5-step Do-it-yourself MLM Evaluation


 

 

In 40 years of studying MLM fraud, I have not found a better detection method than the "5 Red Flags" found at – www.mlm-thetruth.com.  – Frank Thomas, "the Consumer Advocate"

  

 

  

NOTE – How 5 Red Flags analysis applies to (Australian) 2-up plans:

You are required to forego commissions for the first two people you sell or recruit before you qualify for commissions. They go to your immediate "upline" instead (the person who recruited you if qualified; if  not, the person who recruited that person, etc). All who wish to earn commissions must go through the same procedure, thus perpetuating the chain. You advance by foregoing these two commissions. Your "pay to play" is the requirement to qualify for commissions, and all commissions go to the upline – which with an "Aussie 2-up" scheme is anyone who is qualified for commissions. Whether or not it is labeled MLM, at least 4 of the 5 Red Flags applies. For those seeking an income from such a scheme, the emphasis is clearly on compensation from recruitment.

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"Your logical questions and objective research are exactly what is needed in this industry." 
—Donna Horowitz

"Thank you for your great insights and all the work you have put into researching this little-understood subject.  If every [person] interested in joining recruiting MLM's would just take the time to read your [reports] and educate themselves, they could save a lot of grief." 
—Michael Rawlings

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DISCLAIMER: These evaluations are intended purely as a communication of information in accordance with the right of free speech. They do not constitute financial, legal, or tax advice – merely his opinions based on his own research and that of others. Anyone seeking such advice should consult a competent professional who has some expertise on endless chain or pyramid selling schemes. Readers are specifically advised to obey all applicable laws, whether or not enforced in their area. Neither the Consumer Awareness Institute nor the authors assume any responsibility for the consequences of anyone acting according to the information in these reports.

 

 



  

Before we share our evaluations, please do your own evaluation. Use with any MLM or chain selling* program.

We will not be responsible for the consequences of a decision that is ultimately yours to make. (See  Disclaimer.) But we are confident that you will here receive the best advice available on how to make that decision.  To begin, obtain the compensation plan of the MLM program you are considering. Then answer the questions for each step and follow the links to its conclusion. See how your evaluation compares to ours.


 

 

About this evaluation tool

After extensive research corroborated by MLM company reports, “5 Red Flags” have been identified which when found in a compensation plan lead to losses in excess of 99% – in at least four independent investigations. After completing this evaluation, you might want to read the report  "The 5 Red Flags for Identifying Exploitive Pyramid Schemes, or Recruiting MLMs", a summary of which was published in the newsletter for the National White Collar Crime Center and presented at the Economic Crime Summit Conference in 2004. 

Since it is based on solid research, It is much safer to use this "5-step Do-it-yourself MLM Evaluation" as the basis for deciding on participation, than to accept the claims of MLM recruiters on potential income – especially since law enforcement seldom requires disclosure of information essential to making a good decision.

Research and consumer guides:

This research and information on MLM (multi-level or network marketing, etc.) was prepared with the help of top experts over ten years by the Consumer Awareness Institute, directed by Dr. Jon Taylor. Opinions vary widely on MLM's legitimacy. But here you will find objective research on success and loss rates, compensation plans, etc.

What went into this  research: 

The investigative research that formed the basis of these reports includes: 

  • Extensive comparative research on MLM compensation plans and alternative business models to clarify differences,

  • interviews with and feedback from thousands of MLM distributors and ex-distributors in a wide variety of MLM programs, 

  • Interviews with the top experts in the field, 

  • Surveys of hundreds of tax professionals where MLM is concentrated – representing thousands of tax returns of MLM participants, 

  • Actual tax records examined by Wisconsin investigators

  • Court records in MLM cases – including IRS income tax records of top distributors in one state, 

  • Household consumer surveys regarding MLM participation, 

  • Surveys of leading MLM company presidents, 

  • Private and public financial disclosures by MLM companies, 

  • Communications with law enforcement officials at all levels, and— 

  • Direct experience with prominent MLM companies.

For more information on the research and analyses underpinning these reports, go to – MLM Research and MLM Consumer Guides

 

 *  Chain-selling programs are referred to as "multi-level marketing" (MLM), "network marketing," "consumer direct marketing," etc. The MLM industry would even like to be called "direct selling," even if little direct selling to actual customers is taking place. Regardless of what promoters call a program, this 5-step do-it-yourself analysis will help you evaluate their potential for income or loss. Avoid falling for the semantic trap of chain-selling promoters who say they are not MLM, or multi-level marketing. If the program pays on more than one level of participants, it is multi-level or MLM. If you get paid only for selling directly to customers and get no override commissions (other than a small referral fee) for recruiting more than one level of participants, it is single level compensation and could be considered true direct selling.