Truth On MLM – How To Create Success In MLM

I just got some information from a couple of good friends of mine that are into Network Marketing. They was wondering about Gifting programs and if they were legal or not, so they wrote an email to the canadian government and asked. Now let me say that the laws on gifting programs are pretty much the same in most countries around the world including USA and most of Europe.

Here is the answer they got in return. Let me just say that it is not very encouraging for people in these Gifting Programs. People who promote these programs keep telling you that “My program is approved”, “My program is different” and all that crap. Guys…go check out the website of the FTC and see for yourself.

Now, here is the answer they got from the canadian government:

I can provide you with some information that I hope will help you. The gifting program appears to be a straight exchange of money.

Although the money is called a “gift”, if your friend is entitled to a larger sum of money by participating (or “gifting”) in the program, then there may be an offense under the Competition Act and/or the Criminal Code.

Under the Competition Act, a scheme of pyramid selling is a multi-level marketing plan (”MLM”)
A MLM is defined under section 55 of the Competition Act to be a plan for the supply of a product in which a participant receives compensation for the supply of the product to another participant in the plan, who in turn, receives compensation for the supply of the same or another product to other participants in the plan.

In a nutshell, an MLM has A Product the definition of a product under the Competition Act includes money.

Three levels of Participants (usually one of the levels includes the operator) Compensation for the the supply of a product.

If a participant or the operator of an MLM makes representations relating to compensation under the plan there must be a disclosure of the compen sation that a typical participant in the plan actually or likely receives.

This disclosure must be made in a fair, reasonable and timely manner. If a marketing plan meets the definition of a MLM under the Competition Act it must NOT have any of the following features:

..The right to receive compensation for recruitment

..A required product purchase as a condition of participating Inventory loading

.. A Lack of a buy-back guarantee on reasonable commercial terms

If an MLM has any of the features described above it would be a scheme of pyramid selling as defined under section 55.1 of the Competition Act.

In this case, if your friend promotes, operates, advertises or establishes a scheme of pyramid selling s/he will have breached the Competition Act.

The MLM and scheme of pyramid selling provisions of the Competition Act are criminal provisions and an accused found guilty under the provisions could be subject to a fine and a prison term.

In the case of an MLM plan in which a prospective participant pays money to join and in doing so, s/he is entitled to a larger sum of money there must be recruitment into such a plan and there fore compensation for recruitment.

Also, the only way to join such a plan will be to pay money. In this case, there is the product which is the money you get as compensation under the plan and there is the product which is the membership.

As such there is a product purchase requirement as a condition of joining the plan.You should also be aware that the Criminal Code may also apply.

I have included the text of the relevant provision below. Section 206(1)(e) – Criminal Code 206.(1) Every one is guilty of an indictable offence and liable to imprisonment for a term not exceeding two years who …

(e) conducts, manages or is a party to any scheme, contrivance or operation of any kind by which any person, on payment of any sum of money, or the giving of any valuable security, or by obligating himself to pay any sum of money or give any valuable security, shall become entitled under the scheme, contrivance or operation to receive from the person conducting or managing the scheme, contrivance or operation, or any other person, a larger sum of money or amount of valuable security than the sum or amount paid or given, or to be paid or given, by
reason of the fact that other persons have paid or given, or obligated themselves to pay or give any sum of money or valuable security under the scheme, contrivance or operation In this case, if your friend participates in a scheme as defined by paragraph 206(1)

(e) above, they could also be in breach of the Criminal Code.

Regards,
Competition Bureau
Industry Canada

I rest my case. Do you get the picture? Illegal, People go to jail for being a part of gifting programs. RUN THE OTHER WAY!

If you want more info on this or any other subject of MLM, let me know so you can get all your questions answered on this topic or any other topic og MLM and Network Marketing by my good friend and mentor Michael Dlouhy.

Please leave a comment…

~Olav/Blogmaster

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