Direct Sellers Objections to FTC Business Opportunity Rule - Real or Contrived?
I have had a chance to review some of the 1500 comments made to the the FTC about the new business opportunity rule. The vast majority of them are simply templates from MLM companies expounding on (3) themes. First, they are concerned with the 7 day waiting period, believing that this will cut into their ability to recruit. Second, there is a concern about having to disclose the 10 nearest distributors in the system. And finally, there is a concern about having to disclose litigation details. I want to focus on the first concern.
MLM recruitment is a lot like fishing, but without the catch and release component. As detailed with Bioperformance, the recruitment meetings are very powerful social proof mechanisms - look at all these people yelling, screaming and being excited about this product. Might there be something to it? I should look further into the abyss, leave my brain on the train.
If the MLM recruiter had to wait seven days after the big pep talk before anyone could sign on the dotted line, they would be unable to sign up anyone.
Is this a bad thing? Shouldn't you be committed enough to wait the seven days? Isn't this good consumer protection?
Technorati Tags: mlm companies, pep talk, disclose, recruitment, ftc, social proof, waiting period, recruiter, business opportunity
Actually, I have some sympathy here for legitimate distributors, such as Pampered Chef or Tupperware. If everyone took seven days to review their commitment to these party programs, I doubt that many would get off the ground.
There is a distinction between a cooling off period, such as with condominium purchases, and a period of time in which rescission is possible. Buying a condo is a big deal, and once the paper work is started it is hard to undo the process -thus the need for a cooling off period in which no activity is possible. But, with a MLM scheme there need not be a lot of money up front and so there is no need to have a cooling off period. However, to forestall unpleasant high pressure sales tactics, the purchaser should have up to 3 monthes to return their inventory at the price they bought. It will be very clear long before then if they are a "real party" person.
Technorati Tags: mlm companies, pep talk, disclose, recruitment, ftc, social proof, waiting period, recruiter, business opportunity
Comments
Have you ever recruited anyone into a Network Marketing business?
My guess is that you haven't.
Do you think that the seven day rule would be follwed by a scammer?
My guess is that it wouldn't.
Most of the people that I have recruited naturally take 7 days to get involved, however there are a handful that for whatever reason want to get started now.
I think that Network Marketers are unhappy wih the rules because as you suggest, they target good companies and distributors as well as the scams.
I am an industry advocate and I wrote about the Bioperformance scam very early on, yelling at the top of my lungs (or at least on a couple of blogs) to stay away from the company.
The FTC does not need new rules, they need to go after companies that are scams.
Posted by: Ty Tribble - MultiLeveler | July 13, 2006 12:03 PM
Ty,
The seven day rule will likely be abused by scammers, using it to increase the scarcity of the opportunity.
As I wrote, the seven day waiting period should really be a two or three month period in which the new mlm'er could cut all ties with the company and be made whole.
But on the whole, mlm'ers should have an accurate picture of what their earnings might be as opposed to vague references to vast wealth, cars, and yachts. This is why I support the new FTC Rule, with some modifications.
Posted by: Michael Webster | July 13, 2006 12:28 PM
I'm not sure what you mean by "made whole". Most companies charge less than $50 to become an associate these days and the company I an with has a 90 Day money back guarantee for associates and a lifetime guarantee to customers.
As far as the mansions and yachts go, I agree 100%.
Posted by: Ty Tribble - MultiLeveler | July 13, 2006 8:55 PM
Ty,
"Made whole" means "return of all monies".
Scam mlm's will upsell their associates very quickly from an associate level to some other level. A 3 month period in which a mlm'er could get out with a full return of their money would shut these scams down.
And for most legitimate mlm's the three month period would be irrelevant as it mirrors their own policy.
Posted by: Michael Webster | July 13, 2006 9:17 PM