Law Offices of David Eisenstein: Library

...and MORE ARTICLES:

MLM DISTRIBUTOR TERMINATIONS--MLM or Network Marketing Law is a complex interweaving of State and Federal, statutes, regulations, with an overlay of court precedents. It takes an experienced MLM Lawyer to understand some of the fundamentals of MLM Network Marketing distributor termination.

Complete Article Click Here: MLM Terminations

-- AFFILIATE MARKETING PROGRAMS ~ How They Work

by David G. Eisenstein, Esquire

In addition to providing added capabilities to traditional network marketing models, the World Wide Web has brought an innovation on the concept of network marketing itself to the forefront, referred to as Affiliate marketing programs. Companies promoting their products through user/marketers refer to their independent distributors as Affiliates and pay them on a scaled down version of a network marketing compensation plan, usually paying down only one or two levels of Affiliates in a uni-level compensation plan arrangement. Affiliate programs can be an excellent promotional device for a web based business.

Complete Article Click Here: Affiliate Marketing

-- "Internal Consumption" Is Not A Disease (but the FTC contends it may not be enough to justify getting paid commissions)

by David G. Eisenstein, Esquire

First, a Little History and a Few Words of Caution: Remember the phrase that you need to be a "product of the product" to be successful in network marketing? Well, that still may be true, but the new buzz word in network marketing legal circles is "internal consumption" and if the Federal Trade Commission is the one using that phrase it can conjure just as much evil sickness as the word "consumption" did in olden times when it was the name of the deadly illness which "consumed" the lungs, long since referred to as tuberculosis.

Complete Article - Click Here: FTC - Internal Consumption

-- COUPLE GET $650,000 IN CONTRACT DISPUTE

By VIRGINIA HENNESSEY

vhennessey@montereyherald.com

A Monterey jury has awarded $650,000 to a Cleveland couple after finding their distribution contract was wrongly terminated by Starlight International of Monterey, a multilevel marketing company that distributes dietary supplements.

Complete Article - Click Here: Starlight Dispute

DISTRIBUTOR CHECKLIST TO USE WHEN CHOOSING A COMPANY

-----Perspectives from a network marketing attorney whose practice emphasizes distributors’ rights.

Have you ever heard, “I didn’t quit the company, the company quit on me?”

Often, the companies are helped to “quit” by regulators due to glaring weaknesses and outright illegalities in the companies’ structures and/or operations. Company weaknesses such as failure to emphasize retail sales, assure strong buy-back protection for distributors, prohibit front-loading, and, in particular, earnings misrepresentations by the company and/or its distributors, will continue to lead to regulatory attacks on the legality of such companies’ operations.

Now, how can a Networker avoid involvement with companies that will “quit” on them or be forced to stop doing business by regulators?

Complete Article- Click Here: Distributor Checklist

“ARE NETWORK MARKETING DISTRIBUTORS BUSINESS PEOPLE?”

-----Perspectives from a network marketing attorney whose practice emphasizes distributors’ rights.

In the network marketing industry, there are many successful distributors who have found a nice niche as a home based business owner. Many more are diligently working to be successful. But, do they really own their own businesses, or are they more like employees of the companies for whom they are often called “independent distributors?” The answer is more difficult than the corporate marketing departments of most network marketing companies would have you believe.

How much control does the “company” exercise over the distributor?

Complete Article- Click Here: Distributors as Business People

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More...ARTICLES

IT’S NOT WHAT “YOU MAKE” BUT WHAT YOU MAKE “STICK” TO YOU

The Network Marketing Industry has Many Million Dollar Earners but Few Millionaires Complete Article- Click Here: Make it Stick to You

RESIDUAL Income Spelled Out--All too often it is brought to my attention that a distributor who has been induced to build a productive downline organization through a promise of residual income has been unfairly and/or illegally stripped of that hard earned item of personal property. Complete Article- Click Here: Residual Income Spelled Out

THE “PERFECT STORM” OF COMPANY-DISTRIBUTOR CONFLICT

What are the “lethal” ingredients of the MLM company dispute with a distributor which results in litigation being filed by one against the other?

Complete Article- Click Here: Perfect Storm

THE “PERFECT STORM” OF COMPANY-DISTRIBUTOR CONFLICT, REVISITED---Previously, I wrote about the so-called “perfect storm” of company-distributor conflict. By that I meant what are the “lethal” ingredients of the MLM company dispute with a distributor which results in litigation being filed by one against the other? Now, at least one industry commentator, has raised the question, would the companies and their executives who terminate key distributors, resulting in a forfeiture of the “residual income” previously promised to them back to the company, be guilty of more than alleged civil wrongdoing, possibly violating the Hobbs Act prohibition against “interference with commerce by threats or violence” enacted by the United States Congress, exposing them to potential criminal prosecution?

