Why Can’t I Show My Big Cardboard MLM Check?

by bobandanna on July 3, 2013

EmpowerBigCheck2013“What’s the harm in showing off my big cardboard check? I’m proud of it and I’m going to post it on my profile!”

The harm is that you could lose your distributorship and you could place your company in jeopardy with the FTC. And if your company goes down, so does your distributorship. That’s the harm.

You may think that because you’re an ‘independent’ distributor you do not have to read, understand and follow all the guidelines and restrictions placed on you. You are not independent or exempt from the law.

You may think that because Facebook and Twitter and YouTube are such fun places you can post and say whatever you want.

If you think that, you are wrong and you can do great damage, not just to yourself, but to thousands of others who will be affected when your company is taken to task or taken out by the FTC for allowing you to do and say what you want.

In every other part of our lives, we are governed by strict rules to protect ourselves, our families, our employers and employees, our companies and the public. Why should that be any different in network marketing? Let’s all grow up and read the rules. Then let’s grow up some more and abide by them.

Start with your Policies and Procedures. Every good MLM contract we’ve read forbids enticement of any kind.

grimesandreeseGrimes and Reese is a well respected law firm providing legal services to dozens of direct selling and network marketing companies. Click here for their powerful article about what we CANNOT SAY OR DO.

Some highlights:

Direct sellers MUST understand that they are responsible for all the social chatter that goes on. The FTC has made it clear in its testimonials and endorsements guidelines that it will hold a business responsible for statements and representations made by anyone with a “material connection” to a company. Guess what – your distributors definitely have a material connection to your company, and you are responsible for what they are saying!

What does this mean to you?

If your company is responsible and intends to stay in business for the next hundred years, it will have a compliance department keeping an eye open for any distributor violating any law. They usually contact you politely to ask you to remove any non-compliant material or cease any non-compliant behavior like flashing checks or making illegal product claims.

If you do not comply, you should and will be terminated. The company must protect itself for the greater good – the future of all distributors, owners and management.

The company knows that the FTC will not take the time to prosecute individuals. The FTC will prosecute the company to eliminate the problem in the most efficient way. Taking out the company will take out the offending distributors.

Early in 2013, the FTC moved against and shut down Fortune Hi Tech Marketing. Among the evidence used against FHTM, the FTC cited the following (from the Grimes and Reese article):

  • A Tweet wherein an FHTM distributor allegedly states: “bring ur friends & learn how 2 make $100K a YR.”
  • Photos of a check presentation ceremony
  • Distributor photos of their commission checks
  • A claim by a top level FHTM distributor on Twitter that he made more than $5 million through FHTM.

chimpMoneyAre we starting to get it here? If you are a serious business builder and not a hobbyist or scammer, let’s work together to stop this moronic behavior that gets us all into trouble and gives the industry a bad name.

Enticement is illegal and should be eliminated.

Paul Orberson of FHTM defied the law for years, and was taken down in 2013. Don’t let your company be next. If you see non-compliant behavior, don’t hesitate to report it to your compliance department. Your future is at stake.

If you want to learn more about the good, and how to avoid the bad and the ugly in our industry, you’ll want to read this free report – Big MLM Lies. You’ll be happy you did!

Bob and Anna Bassett
519-371-1028
bobandanna@togethertothetop.com
Tom ‘Big Al’ Schreiter’s 25 MLM Skills
Material Connection Disclosure

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{ 9 comments… read them below or add one }

bobandanna August 7, 2014 at 4:53 pm Thumb up 0 Thumb down 0

Hi Steven S.

Let’s see if we have this straight … You’re suggesting that someone in Company A joins Company B and starts making claims in order to shut down the competition B?

First, you are assuming that competition is something to be shut down, rather than welcomed in the marketplace to make everyone better and stronger.

Secondly, one person is not likely to be able to bring down a company. If B is on the job, they will terminate you before you have a chance to do any damage. Besides, a beginner rep will have no clout. You’d have to become a leader or big earner in B in order to draw any attention. And then, if you are making a good check with B, why would you want it shut down?

Thirdly, it would not take long for A to learn what you are doing, and would probably terminate you for unethical practices, leaving you with neither A or B to work, not to mention a tarnished reputation in the industry.

Fourthly, the kind of manipulation you are suggesting is just one of the many reasons for contracts that allow companies to defend themselves against the kind of people who would operate this way.

It takes more energy to do it wrong than it does to do it right, and the latter has greater rewards. Why not go into network marketing thinking like an entrepreneur rather than thinking like a criminal? Positive beats negative every time.

Bob and Anna

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Bob and Anna Bassett August 7, 2014 at 4:51 pm Thumb up 0 Thumb down 0

Hi Steven S.

Let’s see if we have this straight … You’re suggesting that someone in Company A joins Company B and starts making claims in order to shut down the competition B?

