Academy of Multilevel Marketing Awards – 2014 Nominees

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

TAMM logoThe Academy of Multilevel Marketing, TAMM for short, was started by Len Clements in an effort to create an objective process for recognizing the “best of the best” in the network marketing industry. TAMM honors those that exemplify the “gold standards” of the industry. I’ve been serving on the board since its inception two years ago, and I’m very proud of how much this organization has grown. It’s grown primarily through the hard work of a handful of people, grinding it out on conference calls (Len Clements, Mel Atwood, Doris Wood and others).

Len and the board have created a nomination and voting process to ensure transparency and fairness. It’s not designed to be a popularity contest. The end-result truly reflects the general sentiment shared by the 100+ academy members (all of whom are vetted professionals in the industry).

The 2014 nominations were released recently. If you’re an academy member, check your email and be sure to vote. To view the nominees, read below. There’s also a video presentation (below). If you’re reading this via email, the video can be watched here.

COMPANY OF THE YEAR

Isagenix
It Works!
Origami Owl
USANA
ForeverGreen

CEO OF THE YEAR

Cindy Monroe (Thirty-One Gifts)
Jim Coover (Isagenix)
Mark Pentecost (It Works!)
Jeff Olson (Nerium)
Steve Wallach (Youngevity)

PRODUCT OF THE YEAR

Instantly Ageless (Jeunesse)
Nerium AD (Nerium)
Protandim (LifeVantage)
Balanced Nutrition (WellnessPro)
Better Body System (Yoli)

BEST NEW START UP

Kannaway
XPS Nutrition
TruVision Health
Vfinity
Xseed Health

DISTRIBUTOR OF THE YEAR

Alex Morton
Jeri Taylor Swade
Jimmy Smith
Michael Linden
Mike Akins

TRAINER OF THE YEAR

Eric Worre
Tom Schreiter
Margie Aliprandi
Lisa Grossmann
Susan Sly

SUPPORT COMPANY OF THE YEAR

Thompson Burton (Kevin Thompson)
Prosperity Central
Sound Concepts
Home Business Advertiser
Hyperwallet

HUMANITARIAN OF THE YEAR

John Fleming
Pure Radiance
USANA
Nerium
Sarah Robbins

INDUSTRY ADVOCATE OF THE YEAR

Len Clements
Kevin Thompson
Eric Worre
John Fleming
Richard Brooke

HALL OF FAME INDUCTEE

Rich DeVos
Mary Kay Ashe
Jay Van Andel
Mark Yarnell
Niel Offen

Junkie See, Junkie Do – by Randy Gage

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

Randy Gage wrote a tremendous article last week titled “Junkie See, Junkie Do.” It was regarding a recent acquisition in the industry. With his permission, I’ve posted it in full below. I’ve been a fan of Randy’s for a long time. He’s an outstanding networker with years of legitimate results. After following him for years, he strikes me as a guy that’s willing to grind it out and put in the hard hours to dig out results. He sticks, thus he succeeds LONG TERM.

It’s a very courageous article. I have a lot of the same feelings and thoughts, and I could not have expressed these thoughts any better. There’s something about this recent development that troubles me. Bottom line: Companies that rely on confidential deals to attract distributors are in for a rude awakening. The good news: the market is no longer blind to it.

—————Start of Randy’s article—————

Alas, the ongoing chronicles of the “MLM Junkies” continues repeating the pattern, year after year, company after company.

On Monday I got a message from Art Jonak that there was a live-stream of ABC company, announcing their sale to XYZ company. Company ABC had targeted my own company a few years back, buying off a top leader and attempting to get many others. In fact they laid a trail of destruction across the entire network marketing landscape, making sweetheart deals with every leader they could buy.

I’ve been witnessing this sad saga replayed over and over for more than 25 years. Five or six years ago, ABC company was the “hot” deal on the scene. One of their principals was sending his private jet around the globe, wining and dining leaders he wanted to poach away from other companies. And he got a lot. Sales were skyrocketing, shareholders were happy, most of the other companies were jealous. But a strange thing happened…

Those hired mercenaries turned out to be, well, mercenaries. And when DEF company came along and wanted to make a big splash, most of these “mercs” went with DEF for under the table deals and payoffs.

