Copyright 2006 Chris Zavadowski
It happened to infomercials…
It happened to fax broadcasting….
It happened to emails….
And now it might happen to direct sales and network marketing: The FTC, in it’s infinite wisdom (think back to the “suppression lists” they were proposing 2 years ago), is attempting to create new regulations for the MLM/network marketing industry. If this passes, they would make fast downline growth a thing of the past.
This is vitally important, so listen up!
Right now, there’s a proposed new rule out (16 CFR Part 4370) that if passed would have a severe negative impact on your network marketing business. In fact, these new regulations would completely change the face of network marketing and recruiting. Now, the actual Federal Register document is 44 pages (you can download a .pdf copy here), but, according to the Direct Selling Association’s website (www.DSA.org), it boils down to this:
The FTC would require all prospective sellers to be provided with a “disclosure document”. This document must include information including (but not limited to):
1) YOUR associate/distributor information
2) A list of legal actions (i.e. lawsuits or otherwise) filed against you and/or your company in the last 10 years
3) Whether or not earnings claims are made. Under the proposed rule, an earnings claim can be considered ANYTHING from a picture of a boat or car purchased with earnings from direct sales activities, to actual dollar amounts. And get this: If earnings claims are made, additional information must be provided, including:
A. The beginning and ending dates when the earnings were achieved;
B. The number and percentage of all sellers represented by the claim;
C. All “special characteristics” of those who made such earnings that may distinguish those sellers from others, such as geographic location. (In reality, the fact that anyone has created success in MLM is out of the norm anyway. Most people, in MLM or otherwise, never do anything with the opportunities they are given.)
4) The number of all associates/distributors who have canceled within two years (which means your company has to constantly provide you with a new list)
5) A list of the 10 closest current or past distributors/associates to your prospect, with personal information so that your purchasers may contact these references (something you would continually have to keep updated from the company)
And the proposed rule would require that the disclosure document above be given to your prospect at least seven days before they sign any contract or give you any money. Talk about squashing weekly meetings, conference calls, three-way calls and more!
And look at how many privacy violations (and safety issues) this rule would require: Sharing your downline’s personal contact information, the company’s “refund” percentage and even the lawsuits against the company. I agree that lawsuits against a company are important to consider, but merely having been sued is NOT the same as having been found guilty.
Unfortunately, the FTC’s proposal does not distinguish between this. If some wacko decides to sue you or your company for ANY reason – you have to disclose it.
Plus, now someone you don’t even know is being given YOUR personal information so they can contact you and ask you anything they want. Who is the FTC to mandate that your personal information (or ANYONE’S) be given to potential prospects? That’s dangerous and irresponsible.
But forgetting all of the privacy violations this ignorant rule would require, think about what this means to you: If you have a hot prospect (whether it be from a lead you generated, a lead you purchased, someone you just met), you basically have to give them a list of all the reasons everything you are telling them should not be listened to.
In other words, the government is trying to require you to give them a list of reasons they should NOT consider becoming an entrepreneur (the FTC seems to forget that EVERY business venture has risk.) Then — to top it all off – you’d tell them to take that document home and look it over for a week.
You think after a week of staring at their list AND having been exposed to nay-saying family and friends…anyone would want to join? Heck no!
I’ll admit, there are many business opportunity scams online and offline, so the FTC is correct in trying to protect consumers and prevent them from getting duped. However, they are going about it in completely the wrong fashion.
At what point do we let the government do our thinking for us?
The people who are scamming aren’t going to care about the regulations above anyway, and the average prospect won’t even know about these regulations – so the only thing this ANTI-BUSINESS rule would accomplish is squashing the “good” network marketers. And there are MANY other discrepancies and even safety issues involved with this clueless proposal.
Hopefully you’re angered and fired up at this point (and if you aren’t, you shouldn’t call yourself a true entrepreneur). If you understand what I just said, and what the FTC is trying to do, then you need to take immediate action (read: TODAY) to voice your opinion on this. Until July 17, 2006, the FTC is accepting public commentary on the proposed, idiotic rules.
So, I *highly* suggest you read the DSA’s Q&A (
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More topics: Business Opportunity Rule, Ftc Business Opportunity Rule, 16 Cfr Part 4370, Network Marketing Prospecting, Mlm Prospecting, Network Marketing, Mlm, Network Marketing Recruiting, Mlm Recruiting, Chris Zavadowski
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