First, you are assuming that competition is something to be shut down, rather than welcomed in the marketplace to make everyone better and stronger.

Secondly, one person is not likely to be able to bring down a company. If B is on the job, they will terminate you before you have a chance to do any damage. Besides, a beginner rep will have no clout. You’d have to become a leader or big earner in B in order to draw any attention. And then, if you are making a good check with B, why would you want it shut down?

Thirdly, it would not take long for A to learn what you are doing, and would probably terminate you for unethical practices, leaving you with neither A or B to work, not to mention a tarnished reputation in the industry.

Fourthly, the kind of manipulation you are suggesting is just one of the many reasons for contracts that allow companies to defend themselves against the kind of people who would operate this way.

It takes more energy to do it wrong than it does to do it right, and the latter has greater rewards. Why go into network marketing thinking like an entrepreneur rather than thinking like a criminal? Positive beats negative every time.

Bob and Anna

Reply

Steven S. August 5, 2014 at 8:42 am Thumb up 0 Thumb down 0

although I do understand these rules and abide them, what is there to stop someone joining a company and making posts about earnings as a way to have their competition shut down?

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Nando C July 3, 2013 at 8:17 pm Thumb up 0 Thumb down 0

Yes. I think the company mentionned by Tony Rush will be the next to be tested by the FTC for the outrageous income claims of their distributors. Their own distributors will sink the organization. Many groups online are mobilizing to complain to the FTC.

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Dale Gerke July 3, 2013 at 5:26 pm Thumb up 0 Thumb down 0

After 25 years in the MLM industry, I have seen the good and the bad. The bad includes listening to years of “smoke and mirror” rants from distributors in an old and well established company. They promised financial rewards but explicitly said that “their income was only their business” and they never substantiated promises of wealth. After several years I realised the promised rewards were not there and after investigating for many more years I found out that even the higher pin level distributors were not making the incomes they espoused.

When I joined another company (and became very successful and wealthy) I made a conscious point to declare my incomes (monthly cheques over many years). I encouraged my down line Diamonds to do the same. This was not as an enticement but rather as direct proof that money can be made in at least one MLM company. Frankly I do not feel the MLM industry is the most ethical or honest industry in the world. Therefore I feel it necessary and justified that proof of income should be given to all potential distributors. This is no different to any other business where potential “owners/buyers” are doing their “due diligence” on the financials of the business they are interested in. This includes proof of income. By doing this, I also made it clear to potential distributors, that if I lied about the incomes I was declaring, then I was liable for a fraud claim and therefore exposing myself to potential legal action if what I declared was untrue. This provided some security to the people reviewing the concept and my business opportunity.

I have now established my own MLM company and I again intend to publish the incomes of various distributors. I totally agree that this sort of publication should not be abused or misused as an enticement. However the abuse is far more dangerous when viewed the other way – false claims of possible income (yet hiding behind the mask that it is illegal to declare real incomes).

Clearly how this is handled needs to be done properly and sensitively. I do not believe declaration of income should be to used as a promise of what a potential distributor can earn. However I most certainly feel that proof of incomes should be declared by companies and distributors to allow interested people to arrive at an informed decision as to whether they want to join a particular company. It is all about transparency. This is a legal requirement in the buying and selling process of a traditional business and it should also be with an MLM business. The real problem with the MLM industry is that most people join their respective company completely ignorant of what they should look for and how to do their proper due diligence. Thus many end up disillusioned and embittered from an experience they did not realise they were heading into. Any information that helps in the initial evaluation process should be a requirement as an industry standard. It would therefore be optimum that the industry press hard to set up a standard that is proper and legal (and with the approval of any respective local/state/national authority).

Dale Gerke – Chairman MiVeda

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bobandanna July 5, 2013 at 4:21 pm Thumb up 1 Thumb down 0

Hi Dale

We believe that the way we promote our business should be as duplicatable as possible. If leaders are showing $10000 per month checks, they are using a tool that their new distributors do not have.

Check flashing also promotes the irrelevant question, “So how much are YOU making?”

Here are two articles we wrote about that …

Is Cadillac A Good Car?
http://togethertothetop.com/?p=8337

How Much Money Are YOU Making?
http://togethertothetop.com/?p=5368

Thanks for your comment, and we’d love to hear what you have to say about those articles.

And congrats on forming your own company!

Bob and Anna

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Tony Rush July 3, 2013 at 10:04 am Thumb up 6 Thumb down 0

Unfortunately, the rules aren’t as cut-and-dried as they should be. For instance, there is no actual “MLM Law” at the federal level; instead, we’re dealing with 50 different state-level laws along with various legal precedents and guidelines set by the FTC.

But no such “one size fits all” law exists.

Secondly, there are no laws in place (that I’m aware of) that explicitly say that you cannot publicize one’s results in a business opportunity…..and not all income disclosures are considered “enticement”.