There is a morphing blob of a couple hundred thousand “MLM junkies,” who drift from deal to deal, every couple of years. They’re always jockeying for a better position, trying to flip their upline into their downline. Unfortunately for them, they have no idea that the game is rigged, so they can never win. Because if you’re not recognized as one of those “heavy hitters,” you don’t get the cooked line, master distributor position, or phantom positions in the tree for your spouse, mom, dog, cat, and parakeet that these manipulative deal-making insiders negotiate for themselves.

Eventually the junkies leave DEF company for GHI company, and two years later, they’re at JKL company. Until we get to where we are today….

Poor ABC company geared up staff and production to handle all that amazing growth they had for two years, but then the bottom fell out. Most of the mercenaries had moved on, and the company couldn’t slash overhead fast or deep enough. Finally the dealmaker was forced out in a desperate refinancing. Now company XYZ is buying the burnt out shell.

So I couldn’t help myself, and tuned in to see the carnage. But the presentation was amateur and cheesy and I had work to do, so I tuned out after two minutes. To paraphrase Dwight Yoakum, it was just another lesson about a naive fool that came to Babylon, and found out that the pie don’t taste so sweet.

Every couple years these junkies blow up whatever work they’ve done, destroy yet more of whatever waning credibility they have remaining, and jump to the next hot deal, thinking this time it will be different. But of course it never is.

Because you don’t reach success in MLM but getting in the hot deal at the right time, but by getting in the right deal and making it hot. By going to work.

Of course I’d love to tell you that my company is different and we would never do a deal. But that would be a lie. One of the co-founders was a dealmaker. And when I joined, most of the top income earners, including my sponsor, were on some kind of deal. I didn’t have a problem with it, because at least they were disclosed. And of course they were ready to offer me the farm. I think they were shocked that I didn’t want a deal of any kind. I bought a distributor kit and purchased the “everything but the kitchen sink” activation order for about $1,000. It was important to me that everyone I brought into the business could duplicate everything I was going to do. And they did…

I sponsored 11 people the first month. Each of them with no network marketing experience. Two more the second month. I went to work, driving depth, teaching them the basic skills of meeting people, working a candidate list, making invitations, and follow up. It was steady work, building block stuff, staying with each line until someone in that line took it away from me. Creating the team support structure required: a team website, training manuals, plug-and-play presentation tools, and live events where real people actually went in person and shook hands with other real people, instead of hiding behind their computer, “liking” cat videos on Facebook.

By year two, I was now the top income earner in the world. The next year, the former top income earner left – for a deal with ABC company. Meanwhile my company had made another deal and brought in another “heavy hitter.’ Because they had a cooked leg, within a couple years, they replaced me as the top income earner. For a few months at least, until they found a better deal and left. (Since then, they’ve been in at least eight other deals I know of.)

A couple years later, my sponsor negotiated a buyout to his deal and now makes his living as a generic trainer. In fact, within five years, every single person who had a deal with my company was gone. And the guy making the deals, was terminated by the board of directors. (And since then, he’s bounced around through about ten different deals.)

I don’t wish any ill for any of those people. I hope things work out the best for all of them. As for me, I’m just minding my own business; doing what I always do. I drive around town to new peoples’ homes, to be there for their first meeting, driving depth in the organization. I get on planes and speak at major events for my long distance lines. And last night, I had my latest prospect in front of a TV, watching a presentation.

Because this is how the business is built…

It is mindboggling to see how many people simply refuse to see this reality. And every couple of years, there is another inexperienced and gullible company owner who thinks they can jumpstart their growth and circumvent the time it takes to build a structure. So they pull out their checkbooks, and start buying mercs. They have a two-year run, become the next hot deal, and then cry foul when the next, next hot deal poaches away the very people they poached from someone else. Junkie see, junkie do…

Unfortunately here’s what other collateral damage happens along the way…

On every cycle of the process, there are thousands of junkies that burn out. They have been in so many deals, burned through so many contacts, and maxed-out so many credit cards that they simply give up the ghost. And that’s a heart-breaking tragedy.

Because these are not bad people, and they’re not lazy. They really wanted to succeed. They joined network marketing because they had a dream: They wanted to be their own boss, spend time with their family, drive one of those exotic bonus cars, take that trip to that glamorous locale, sponsor that orphanage, or simply break the bonds of debt. And when they throw away that last flipchart or distributor kit – their dream goes in the recycling bin with it.

