Multi -level marketing companies sometimes face allegations as hierarchical plans, partly due to how they are organized. In both illegal pyramid plans and multi -level legal marketing companies, sales representatives sell products or services while people are employed to join them. These companies have captured Zeitgeist in recent years, thanks to Docuseries (Lularich) and podcasts (“The Dream”) to explore their ills.
What is of much less attention is the program that operates these companies. In the digital age, software companies that enable the multi -level marketing industry are considered to do their work. Experts weighed how melted software companies could be if their customers turned out to be a pyramid plan.
“It is a very dangerous space in it,” said Mark Eagles, a criminal defense lawyer who has dealt with multi -level marketing cases before. Responsible for responsibility [the software companies] To do everything they can to examine the companies they deal with, so not, but when, the prosecutor asks them, they say: “Here are the lengths that we took.”
Software companies that serve multi -level marketing companies have been around for more than two decades. This sub -industry often works with smaller and medium -sized multi -level marketing companies that do not have the resources needed to create their own programs. These companies are also different from payment processors such as Square or Stripe, which are not designed to meet the specific needs of the multi -level marketing industry.
In most expansion marketing programs, the company’s backbone can be the commission structure, sales tracking, and determine whether sales representatives are achieving their goals. When participants in a multi -level marketing company want to track the money they earn from the sale products or the new members they bring, they often log in to a portal provided by companies such as the BYDESIGN technologies that are based in Florida.
But what makes this program different from other offers is its ability to allocate unique compensation structures for industry. While there are some differences, compensation structures in a multi-level marketing company usually appear to be an inverted tree-a new person who has been brought to a current “branch” is added. In addition to payment for product sales or service, sales representatives can also be paid for their below on this tree. As the company grows, this structure can become sprawling. The program helps in managing this.
“As is the case for almost any work these days:” It is possible that the provision of technology and technology is one of the biggest challenges faced by direct sales companies, “said Joseph Mariano, head of the Direct Sales Group.
Mariano said that the direct sales association represents companies that represent approximately 90 percent of the total sales volume in the multi -level marketing industry. Its location lists 92 members, starting with the names of families like AMWAY and Herbalife to smaller stores. Several software companies, listed out of 129 suppliers, sponsored the annual conference of the direct sales association this year, including Jenkon, Exigo and Flight Commerce.
But multi -level marketing programs can also allow problematic allocations.
Serious [a multi-level marketing company] William, a former marketing professor at New Jersey College, who served as an expert in multi -level marketing lawsuits, said, but this novel is not always correct at New Jersey College, who worked as a witness of an expert in multi -level marketing lawsuits, but this novel is not always correct in New Jersey College, which worked as an expert in multi -level marketing cases, but this previous novel at New Jersey College, which worked as a witness Expert in multi -level marketing lawsuits.
For example, some multi -level marketing companies quietly allow some new participants to enter the company more on the tree than others, giving them a greater chance of success due to the fixed line than people who seek to achieve sales or meet the minimum sales requirements of the company. Others may transfer people from “branch”, which may change the profits of the affected. Pyramid charts may also move new participants to the tree, but only transferring people around them is not equivalent to illegal activity.
“This does not mean that the company that creates the program makes these decisions,” said Keep. “They are informed about this is how we want the program to work.”
Legal scene: Pyramid plans against multi -level marketing companies
Pyramid charts, which are illegal, can look significantly “multi -level marketing companies, according to the Federal Trade Committee (FTC). How to make compensation is one of the main factors that organizers use to distinguish between them.
Organizers use a two -fissure test to determine whether the company is working as a pyramid system:
- If the company’s sales representatives are required to pay for the sale of their products or services,
- If sales representatives can earn “bonuses” outside sales to actual customers, such as payment for employment.
“You have to look at the flow of money,” said Luis Grizman, Assistant Director of the FTC Marketing Department. “You must actually look at the incentive structure and where the incentives are.”
Mariano said that members of the Direct Selling Association must follow an ethical code to preserve the condition of their membership, including sales representatives to obtain funds to employ other sales staff, Mariano, with the exception of “lower incentives” within the limits of the law.
But with regard to whether software companies are accountable when serving a multi -level marketing company accused of being a pyramid scheme, it is about details.
The awareness of complaints against the customer or the presence of some knowledge that his platform is used in illegal activity can make them fatal, according to a professor of law at Harvard University of Harvard Rebecca Tosette.
Tushnet said: “The organizers take the position that if you contribute to something illegal and know it – or they should know reasonably – what is doing it, you can be responsible for that.”
For example, FTC has sued technology companies that have already enabled Robocls through the online sound protocol products, although the companies are not behind the calls themselves.
Then there is the intention of compensation. Stassi Bossley, professor of economics at the University of Hamin, said that software companies should search for a “separation” between the income of sales representatives from actual sales against income from employment. She said that if their income is very inclined to employment, this should be a red sign.
But this type of analysis can bring a thorny issue on privacy and whether this hurts customer confidence in software companies, Eric Goldman, a law professor at the University of Santa Clara.
Mariano said that many software companies in this space recommend their multi -level marketing customers on how to comply with the law.
One company, RallyWare, provides multi -level marketing programs and other types of companies, but does not provide compensation management as a service. However, their contracts with clients determine that these companies earn money in ways that fall within the limits of the law, according to the great writer at RallyWare Alack Nedensy.
Software companies witnessed in court
Many software companies that focus on the multi -level marketing that have been contacted by the signs that this article contacted or did not respond to the interview requests. But the legal issue sheds light on how these companies intertwined with multi -level marketing companies and potential pyramids.
In 2017, FTC filed a lawsuit against a multi -level marketing company called Infinity 2 Global, which was claimed to be an investment opportunity. Keep his testimony as an expert witness. The federal government claimed that Infinity 2 Global was a pyramid and Bonzi plan. Its operations are possible through the software platform provided by the Texas -based Trinity program.
Trinity announces “the most advanced sales tools for [multi-level marketing] Party plan organizations. nothing. Its program provides multi -level marketing companies to pay their sales commissions and track what customers buy, among other features.
Trinity created the infrastructure of how to treat compensation in Infinity 2 Global, and was access to information on sales activity and bonuses, where people sat in the company’s structure, the amount of each product contributed to the company’s total profits, and what is the company’s profit margin. Its program also enabled the conversion of people in the compensation tree, which can affect their income; Jerry Reynolds, CEO of Trinity, has witnessed that his company refuses to do so, and instead, Trinity trains customer companies to obtain written permission from every person who is affected by the transformation of such a way before changing “TREE” compensation.
Details of this data were used by the federal government to claim that Infinity 2 Global operates as a pyramid scheme. Reynolds witnessed that he would not work with any company if he believed that its compensation plan was not practical. When asked if the Trinity was looking for patterns in this information, such as “whoever was distributed, who won it and who lost,” Reynolds said that his company does not do that.
“I do not do it because it is private,” he said. “If they start having difficulty paying, I will run some inquiries and know whether their business imagines so that I can prepare as a businessman … I am about to pay.”
Reynolds did not respond to the interview requests.
Three leaders were condemned in the plan by conspiring to commit fraud and securities, and one of them was convicted in addition to money laundering and attempt to tax evasion after the prosecutors proved the trial [the company] According to a statement of 2022, he was working as pyramid plans, “Two of them were sentenced to 10 years and 4 years in prison, and one of them ordered a fine of $ 100,000. The victims were also requested.
Mariano said that not all software companies have access to financial information such as the actual sales of the company. For those who do it, he said that guilt will depend on “the facts of each of these circumstances.”
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