning. This is breaking the law.

 

Statutory Wealth Warning

This is schedule 1 mentioned above.

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Making promises to prospects

This is from  The Fair Trading Act 1973, from the wonderfully named section XI called ‘Pyramid selling and similar trading schemes’.

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(3) means that an MLM participant cannot persuade another member or potential member to make a payment, based on a promise that they will get payments for recruiting others.

(4) means that the person making these promises is breaking the law.

 

Penalties for breaking the above laws

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This is from the Fair Trade Act 1973, section XI (Pyramid selling and similar trading schemes). I think it is self explanatory. People involved in these schemes might be encouraged by their uplines or company to break these laws. There are penalties and you could end up in prison.

Fraud

The Fraud Act 2006 describes the different ways people can be guilty of fraud.

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Section 2 (fraud by false representation)  If a person lies, or implies an untruth, and they gain from this lie, and the lied-to person is exposed to a risk of loss, this is fraud.

Section 3 (fraud by failing to disclose information). If a person omits to tell something that they are legally bound to disclose, and this omission leads to someone being exposed to a risk of loss, or the liar gaining, this is fraud.

Section 4 (fraud by abuse of position). This happens when someone occupies a position where they should be safeguarding someone’s financial position. If they then lie or omit to tell the truth and that causes the liar to gain or the victim to be exposed to a loss, this is fraud.

I can think of lots and lots of examples where MLM companies and the recruiting members commit fraud. It is pretty widespread. These companies and the recruiting participants are taking quite a risk because the potential repercussions are a fine and/or up to  ten years in prison. TEN YEARS!!

The Fraud Act 2006 apples to companies, as well as individual people so that the people running the business could be found guilty and subject to a fine or prison sentence.

 

 

False advertising

Adverts in the UK are governed by the CAP code. The Advertising Standards Authority oversees this code. Here are some of the sections-

Section 8 Promotional marketing. This section reminds people to ensure their raffle/ lottery/ prize draw complies with the Gambling Act 2005 and data protection legislation. It covers offers that may be made, such as ‘buy one, get one free’, sales, competitions and prize draws.

Section 13 Weight control and slimming.  “A weight-reduction regime in which the intake of energy is lower than its output is the most common self-treatment for achieving weight reduction. Any claim made for the effectiveness or action of a weight-reduction method or product must be backed, if applicable, by rigorous trials on people; testimonials that are not supported by trials do not constitute substantiation”.

“Vitamins and minerals do not contribute to weight reduction but may be offered to slimmers as a safeguard against any shortfall in recommended intake when dieting”

“Health claims in marketing communications for food products that refer to a rate or amount of weight loss are not permitted”

“Claims that an individual has lost an exact amount of weight must be compatible with good medical and nutritional practice. Those claims must state the period involved and must not be based on unrepresentative experiences. For those who are normally overweight, a rate of weight loss greater than 2 lbs (just under 1 kg) a week is unlikely to be compatible with good medical and nutritional practice. For those who are obese, a rate of weight loss greater than 2 lbs a week in the early stages of dieting could be compatible with good medical and nutritional practice”

Section 12 Medicines, medical devices, health related products and beauty products. Adverts must not offer advice on the treatment or diagnosis of an illness or condition. They must not falsely claim that their products can cure anything. There are links in this section to other laws and resources to assist in working out if any rules have been broken.  The MHRA have a Blue Guide that has more details on medicine reporting.

 

More on health claims

According to Regulation 2 of the 2012 Human medicines regulations, and amended since then

A medicinal product is:

  • any substance or combination of substances presented as having properties of preventing or treating disease in human beings
  • any substance or combination of substances that may be used by or administered to human beings with a view to restoring, correcting or modifying a physiological function by exerting a pharmacological, immunological or metabolic action, or making a medical diagnosis

 

Medicinal products have to be carefully tested and registered with the MHRA for them to be considered medicines. To tell if a product has been through this process and is properly registered, it will appear on the MHRA’s medicines information database.   The European Medicines database covers the whole of the EU, including herbal remedies and veterinary products. Look up a product on these lists. If it isn’t there, no health claims can be made.

 

Libel and slander

When faced with criticism scheme participants will often cry slander or libel, often inaccurately. This is a brief description just to help clear up any misunderstandings if you are accused of either. The relevant law is the Defamation Act 2013.

Libel is defamation of a person that is written down. The complaining person does not need to prove they have been damaged by the comments made.

Slander is defamation of a person that is verbal. The complainer has to prove that they have been damaged by it.

For both types of defamation, the burden of proof rests on the defendant. For example, if I complain that you lied about me, and I have been harmed by that lie, you have to prove you are telling the truth. If you say it, you have to be willing to prove it.

If a comment is made and someone is upset about them but the comment is true, this is not libel or slander. This is why people say things like ‘I believe you are running a scam.’

To avoid being accused of libel or slander, do not tell lies on purpose. If you are saying something you think might offend or upset a powerful, rich and litigious company, be sure to make it clear your statements are based on facts or your beliefs.

 

 

To be added soon-

How to complain