Also on every cycle, there are some junkies that stay, because they have the security of the top-up or other fixed deal they were able to get as a mid-level merc. But alas, it turns out they can’t actually build a network marketing organization.

Because first of all, that takes honest work. Building a business in network marketing is simple, but it’s not easy. You do have to actually work.

Second it requires integrity and being able to look people in the eye and promise them that they have the same exact opportunity and pay structure that you began with.

And it means actually knowing the fundamentals of the business: how to meet people, make compelling invitations, use duplicable tools, and become great at teaching and mentoring.

If you want to truly develop – and lead – a large team, you have to create a support structure of marketing tools, training materials, and live and online events that nurture the team. This is sacrificial effort that doesn’t translate immediately into higher bonus checks early on, but creates true residual income and duplication for a lifetime.

I’d like to say my company has the best products in the entire world. But that’s not true. My company has some amazing products. Just like about three hundred other MLM and direct selling companies. I’d like to say my company has the best compensation plan in the world. But there are at least 100 companies with great pay plans. You probably want to be in the best company in the world. And for you, that’s probably the one you’re in right now.

Want to become an MLM Rock Star? Stop looking for the next hot deal. Stop looking for the next heavy hitter and become one yourself. Stay with your company, develop your skills and be willing to do the work it requires.

Otherwise you become the “mud against the wall,” in the saga with no end

Now company XYZ is just the latest entity to be running around the globe offering these backroom deals to anyone that will take them. So it was only fitting that they pick up the crumbs of company ABC for fractions of pennies on the dollar. The smoke and mirrors have all played out. Now all they’re buying is the wisps of leftover smoke and the shards of broken mirrors.

Meanwhile, all the parties involved are making proclamations of grandeur and world domination about their new, stronger entity changing the game forever. Please forgive us if we’ve seen this movie before.

How the story ends….

So about an hour later, Art messaged me to ask what I thought of the live stream. I told him I was preparing my leadership call for that night and had prospects to follow up with, so I had dropped off after two minutes. He insisted that I go back and watch it some more. So I was intrigued enough to comply, and was glad I did, because I got the biggest laugh of my week.

The main speaker still wasn’t giving up the ghost, beseeching some of the mercenaries that had left that, “You have my number!” But my favorite part was when he was thanking the “millions of viewers” around the world who were watching. The live feed had 278 people.

-RG

P.S. If you really believe in our profession – and doing it the right way – I hope you’ll share this post all over social media. The profession gets stronger every time you do. There are share buttons above.

—————End of Randy’s article—————

Follow Randy on Facebook at: https://www.facebook.com/randygage.

Nestler vs. Jeunesse

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

It’s been close to five years since I’ve represented a plaintiff against a network marketing company. I rarely do it for a number of reasons. First, I tend to agree with companies. It’s a bias that I’ve formed over the years after representing close to 200 companies. Second, the economics rarely justify the effort. When networkers are earning less than $10,000 per month, it’s usually not in their economic self-interest to sue a company. It’s expensive and laced with uncertainty.

But I like this case.

It’s a very simple story. It involves a networker, Matt Nestler, that sponsors another networker, Kevin Giguere. And nine months later, Nestler was terminated for ostensible reasons (in our opinion). The lawsuit is included below, and it can be found here. All of the pleadings can be found here.

The facts are interesting. Nestler and Giguere both signed separate Business Development Agreements (“BDA”). The copy of Nestler’s agreement can be viewed here. BDAs are commonly used by Jeunesse to provide extra incentives for distributors to join their company. The terms of these deals are kept confidential, out of sight from the general public. They include various incentives, such as significant volume in the binary, additional cash on all CV generated in the pay-leg, “Top-Off” arrangements where networkers are guaranteed a certain sum of money each month (this was Nestler’s deal), cash advances, etc. With the assistance of their BDAs, Jeunesse can recognize numerous distributors as achieving rapid success when, in reality, the “success” was achieved with significant (and undisclosed) assistance. Based upon information and belief, Jeunesse, along with their distributors authorized to cut similar deals, have cut a number of these confidential deals with leaders all across the industry.

