Multi-Level Marketing

I’m back at my old stand in the bookstore cafe and I arrived to hear a guy making a pitch to a kid and his girlfriend for a multi-level marketing (MLM) scheme.

It could have been Amway or any number of other schemes that promise big bucks to those with drive and hustle.

Yes, there are some people who make money in multi-level marketing, but they are rare. Most lack the wit and will to succeed and drop out.

Here’s what the Federal Trade Commission has to say about MLMs:

The Federal Trade Commission cannot tell you whether a particular multilevel marketing plan is legal. Nor can it give you advice about whether to join such a plan. You must make that decision yourself. However, the FTC suggests that you use common sense, and consider these seven tips when you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive inventory. These plans can collapse quickly -- and also may be thinly-disguised pyramids.
3. Be cautious of plans that claim you will make money through continued growth of your "downline" -- the commissions on sales made by new distributors you recruit -- rather than through sales of products you make yourself.
4. Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn't mean it's true! Ask the promoter of the plan to substantiate claims with hard evidence.
5. Beware of shills -- "decoy" references paid by a plan's promoter to describe their fictional success in earning money through the plan.
6. Don't pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant or lawyer.
7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering -- especially when the claims about the product or your potential earnings seem too good to be true.

I hope the kid makes it. I really do, but the odds aren’t on his side.

I know. I was an Amway distributor in a previous life. Twice.