It’s often the case that a distributor departs to a new multi-level marketing (“MLM”) company because he or she sees a greater opportunity. It’s also often that distributors use social media as a marketing tool to promote their business – whether it be with the former company or the new company.
Law360 (August 14, 2019, 6:08 PM EDT) — The founder of multilevel marketing company IPro accused the U.S. Securities and Exchange Commission on Tuesday of essentially setting it up to take the fall for an alleged $26.5 million pyramid scheme in a countersuit against the agency filed in California federal court.
When a distributor is terminated by his or her MLM company, he or she may claim breach of contract and seek recovery of his or her past and future commissions. After all, the distributor may have worked for months or years to build up his or her downline only to have its income stream summarily stopped and taken by the company.
Most Multilevel Marketing companies claim that their list of distributors is a proprietary asset of the company. When a departing distributor uses the list to solicit other distributors to follow him or her to a new company, the MLM company cries foul ball. Indeed, many MLM companies include in their Policies & Procedures provisions acknowledging the proprietary nature of the company’s distributor list (i.e. genealogy) and providing restrictions allowing use only in conjunction with the company’s business.
By: Scott Warren, David Van Sambeek, Scott Wellman*
There has been a recent surge of enforcement actions by governmental agencies claiming that that certain network marketing companies are illegal pyramid schemes. The most notorious of these recent actions is the action filed by the U.S. Federal Trade Commission (FTC) against Vemma. But this is just one of the actions and investigations brought by both the FTC and the U.S. Securities and Exchange Commission in recent time. In order for your MLM company to avoid the same fate and regulatory scrutiny, it is essential that you (1) gain an understanding of the crucial role retail sales play in the determination of what is a legitimate MLM company versus what will be considered to be an illegal pyramid scheme, and (2) implement any needed changes immediately.
EXCLUSIVE: Wellman & Warren go to trial for two-year-old toddler that lost his life after falling from a luxury suite at the Staples Center!
Six months after AEG Live was found “not liable” in the Michael Jackson wrongful death lawsuit, another AEG subsidiary, which owns and operates the Staples arena in downtown Los Angeles, faces a legal showdown over a fatal accident there.
Since our founding in 1982, Wellman & Warren has served as the authority in business litigation matters involving multi-level marketing issues. We specialize in four practice areas that include: cross recruiting, non competition violations, breach of contract and policy and procedure violations.
When most Americans think of the First Amendment, they think of freedom of speech. Freedom of speech is one of the United States’ greatest rights, established by our Constitution under the Bill of Rights that we Americans have the liberty to enjoy.
Wellman & Warren represent a variety of clientele in land use cases from local small businesses to individual plaintiffs to even celebrities with name recognition.
What happens when you have a company from South Korea, with a distributor in Germany and an injured consumer from the United States? Which court has jurisdiction? Which country’s laws will apply?