Jeffrey A. Babener
you have been living in a cave, you can't have missed experts'
predictions that the Internet will be one of the most powerful
forces in the 21st Century. Some commentators say that virtually
every device and wall socket will one day be wired into the net.
so it will be with the networking industry. The Internet will
become the prime means of communication, training and ordering
for MLM distributors. Sales kits and videos may become obsolete
as sophisticated multimedia and power point presentations are
shown to recruits on laptops or by e-mail. Long distance sponsoring
and training will be through cyberspace.
edge companies have already abandoned phone lines and communicate
between domestic and international divisions over the Internet.
The Internet will allow rapid expansion on a global scale with
instantaneous communication between corporate and its distributors.
VIRTUAL MLM - THE PAPERLESS MLM
may say goodbye to the large company headquarters, shipping and
manufacturing facilities. Think of it as Amazon.com comes to MLM.
Why not? How is it that a company like Amazon.com, without one
bookstore, can become one of the world's largest book sellers?
Expect to see virtual MLM companies on the Internet. Documentation,
sales kits, distributor agreements, policies and procedures will
be downloaded. Courts already recognize electronic signatures
as part of e-commerce. Distributors will order direct from the
net, without live operators. Companies will pay commissions by
direct deposit to bank accounts or credit card accounts.
Virtual MLM will outsource all but the basic activities, private
label manufacturing, private label service vendors, fulfillment
houses for shipping, graphics houses for creative work, and computer
firms will be tied in through the Internet for genealogy and accounting
processing. The technology revolution will make entry for the
"small guy" easier as the Internet and other technologies
level the playing field. Query, however, if the virtual MLM will
be successful without returning to the most important historical
factor in the historical success of MLM companies, the human factor,
i.e. "pressing the flesh."
are some of the Internet challenges and opportunities that the
MLM industry will face in the new millennium:
1. FTC SWEEPS.
FTC and states attorneys general are coordinating Internet sweeps
on a regular basis. Companies and distributors should understand
that anything that is posted on the Internet is effectively transmitted
immediately to the FTC and state regulatory agencies. Given some
of the recent restrictive positions of the FTC, companies and
distributors should be very conservative with what is posted on
the Internet. This particularly applies to health claims and earnings
Who Is Entitled To a Website?
Who's On First
The Spam Problem
2. INTERNET PYRAMIDS.
virtual MLM will soon be a reality. The problem is that the virtual
pyramid is becoming a reality even sooner. Fortuna Alliance, which
faced pyramid accusations by the FTC and an FTC injunction, located
itself after the injunction on the Internet and outside the boundaries
of the United States. Expect to see more and more offshore pyramid
schemes recruiting into the United States, as well as out and
out cash pyramid schemes recruiting on the Internet. Unfortunately,
this will bring adverse publicity to the industry and it is in
the industry's interest to support enforcement action against
of the true miracles of the Internet is instant communication
between company and distributors and distributor and distributors.
Unfortunately, the ease of access to this "instantaneous
communication" also means the spread of "false"
rumors and accusations. The case of Market America is a good example
of a recent experience in which false Internet rumors spread as
to the meaning of a recent federal ruling involving Market America.
The Internet rumor suggested that the ruling stood for the proposition
that companies could not restrict distributors from cross-sponsoring
activity when in fact the ruling did not hold for this proposition
at all. The only cure for this problem will be responsible reporting
from responsible sources on the Internet.
WHO IS ENTITLED TO A WEBSITE?
companies are struggling with website policy. Most companies prohibit
distributors from having websites. While this appears to be a
poor use of a tremendous medium, it has become essential for many
companies for two reasons. First, companies are concerned that
their name and site will be lost in search engines among thousands
of distributors using the same name. Secondly, companies are quite
concerned about inappropriate medical claims and earnings claims.
A resolution appears to be developing by which companies will
create integrated websites that interface with their own websites,
thus allowing distributors to have a website, which is both monitored
and integrated with the primary marketing material on the main
website. It appears that technology should provide some answers
to this issue.
WHO'S ON FIRST?
companies move to become virtual MLMs, distributor agreements
will be filled out over the Internet. The problem that has arisen
and will arise in the future relates to arguments about "who
is the proper sponsor?" In the "paper world," companies
provided that irrespective of claims to first sponsorship, the
individual whose name appeared as sponsor on the distributor application,
was the true sponsor. When distributor applications are received
over the Internet, the authentication issue becomes a problem.
Therefore, prudent companies will continue to require within 30
days of receiving an Internet application, that the signed distributor
agreement be received by the company designating in writing the
THE SPAM PROBLEM
is a dirty word on the Internet. Unfortunately, the MLM industry
is being touted in Internet circles as the number one abuser of
unsolicited e-mail. Although it may seem very easy to MLM distributors
to send out unsolicited e-mail, most industry experts will agree
that there is no substitute for "pressing the flesh"
and "kissing" a lot of frogs. Unsolicited spam will
also degrade the reputation of the MLM industry. Therefore, MLM
companies and MLM trade associations, such as the Direct Selling
Association and the MLMIA, should adopt and enforce policies prohibiting
spam. If they do not, in the long run, the MLM opportunity will
be diluted and be viewed as a "nuisance" industry.
Internet offers tremendous potential as a communications tool
for the MLM industry. How the industry treats this important medium
in the new millennium will reflect back on the future success
of the industry.
more on the MLM and Internet, visit www.mlmlegal.com
Jeffrey A. Babener, the principle attorney in the Portland, Oregon
law firm of Babener & Associates, represents many of the leading
direct selling companies in the United States and abroad. www.mlmlegal.com