Within days of Nestler’s termination, two well-known and highly productive multi-level marketers, Rick Ricketts (“Ricketts”) and Cedrick Harris (“Harris”) became active in the Jeunesse organization. Ricketts was placed upline of Harris in Giguere’s downline. Contrary to its own Policies and Procedures, which expressly forbids Jeunesse participants from owning more than “one distributorship,” upon information and belief, it’s our view that Giguere, Harris and Ricketts were each allowed to accumulate over fifty positions between themselves in the Jeunesse genealogy. This provides them with a significant edge in their ability to dole out preferential placement for recruits. These participants are also expected to have received BDAs, with unique and undisclosed incentives that are generally not available to the public.

The facts continue, and I’m not going to bore you with details. In my opinion, this sort of controversy is the natural byproduct of a reckless, deal-oriented culture where whole genealogies are moved to satisfy networkers with the hot-hand. Nestler was road-kill.

Keep in mind, we’ve just filed a complaint. Jeunesse will have an opportunity to respond and if things come to light that refute our claims, we’ll respond accordingly and publish updates, but not here.

We’ve created a separate site that will contain information about the matter:

http://thompsonburton.com/jeunesselitigation

We’ve also created a brand page to make it easier for people to follow the progress:

https://www.facebook.com/jeunesselitigation

If you have information that might be relevant for the matter, we want to hear from you.

Nestler vs. Jeunesse by Thompson Burton

“A moment’s insight is sometimes worth a lifetime of experience.” Oliver Wendall Holmes, Supreme Court Justice from 1902 – 1932

Oliver Wendall Holmes

ViSalus Investigators Indicted

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

The details are fuzzy and I have more questions than answers. But here’s what we know: Investigators were hired by ViSalus to track the activities of Ocean Avenue. What were they hired to do? According to a lawsuit filed by Ocean Avenue in late 2013: “The P.I. Firm at the direction of Visalus, and Nic Sarnicola hired a computer expert located in India referred to as ‘Sumit Vishoi’ to access the email accounts of the former Visalus distributors working with Ocean Avenue, Ocean Avenue employees, Ken Dunn and Fred Ninow.”

If you want a detailed, play-by-play, read BehindMLM’s article. The facts are reported well.

At some point, the case with Ocean Avenue settled. When the lawsuit was initially filed, there were no public statements made by ViSalus, other than to say the allegations were “without merit.” At no point did ViSalus say, “Hey, we had no idea those knuckle-heads were hacking into email accounts.”

Fast forward to January 7, 2015: Four investigators associated with ViSalus were criminally indicted. The charges all stem to them accessing data without authority (i.e. hacking into accounts). The indictment is included below. If you’re reading this via email, click here to view the indictment.

It’s interesting to note that none of the ViSalus officers were indicted. While ViSalus is mentioned as having employed the investigators, none of the individual officers are listed i.e. Ryan Blair, Blake Mallen, Nic Sarnicola. I’ve heard that they participated during the grand jury investigation, hinting that they truly had no knowledge of wrongdoing. It’s just a rumor, so take it for what it’s worth. If they did NOT participate in the investigation, it’s possible that this could roll up to bite them later.

Questions:

Why would these investigators risk their freedoms in exchange for a small fee? Were they instructed or encouraged by ViSalus, in any way, to obtain the electronic data?
Why would the investigators be under the impression that ViSalus would even want the data?
Why hasn’t ViSalus made ANY kind of public statement regarding their involvement (or lack thereof) of this crime?
What were the investigators originally hired to do, if not to obtain the database from Ocean Avenue so they can identify who OA was poaching (as alleged in the OA lawsuit)?
Did this have any bearing on Blythe’s decision to dump ViSalus in 2014?

The whole thing reeks, top to bottom. The only thought that comes to mind that could serve as a lesson for the rest of the industry: CULTURE MATTERS. Whether ViSalus knew or had no idea, the fact remains that the investigators were hired (which is bizarre by itself) and they broke the law while under the impression it was in ViSalus’s best interest. Over the years, I have heard of so many disturbing things coming out of the ViSalus organization. This tops it off for me.

What do you think? Any questions of your own?