Complete Article- Click Here: Perfect Storm Revisited

Complete Article- Click Here: Book Excerpts

MEDIATION, ARBITRATION OR LITIGATION: WHICH, IF ANY, IS THE RIGHT CHOICE FOR DISTRIBUTORS?

Complete Article- Click Here: Marbligate?

ARBITRARY DOWNLINE MOVES BY COMPANIES SIGNAL LACK OF INTEGRITY Complete Article- Click Here: Arbitrary Moves

INDIVIDUAL 401K AND DEFINED BENEFIT PLANS ARE THE TICKET FOR HIGH INCOME EARNERS Complete Article- Click Here: Retirement Plans

When PAMPERED CHEF went to federal court in Chicago recently against some of its key distributors who had defected to a smaller company PARK LANE.the Judge was not in a "pampering" mood, nor was he impressed by PC's request for a preliminary injunction against its key distributors because 1) the history of high turnover ratios normally found in MLMs and direct sales companies; 2) the fact that competition is normally considered legal in the U.S.; and 3) it was not necessary to enjoin the conduct of the relatively few distributors who had changed companies to join PARK LANE, as any harm done to PC could be compensated by an award of damages, if appropriate, after a trial on the merits. Motion for Preliminary Injunction: DENIED.

YTB suffers reversal by the 7th Circuit Court of Appeals. In Morrison v. YTB, Inc., the appellate court determined that the Complaint of the Plaintiffs (distributors of YTB), as it relates to the claim that YTB is a pyramid scheme, had alleged sufficient allegations to get by the motion to dismiss that the lower court had erroneously granted. This decision merely sends the case back down to the U.S. District Court in East St. Louis for further discovery and pre-trial proceedings. Click here for the decision.

U.S. v. COOPER, 10-3105 (10th Cir. 8-15-2011). Click here for full text of decision

Michael Craig Cooper (who received a 20 year sentence from the District Court which was affirmed by the Appeals Court--could a U.S. Supreme Court appeal be next?) "was the founder, president, and chief executive officer of Renaissance, The Tax People, Inc which he founded in 1995. Beginning in 1997, Renaissance developed, marketed, and sold tax materials aimed at home-based business owners. More specifically, Renaissance sold a tax package called the Tax Relief System ("TRS"), which "included a written manual and set of accompanying audiotapes setting forth the general guidelines and rules applicable to the wide array of tax deductions available to owners of home-based businesses...."

"...Viewed in the light most favorable to the government, the evidence presented at trial is sufficient to support Mr. Cooper's mail and wire fraud convictions....per transmitted false, fraudulent, or misleading information by mail and wire "to recruit IMAs or encourage IMAs to continue their participation in Renaissance, which meant the defendant ultimately continued to receive their $100 monthly payments...

In Stull v. YTB (see related case of Morrison v. YTB below) the U.S. District Court for the Southern District of Illinois described what constitutes a pyramid scheme in evaluating whether the Plaintiff former distributors of YTB had stated a claim in its Complaint that could get past YTB's Motion to Dismiss:

1) "A lawful MLM program is distinguishable from an illegal pyramid scheme in the sense that the 'primary purpose' of the enterprise and its associated individuals is to sell or market an end-product with end-consumers, and not to reward associated individuals for the recruitment of more marketers or 'associates.'"

2) "A legitimate [MLM] firm includes a system of distributing products or services in which each participant earns income from sales of a product to his or her downline and also from sales to the public. The operative question is whether the revenues from sales of the goods and services to consumers is sufficient to cover the production costs or costs of the goods sold, the various marketing expenses, and the promised rewards for recruiting new participants."

3) "Whether a MLM plan operates as illegal pyramid scheme is determined by how it functions in practice."

..."Travel-related sales accounted for less than 10% of YTB Defendants' total revenues in 2007. In 2008, YTB Defendants' net revenue amounted to $162 million, $122 million of which was from the sale and maintenance of OTAs."

..."Importantly, it appears from the allegations of the complaint that YTB distributors were compensated solely for bringing new people into the YTB Defendants' scheme, regardless of whether any travel was sold or not. Even assuming the evidence ultimately does not show that the YTB Defendants are engaged in a pyramid scheme, there obviously is a "danger of . . . recruitment focus" in the YTB Defendants' scheme."