MLM: The bottom line about MLM plans

This is the season for consumers to be confronted with a wide range of MLM health, beauty and fitness products and promotions. Many of these MLM items aren't available on store shelves and are sold only through distributors.

What Are You Buying in MLM?

Many MLM companies that market their products through MLM distributors sell quality items at competitive prices. But some MLM companies offer goods that are overpriced, have questionable merits or are downright unsafe to use.

The Federal Trade Commission warns consumers to apply a healthy dose of caution before buying products advertised by MLM as having "miracle" ingredients or techniques and guaranteed results. Many of these "quick cures" are unproven, fraudulently marketed and useless or even dangerous.

Before using one of these MLM products, the best prescription may be to check with a health professional.

What Else Is For Sale through MLM?

Some MLM distributors sell more than diet and exercise plans, vitamin supplements or wonder creams. Many may sell "MLM opportunities", too-a chance for you not only to buy, but also to market, the MLM products. In addition to describing the benefits of their product or MLM program, these MLM distributors may encourage you to become an MLM distributor.

If you sign up as an MLM distributor, you may be promised commissions or other rewards-for both your sales of the plan's goods or MLM services and those of other people you recruit to become distributors. These plans, often called "MLM plans," sometimes promise commissions or rewards that never materialize. What's worse, consumers are often urged to spend or "invest" money in order to make it.

Watch Out For MLM Pyramids

Steer clear of MLM plans that pay commissions for recruiting new MLM distributors. They're actually illegal pyramid schemes.

Why is pyramiding dangerous? Because MLM plans that pay commissions for recruiting new distributors inevitably collapse when no new MLM distributors can be recruited. And when a MLM plan collapses, most people-except perhaps those at the very top of the MLM pyramid-end up empty-handed.

How to Evaluate an MLM Plan

If you're thinking about joining what appears to be a legitimate MLM plan, take time to learn about the plan before signing on.

What's the MLM company's track record? What products does it sell? How does it back up claims it makes about its MLM product? Is the product competitively priced? Is it likely to appeal to a large customer base? What up-front investment do you have to make to join the MLM plan? Are you committed to making a minimum level of MLM sales each month? Will you be required to recruit new MLM distributors to be successful in the plan?

Use caution if an MLM distributor tells you that for the price of a "start-up kit" of inventory and sales literature -and sometimes a commitment to sell a specific amount of the product or service each month-you'll be on the road to riches. No matter how good a product and how solid a MLM plan may be, expect to invest sweat equity as well as dollars for your investment to pay off.

MLM And Your Responsibilities

If you decide to become an MLM distributor, remember that you're legally responsible for the claims you make about the MLM company, its product and the MLM business opportunities it offers. That applies even if you're simply repeating claims you read in a MLM company brochure or advertising flyer.

When you promote the qualities of an MLM product or service, you're obligated to present those claims truthfully and to ensure there's enough solid evidence to back them up. The Federal Trade Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to a potential customer.

Likewise, if you decide to solicit new MLM distributors, be aware that you're responsible for any claims you make about an MLM distributor's earnings potential. Be sure to represent the opportunity honestly and to avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.