Indictment (ViSalus)

Kevin Thompson Cracks Into the Power 50

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

Direct Selling Live_Cover (2015)

Direct Selling Live published their 7th Annual Power 50. I’m extremely honored to have made the 2014 list. I’m not one for bragging, so I’ll keep this post short. If you want to learn more about how it happened, I’ve written some deeper thoughts here. It’s good to know that I’m not the only one that senses the urgency for us as an industry to “grow up.” It’s gratifying to see my efforts increase awareness in the industry and generate some healthy discussions.

So without any further ado, I leave you with my acceptance speech. Click here if you’re reading this via email.

The article is included in full below. Keeper asked some great questions, which led to a great discussion about the serious issues. We also chat about our thoughts about the future of the industry. I hope you find it helpful and informative. If you’re reading this via email, click here.

Thoughts about the Power 50

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

Direct Selling Live_Cover (2015)

If you’ve been following me, I think you’ll agree that I never self-promote. Ever. I just try to create relevant material that helps people better understand the issues around network marketing. If those people see fit to share the content, it’s great. If not, no big deal. It’s a pretty simple (and pure) marketing strategy. This post might be a bit out of the ordinary.

Joe Signaigo

I’m going to tell you about my grandfather, Joe Signaigo. He would often say, “When you get in the end zone, act like you’ve been there.” He was my father-figure, and he taught me the importance of speaking more through actions and less with words. As the son of immigrants, he had to produce his own results because nobody was doing him any favors. I guess that hustle in him found its way to me. He was a WWII veteran, Marine Corp Golden Glove champ, all-

Father-Son Banquet

Father-Son Banquet

American football player at Notre Dame and later served in the Korean war. He later found a way to acquire a beer business in Memphis. When my mother was on her own, the smartest thing she ever did was move closer to her parents. I latched onto Joe Signaigo and modeled him as best I could, until the day he died.

He told me something that left a mark after I got into trouble at school with a bunch of other kids: “I expect you to be better. You’ve got to be able to burn hot without exploding.” The “burning hot” remark was about the ability to absorb pressure without crumbling.

I get asked by people “Why do you care? Why do you bother?” The answer: Because I do and because I can. I learned from the best. If I’m not burning a bit, I’m not doing enough. We’re not on this earth to live in the lap of luxury, we’re here to grow and improve. If I see a problem that affects real people, I’m not going to sit there and pretend everything is fine. I’m going to be the one that injects clarity. And after all, how hard is it to write a few articles and steer a conversation towards improvement? As a lawyer in this space, I see some nasty stuff. And I’m in a position to talk about it on a broad scale. It’s not like I’m pretending to be Batman.

Defining the Gray

Six years ago, I wrote an ebook titled “Saving the industry by defining the gray.” I recognized that if scams were allowed to proliferate unchecked, all while pretending to be legitimate network marketing companies, it would inevitably lead to problems.

And it has!

So I push.

I was recently recognized as “2014 Person of the Year” in the 2015 edition of Distributor Magazine (published by Direct Selling Live). It’s an undeserved title, for sure. There were 49 people in the Top 50 that deserve the distinction more, along with over 100 people that were not even on the list. But…it’s encouraging to see that being an advocate can be good for business.

The more I communicate, the more I realize that there are a bunch of people, scattered throughout the industry, that sense the need for us to “grow up.” I’m not alone.

Why was I chosen? I believe it had to do with the fact that I threw some punches in 2014 and took some shots of my own. Keeper Catran-Witney, editor at Direct Selling Live and fellow puncher, noticed. Keeper is a no-nonsense kind of man, the kind of man that stands for truth and lets the chips fall.

Advocacy

These are some of the chances I took in 2014:

I went on Bloomberg TV to discuss Herbalife.
I gave an honest assessment of reasons why Avon left the Direct Selling Association. This led to a lot of high-fives, some “eat garbage” emails and a threat (Thanks, TalkFusion).
I got an anti-pyramid bill passed in Tennessee. It’s not perfect, but it’s better than nothing.
I provided several suggestions on ways to improve the Code of Ethics, with the main suggestion revolving around the need to disclose private deals with networkers.
I wrote about the futility in sending Cease and Desist letters to distributors, unless there’s serious harm being done.
I provided an in-depth review of the BurnLounge case, written in plain-English.
I ended the year with the most viral post I’ve ever published. It was about the need for MLM special deals to end. These deals are blatantly fraudulent, toxic and need to stop. It’s like steroids in baseball: it’s a material advantage that creates a false-impression of success. The distributors that follow the leader, without any idea of the existence of a special deal, eventually end up as road-kill. The cure: DISCLOSURE. That’s it. (Jeunesse, I’m talking to you)

Conclusion

Check out the article below (or click the link here if you’re reading this via email). Keeper asked some great questions, which led to a great discussion about the serious issues. We also chat about our thoughts about the future of the industry. I hope you find it helpful and informative.