Instead, there are guidelines in place that state that — if you’re going to demonstrate that someone got a particular result with a company, product or opportunity — then you have to also state what kind of results the AVERAGE person receives with the company, product or opportunity.

This guideline has been in place for several years and is not limited to income. It’s about ALL product claims.

For example, if you sell weight loss products by saying “I lost 50 pounds using this product”, then you would also need to have a disclosure that shows how much weight the AVERAGE customer loses.

So it’s not just about incomes. It’s about ANY alleged result that you claim to get from the use of a product. Nor is the rule limited to MLM and “business opportunities”.

As an added twist — and this is a part of the guidelines that even some legally-savvy people aren’t aware of — the disclosure has to be made in the same format as the claim was made.

In other words:

– if the income results are expressed verbally….then the income disclaimer has to be made verbally.

– if the income results are expressed visually….the the income disclaimer has to be made visually

– if the income results are expressed in a video…..then the income disclaimer has to also be in the video (not just on the page where the video appears).

This is an important distinction that wasn’t mentioned in the article at all. But it’s important.

For instance, the image the author used in the article (above) is that of two company owners giving someone a large check at a live event. What the image does not show (but which that company is fanatical about) is that — while the checks were being handed out at the event — (a visual representation) — there was also a large income disclaimer being displayed on large screens at the same time. The disclaimer was also given verbally. AND the event itself was for affiliates only; there were no members of the general public in the room.

So, in that context, the company’s legal department felt that the requirements of the FTC guidelines were being met. And the affiliates of that company are aware that pictures from that event cannot be used without displaying a disclaimer (which satisfies the “common format” guideline.)

Bottom line….this is a good article. But it doesn’t contain the details that it needs to give an accurate view of the issue.

Fortune Hi-Tech Marketing didn’t get shut down for income claims. Those income claims were secondary to the real issue which involved huge problems with the pay-plan.

That’s not an excuse for companies to engage in frivolous claims about their products. And certainly there ARE a lot of companies out there that flout the guidelines.

I was just disappointed to see the article imply that companies cannot give out checks on stage (they can) or that the company used as an example in the photo was doing something illegal (they weren’t).

Lastly, I think it’s also important to point out that there have been many more companies shut down for ILLEGAL PRODUCT claims.

Our industry is rife with people claiming that their products will perform miracles for the customer. These are independent marketing reps are out there claiming that their product will make you lose weight…..reverse cancer…..relieve the symptoms associated with diabetes…….

For instance, I saw an ad just this week on Facebook where someone is selling a body wrap product in which the video claims that wearing the wrap for 45 minutes will make you slimmer and thinner…..reduces the appearance of cellulite…..and involves no dieting.

Now, the product may well do all of that. I don’t know. But without the corresponding disclaimer to show what the AVERAGE person’s results are……history shows that kind of activity to be more damaging to our industry than income claims.

(Anyone remember the Operation CureAll joint effort by the FTC and the FDA several years ago? These kinds of illegal health claims by Seasilver not only got the company shut down but one distributor was slapped with a $1,000,000 penalty that he had to pay out of his own pocket.)

Bottom line: we should ALL be dotting the i’s and crossing the t’s when it comes to talking about results whether those results are financial or product-driven.

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louabbott July 3, 2013 at 10:20 am Thumb up 1 Thumb down 0

Thanks for the additional information, Tony… and the great comment.

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bobandanna July 5, 2013 at 4:06 pm Thumb up 0 Thumb down 0

Great reply, Tony! Thanks for the insights.

When you mention it, it makes sense that the disclaimers have to be made the same way as the results are stated.

I think the main point of the Grimes and Reese article is that company owners are ultimately responsible for the behavior of its distributors. They may present disclaimers at the time of the check presentation, but they have to know that no one will post the disclaimer on Facebook. Too boring. The only part that gets posted will be the big check, and that’s where Grimes and Reese warn us.

We believe that presenting the big checks is an invitation to violate policies and procedures (if that clause is even in the pnp’s of the company) as there is no way that those pictures will not be sent out on social media. The convention may have been for affiliates only, but the general public would have seen the checks within seconds of the flash going off.

I’d bet a bonus check that the affiliates at the convention are NOT aware that they cannot use the pics without a disclaimer. We just googled “big cardboard check” to find many such pics, none of which had disclaimers as part of the photo.

Our article was not intended to give a complete picture. That would be several books. We were merely warning distributors by quoting Grimes and Reese’s warnings.

We did not imply that FHTM was shut down merely for income claims. Grimes and Reese state, “Among the evidence used against FHTM, the FTC cited the following … ” Just part of the big picture.

And now we’ll quote your statement with which we agree 1000%:

“Bottom line: we should ALL be dotting the i’s and crossing the t’s when it comes to talking about results whether those results are financial or product-driven.”

Thanks again for your thoughtful comments, Tony!

Bob and Anna

Reply

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