Plain-English explainer
Real customers and retail sales: why they matter in an MLM
Short answer: Regulator guidance looks at whether products are sold to real customers outside the business, not mainly bought by participants to qualify for pay. Ask how customer sales are verified.
Why real customer sales matter
Federal Trade Commission guidance emphasizes whether participants make real sales to customers outside the business who buy products for their own use, rather than purchases participants make mainly to qualify for pay or rank.
When most product is bought by participants rather than sold to outside customers, a typical participant can spend more than they receive.
What to ask about customers
Ask how much of the sales volume comes from customers who are not participants, and how the company verifies those sales.
Ask whether a participant can earn meaningful income from customer sales alone, without recruiting, and whether personal purchases are needed to stay eligible for pay.
Questions to ask in writing
- What share of sales goes to customers who are not participants?
- How does the company verify retail sales to real customers?
- Can I earn net income from customer sales without recruiting anyone?
Related pages
Sources
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Regulator guidance
Multi-level Marketing Businesses and Pyramid Schemes
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Regulator guidance
Business Guidance Concerning Multi-Level Marketing