Federal Cooling Off Rule

Kevin Grimes is one of the most experienced and accomplished MLM attorneys in America. Over his 22 career as a network marketing attorney, he has represented and advised the proverbial “Who’s Who” of direct selling and multilevel marketing including Herbalife, Shaklee, Tupperware, USANA, Metabolife, MonaVie, and hundreds more.

Wedding

The Thermonuclear, Scorched-Earth, Mother-Of-All Best Practices Series

By Kevin Grimes

Virtually everyone has heard something about some mysterious state or federal law or regulation that provides some buyers under certain circumstances the ability to cancel some types of purchases or contracts within three days.

But . . . most folks are rather hazy on the details.

On January 6, 2015, the FTC made a change to the federal “cooling off” rule[i] (which is actually a federal regulation). Although the change is not tremendously significant, direct sellers and their independent contractors (“ICs”) need to be aware of the change . . . as well as the other pieces of the Rule.

Introduction

The Cooling-Off Rule is a federal trade regulation rule that was published by the FTC to address unfair and deceptive practices in sales conducted at locations other than the fixed place of business of the seller. In other words, if you’re marketing products or services for a network marketing company, this federal regulation applies to YOU and the company. Even though the vast majority of sales are not made on a door-to-door basis, the Rule calls all such sales “door-to-door sales.”

In addition to sales at consumers’ homes, door-to-door sales include sales at facilities rented on a temporary or short term basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants; or sales at the buyer’s workplace. The Rule requires door-to-door sellers to provide consumers with written and oral notice of a buyer’s right to unilaterally rescind a contract within three business days from the date of the transaction. Additionally, sellers must provide buyers with a completed receipt, or a copy of the sales contract, containing a summary notice informing buyers of the right to cancel the transaction.

What is New?

Under the new rule, the revised definition of “door-to-door sales” distinguishes between sales at a buyer’s home and those at locations outside the home. The revised definition retains coverage for sales made at a buyer’s home that have a purchase price of $25 or more, and it increases the purchase price to $130 or more for all other covered sales.

When is the Change Effective?

The change becomes effective on March 13, 2015.

What Do Companies and ICs Need to Know?

The Rule is applicable to the:

  • Sale, lease, or rental;
  • Of consumer goods or services;[ii]
  • With a purchase price of:
    • $25 or more for sales made at a buyer’s residence;[iii] or
    • $130 or more for all other temporary locations;
  • In which the seller[iv] or his representative personally solicits the sale;[v] and
  • The buyer’s agreement or offer to purchase is made at a place other than the place of business[vi] of the seller (e.g., sales at the buyer’s residence or at facilities rented on a temporary or short-term basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants, or sales at the buyer’s workplace or in dormitory lounges).

This means that certain sales to customers will fall within the scope of the Rule, and some will not. In addition, if the enrollment of a new IC exceeds the applicable threshold ($25 for sales made at the buyer’s residence and $130 for sales made at all other temporary locations), the Rule will apply.[vii] Whether a particular sale is or is not subject to the Rule depends on the facts involved. Because it’s difficult (and sometimes impossible) to know whether the Rule is applicable to a particular transaction, it’s simply a “best practice” to insure that your documents, corporate practices, and your ICs’ practices always meet the requirements of the Rule.

There are six exemptions to the Rule, however, most of them will be inapplicable to direct selling companies and their ICs . . . most of the time.[viii]

What Do Companies and ICs Need to Do?

