FTC v. BurnLounge: Lessons Learned for MLM/Direct Selling

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1. FTC stated policy has been to prosecute egregious pyramid schemes as opposed to mainstream direct selling. By and large, this has been the case since the famous 1979 FTC Amway unsuccessful prosecution.

2. FTC and major court pyramid decisions, including FTC v. BurnLounge, focus on front-loading, large investments, products and services that do not stand on their own in the marketplace, payment of recruitment commissions for purchases of nonconsumer items such as sales tools, unsubstantiated earnings claims and programs where the motivation for distributor product purchases is driven by intent to "buy in" and qualify for commissions in the business opportunity ... and is incidental to a real desire for product or service for resale or personal use.

Full article available at: http://www.mlmlegal.com/burnlounge.html

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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