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Petition to Prevent Multilevel Marketing Companies
from Operating as Pyramid Schemes
We, the undersigned, petition the U.S. Federal Trade Commission
to immediately adopt and enforce a rule that requires all multilevel
marketing companies to disclose full and truthful "income
opportunity" information to all persons solicited to participate
in the income program. We further request that this rule require
that actual disclosure be made in writing and in a form that can
be independently audited by proper authorities and made available
as a public record. The reasons for this request are as follows
- All multilevel distribution programs that advertise "unlimited
income opportunity" or "opportunity of a lifetime"
are suspect because, in reality, only a tiny percentage of MLM
recruits earn even a small profit. It is therefore inherently
deceptive unless full and accurate disclosure of probable net
earnings is furnished to anyone solicited to participate.
- The multilevel marketing program is a solicitation to invest
in a business. This investment may involve commitments of months
or years of time, substantial financial expenditures, and may
affect career or job changes. Promises of "permanent income,"
"residual income," or even "part-time income"
should not be permitted unless adequate documentation of such
net income (after subtracting product purchases and operating
expenses) over an extended period of time can be verified.
- Like shares of stock, the value of an MLM distributorship
will depend upon the future labors and investments of many others
over which prospective investor has no control or influence.
- MLM distributors should have access to full and truthful
information about the income opportunity before being asked to
make any commitment.
We therefore petition that all multilevel marketing companies
be required to disclose in a clear and understandable format (such
as easily interpreted percentile columns)-separate from all other
materials furnished to prospective distributors:
- The total number of distributors involved in the company
for at least for three years (or since founding of the company
if less than three years).
- The number of terminations and the number of new recruits
for the past three years.
- The net increase (new ones less those who drop out) in the
number of distributors in the various ranks of the upline as
a percent of all whohave been distributors for three years
- The median incomes of all distributors who have signed up
for a distributorship by percentiles, not just the ones deemed
- The average costs for purchasing goods or services from the
MLM company or the upline by percentile of income levels (matching
the percentiles in Item #4).
- The percentage of the incomes of the uplines that are derived
from sales outside North America.
- A "weighted" overall average income of all distributors
so that the extraordinary high incomes of the small number at
the top are not calculated in with vast majority so as to give
a more statistically valid figure. Thus the top 1/10 of 1% --
and certainly the founding distributors -- should be eliminated
from any calculation of average income. This group's average
income should be reported separately due to their distinct positioning
for profiting from the investments of all others.
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Federal Trade Commission
601 N. Pennsylvania Avenue
Washington, DC 20580
City _____________________ State _____ Zip
This petition is sponsored by:
- Pyramid Scheme Alert, 1235-E East Blvd., Charlotte, NC 28203.
- Consumer Awareness Institute, P.O. Box 488, Kaysville, Utah
84037. URL: http://www.whatisgood.com/nwm
- National Council Against Health Fraud, 119 Foster Street,
Peabody, MA 01960 (URL: http://www.ncahf.org)
- Quackwatch, P.O. Box 1747, Allentown, PA 18105 (URL: http://www.quackwatch.com)
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This page was revised on August 10,