The Rules requires “sellers” (direct selling companies) and “their representatives” (ICs) to:

  • Furnish the buyer with a fully completed receipt or copy of any contract pertaining to the sale at the time of its execution;
    • Which is in the same language, e.g., Spanish, as that principally used in the oral sales presentation;
    • Which shows the date of the transaction;
    • Contains the name and address of the seller, and
    • In immediate proximity to the space reserved in the contract for the signature of the buyer or on the front page of the receipt if a contract is not used and in bold face type of a minimum size of 10 points, a statement in substantially the following form:

“You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.”[ix]

  • Furnish the buyer with two copies of the Notice of Cancellation[x] at the time the buyer signs the contract or otherwise agrees to buy the consumer goods or services;
  • Before furnishing copies of the “Notice of Cancellation” to the buyer, complete both copies by entering the name of the seller, the address of the seller’s place of business, the date of the transaction, and the date, not earlier than the third business day following the date of the transaction, by which the buyer may give notice of cancellation;
  • Exclude in any contract or receipt any confession of judgment or any waiver of any of the rights to which the buyer is entitled under the Rule, including the buyer’s right to cancel the sale in accordance with the provisions of the Rule;
  • Inform each buyer orally, at the time the buyer signs the contract or purchases the goods or services, of the buyer’s right to cancel;
  • Not misrepresent in any manner the buyer’s right to cancel;
  • Honor any valid notice of cancellation by a buyer and within 10 business days after the receipt of such notice, to:
    • Refund all payments made under the contract or sale;
    • Return any goods or property traded in, in substantially as good condition as when received by the seller; and
    • Cancel and return any negotiable instrument executed by the buyer in connection with the contract or sale and take any action necessary or appropriate to terminate promptly any security interest created in the transaction;
  • Not negotiate, transfer, sell, or assign any note or other evidence of indebtedness to a finance company or other third party prior to midnight of the fifth business day following the day the contract was signed or the goods or services were purchased;
  • Notify the buyer, within 10 business days of receipt of the buyer’s notice of cancellation, whether the seller intends to repossess or to abandon any shipped or delivered goods.

The FTC expects that companies will inform (and remind) their independent contractors of the requirements that are applicable to them. Accordingly, these requirement should be set forth in the Policies and Procedures. In addition, companies should remind their independent contractors of these requirements not less than annually.

Conclusion

Is there a potential downside to violating the Rule?

Yes, there is. A few of the cases the Federal Trade Commission has pursued include:

$22,000 – FTC v. Vision Group of America, Inc., for alleged violation of the Cooling-Off Rule and deceptive income claims.

$40,000 – FTC v. College Resource Management, Inc., for alleged violation of the Cooling-Off Rule and deceptive claims.

$972,000 – FTC v. Screen Test U.S.A, for alleged violation of the Cooling-Off Rule and deceptive claims.

Violation of the Rule can be very expensive.

If you’re bored and want to see the entire text of the Rule, click here.

Let’s do it right!

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The Thermonuclear, Scorched-Earth, Mother-Of-All Best Practices SeriesTM is a collection of articles, reports, and blogs that articulates, educates, and advocates the absolute highest and best business and legal practices for direct selling companies and their independent contractors. We invite and look forward to your feedback.

End Notes———————–

[i] The actual title of the federal cooling-off regulation is Trade Regulation Concerning Cooling-Off Period for Sales Made at Homes or Certain Other Locations, and is found in Title 16 of the Code of Federal Regulations, Part 429.

[ii] “Consumer goods or services” are defined in the Rule as “goods or services purchased, leased, or rented primarily for personal, family, or household purposes, including courses of instruction or training regardless of the purpose for which they are taken.”

[iii] This is true regardless of whether the transaction is consummated under single or multiple contracts.

[iv] A “seller” is defined as “any person, partnership, corporation, or association engaged in the door-to-door sale of consumer goods or services.”

[v] Such solicitations include those in response to or following an invitation by the buyer.

[vi] The “place of business” is defined in the Rule as “the main or permanent branch office or local address of a seller.”

[vii] How do I know that the Rule applies to Starter Kits and Enrollment Fees? I have talked with multiple FTC staff attorneys. Even though the enrollment of an IC involves the commencement of a business, the FTC’s position is that it involves the sale of “consumer goods or services.”

