Pen and Papers: People Making Money Online

Martin,

While I respect your efforts to warn would-be entrepreneurs about illegal schemes, your observations regarding multilevel marketing (MLM) are ignorant and unjustified. Please understand that I am not using the term "ignorant" derogatorily, but rather to describe your commentary as being ignore-ant of readily available historical, mathematical, and legal information about this industry and profession.

First of all, as a successful distributor, consultant, advocate, and court certified expert in the field of multilevel marketing, I am offended by your reference to my profession as a pyramid scheme only by a "matter of degree". There are well over 1,000 such companies in the U.S. alone, which is one of 80+ countries where it's recognized as a legal and legitimate form of business. You assert that they "all" sound like "get rich quick schemes" to you. How many of these several hundred MLM programs have you researched and evaluated? This business model has existed for 75 years, and includes not only Mary Kay and Lia Sophia, but also Shaklee, Avon, Discovery Toys, Watkins, Tupperware, Pampered Chef (owned by Warren Buffet) and many other good corporate citizens (over 20 of which are publicly traded). Your characterization of this profession does a grave disservice to the 30 million world-wide distributors, 20,000+ employees, hundreds of vendors, and thousands of investors associated with this industry.

You state "…the essence of an entrepreneur is creating something new and innovative, whereas an MLM is a traditional formula on an existing product…". And a typical Starbucks or McDonald's franchise is not? But this argument is academic considering the wide array of innovative products that have come from, or been popularized, by the MLM industry. For example, no one even heard of Mangosteen, Noni, Goji or Acai ten years ago. Today these "super fruits" make up a billion dollar world wide market, both within and outside of the MLM industry. Yes, some marketers of these fruit drinks do over-hype their products, and many untrained, unprofessional distributors do make unsubstantiated claims about them. But let's be clear in that this is an issue with how MLM is often packaged, not with the content.

Yet, you go on to claim that an upfront requirement to purchase marketing and training material (which is typically less than $50) that will better educate the new rep on how to properly promote their business is an "unnecessary and are inappropriate" red flag.

You go on to site online material such as Van Druff's “What's Wrong With Multi-Level Marketing?” as a credible source of information. This is in spite of the fact this article was originally written 21 years ago by an individual who has never participated in the profession he criticizes. This is one of the most ill-conceived and debunked anti-MLM article in existence, as is evident here: http://www.marketwaveinc.com/viewarticle.asp?id=7

Your suggestion to look for a formal home office street address is valid, however the existence of a toll-free number is virtually meaningless considering the ease in which one can now be obtained, and considering Bernard L. Madoff Investment Securities LLC had one. Furthermore, the BBB routinely issues low grades to MLM companies due to the "industry in which this business operates" – that is, until the company pays for BBB membership. Then the BBB will have no concern about the "industry in which this business operates" and will unconditionally award it at least an "A-" grade.

While I agree with your "red flags" #2, #3, and #4, when evaluating whether more income is coming from purchases of downline reps, per #5, you must also consider that, according to several states as well as the Federal Trade Commission, those downline reps can count as bona fide customers. As can be gleaned from this FTC letter to the DSA here, http://www.marketwaveinc.com/FTC_Letter.pdf, the FTC considers only the motive for buying the product, not what percentage is sold to non-distributor customers. And, in fact, many retail customers do choose to become reps, and most MLM reps are passionate, often to a fault, about their products.

You state, "you will need lots of family and friends to make it work" yet just a few sentences later you state "The Internet has made it so easy now. In the old days you had to actually visit people, or at least call them, to pitch your fabulous new opportunity." Your first statement is utterly false, while your latter statement is quite correct. While exposing one's product or opportunity to a friend or family member is still common (with the majority of industry leaders training to lead with the product), the majority of marketing is now done online and directed towards one's "cold market".

You further theorize that "Multi-Level Marketing” and “Network Marketing” were "sanitized terms" invented after Amway and others were charged with “pyramiding” back in the early 1970s. What you failed to mention was that the courts ultimately ruled Amway, and thus the MLM compensation model, was NOT an illegal pyramid. Furthermore, the term “Network Marketing” was coined in the early 1990s.

