On Jan. 4, the Federal Trade Commission, which works to promote competition and protect and educate consumers, released business guidance to help members of multi-level marketing (MLM) companies apply core consumer protection principles to their business practices.
The non-binding guidance features detailed answers to 17 questions related to multi-level marketing, including compensation structures, internal consumption and inventory loading. According to the Commission’s website, although there may be significant differences in how MLMs sell products or services, core consumer protection principles apply to all MLMs.
Among other things, the business guidance explains how the FTC distinguishes between legitimate MLMs and pyramid schemes, what is “inventory loading,” and how the FTC treats personal or internal consumption by participants in determining if an MLM’s compensation structure is unfair or misleading. The guidance also addresses how an MLM should approach representations to current and prospective participants.
To review the document, click here.