Finally, you do concede "there must be something to the business model" since "some big business icons like Donald Trump are joining in the MLM parade". Besides Trump you can include the afore-mentioned Warren Buffet, as well as Anthony Robbins, Robert Kiyosaki, Paul Zane Pilzer, Brian Tracy, Mark Victor Hansen, and Bill Clinton (http://www.youtube.com/DirectSelling411) as supporters of this profession.

Martin, pyramid schemes do often try to disguise themselves as legal, legitimate MLM operations – because they want to be perceived as legal and legitimate. And yes, we do suffer a guilt by association with illegal pyramid schemes, but this is due precisely to wholly inaccurate portrayals within the media such as yours.

Thank you for considering, an allowing me to present, an opposing point of view.

Len Clements

Founder & CEO

MarketWave, Inc.

California’s SB 1411, which adds a layer of criminal and civil penalties for certain online impersonations, goes into effect starting today. The consequences include a fine of up to $1,000, and/ or up to a year in jail. So don’t go and do something crazy like impersonate Google CEO Eric Schmidt on Facebook. There may be consequences.

The full text and a summary of the bill are below. There’s a good overview and analysis of it as well, on ZDNet. The state has created a new crime, and a new section is being added to the penal code.

There has to be intent to harm, intimidate, threaten, or defraud another person – not necessarily the person you are impersonating. Free speech issues, including satire and parody, aren’t addressed in the text of the bill. The courts will likely sort it out. Hopefully without my direct participation.

SB 1411, Simitian. Impersonation: Internet.

Existing law makes it a crime to falsely impersonate another in

either his or her private or official capacity, as specified.

Existing law also makes it a crime to knowingly access and, without

permission, alter, damage, delete, destroy, or otherwise use any

data, computer, computer system, or computer network in order to

devise or execute any scheme or artifice to defraud, deceive, or

extort, or wrongfully control or obtain money, property, or data. For

a violation thereof, in addition to specified criminal penalties,

existing law authorizes an aggrieved party to bring a civil action

against the violator, as specified.

This bill would provide that any person who knowingly and without

consent credibly impersonates another actual person through or on an

Internet Web site or by other electronic means, as specified, for

purposes of harming, intimidating, threatening, or defrauding another

person is guilty of a misdemeanor. The bill would, in addition to

the specified criminal penalties, authorize a person who suffers

damage or loss to bring a civil action against any person who

violates that provision, as specified. Because the bill would create

a new crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local

agencies and school districts for certain costs mandated by the

state. Statutory provisions establish procedures for making that

reimbursement.

This bill would provide that no reimbursement is required by this

act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 528.5 is added to the Penal Code, to read:

528.5. (a) Notwithstanding any other provision of law, any person

who knowingly and without consent credibly impersonates another

actual person through or on an Internet Web site or by other

electronic means for purposes of harming, intimidating, threatening,

or defrauding another person is guilty of a public offense punishable

pursuant to subdivision (d).

(b) For purposes of this section, an impersonation is credible if

another person would reasonably believe, or did reasonably believe,

that the defendant was or is the person who was impersonated.

(c) For purposes of this section, “electronic means” shall include

opening an e-mail account or an account or profile on a social

networking Internet Web site in another person’s name.

(d) A violation of subdivision (a) is punishable by a fine not

exceeding one thousand dollars ($1,000), or by imprisonment in a

county jail not exceeding one year, or by both that fine and

imprisonment.

(e) In addition to any other civil remedy available, a person who

suffers damage or loss by reason of a violation of subdivision (a)

may bring a civil action against the violator for compensatory

damages and injunctive relief or other equitable relief pursuant to

paragraphs (1), (2), (4), and (5) of subdivision (e) and subdivision

(g) of Section 502.

(f) This section shall not preclude prosecution under any other

law.

SEC. 2. No reimbursement is required by this act pursuant to

Section 6 of Article XIII B of the California Constitution because

the only costs that may be incurred by a local agency or school

district will be incurred because this act creates a new crime or

infraction, eliminates a crime or infraction, or changes the penalty

for a crime or infraction, within the meaning of Section 17556 of the

Government Code, or changes the definition of a crime within the

meaning of Section 6 of Article XIII B of the California

Constitution.

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Monday 10 January 2011

People Making Money Online

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