[viii] The term door-to-door sale does not include a transaction:

(1) Made pursuant to prior negotiations in the course of a visit by the buyer to a retail business establishment having a fixed permanent location where the goods are exhibited or the services are offered for sale on a continuing basis; or

(2) In which the consumer is accorded the right of rescission by the provisions of the Consumer Credit Protection Act (15 U.S.C. 1635) or regulations issued pursuant thereto; or

(3) In which the buyer has initiated the contact and the goods or services are needed to meet a bona fide immediate personal emergency of the buyer, and the buyer furnishes the seller with a separate dated and signed personal statement in the buyer’s handwriting describing the situation requiring immediate remedy and expressly acknowledging and waiving the right to cancel the sale within 3 business days; or

(4) Conducted and consummated entirely by mail or telephone; and without any other contact between the buyer and the seller or its representative prior to delivery of the goods or performance of the services; or

(5) In which the buyer has initiated the contact and specifically requested the seller to visit the buyer’s home for the purpose of repairing or performing maintenance upon the buyer’s personal property. If, in the course of such a visit, the seller sells the buyer the right to receive additional services or goods other than replacement parts necessarily used in performing the maintenance or in making the repairs, the sale of those additional goods or services would not fall within this exclusion; or

(6) Pertaining to the sale or rental of real property, to the sale of insurance, or to the sale of securities or commodities by a broker-dealer registered with the Securities and Exchange Commission.

[ix] I call this paragraph “the Pointer.”

[x] The seller may select the method of providing the buyer with the duplicate notice of cancellation form, provided however, that in the event of cancellation the buyer must be able to retain a complete copy of the contract or receipt. Furthermore, if both forms are not attached to the contract or receipt, the seller is required to alter the last sentence in the Point to conform to the actual location of the forms. You can find the Notice of Cancellation in §429.1 of the Rule.

See below for a nicely formatted copy of the article:

Kevin Grimes Joins Thompson Burton

Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

As we’ve been building out Thompson Burton over the past few years with my longtime friend and business partner, Walt Burton, there’s one simple concept coined by Jim Collins that’s never failed us: Get the right people on the bus.

Kevin Grimes is the right person. I’m excited beyond measure to be announcing the addition of Kevin to our team!

Kevin and I have a history that goes back close to seven years. Back in the day when I was an in-house lawyer for Orrin Woodward, one of MonaVie’s distributors, I worked closely with Kevin. He was serving as their outside legal counsel on MLM and FDA compliance issues. During those interactions, I came to really respect and appreciate his level of expertise.

Great Character

I also came to admire him as a person. The business relationship was secondary. When I chat with him, he makes me better. And that, by itself, was worth the effort to get him to join. Also, we both share a passion for helping abandoned teens. I was raised by a single mother and I’ve been doing whatever I can for young men over the past several years. I still recall having lunch with him and our CEO and hearing Kevin pour out his heart about his work for distressed teens. He was a foster parent for 13 years and fostered 24 teenage boys! He continues to mentor a myriad of at-risk teenagers in various programs. His comments left a mark. And whenever I’ve had interactions with him as a competitor, he along with his other partners were always incredibly gracious. I always tell my prospective clients, there are about 5 good MLM attorneys out there. KG was one of them.

Great Lawyer

Aside from being a good person, he’s a great lawyer. He’s been working with network marketing companies for over 22 years, with a few $1B+ clients under his belt. His experience is vast and he’s not afraid to acknowledge the challenges facing the industry today. He’s seen the industry evolve over the past two decades, going from very little startup activity to the environment we’re seeing today. He’s also been part of over 3 significant regulatory matters.

One more thing, and I’ll stop bragging about him: he’s not afraid to poke around and explore opportunities. He does different things, and they all revolve around education. He was the first to create a compliance training module, which consisted of over 4 hours of footage and 47 separate video segments. It was deep!

Speaking of the compliance training….yes, it landed him in hot water. And he’s dealing with it. For the uninitiated, Kevin Grimes was sued by the Receiver in Zeek Rewards for, among other reasons, improperly providing Zeek Rewards with compliance training. The gist of the complaint: KG allegedly improperly sold compliance training to a company that he should’ve known was unfixable (Zeek Rewards paid for his compliance training). It’s one of the reasons why he’s no longer with Grimes & Reese, now R&R Law Group. With that being said, he’s gone close to 29 years without a bar complaint filed by a disgruntled client (it happens to the best of us, eventually). But Kevin…he’s got a great record and I know with 100% certainty that Kevin’s skill is unmatched by anybody else in the country. So regarding those challenges he’s facing, he’s going to make his positions clear soon. It’s a shame that the public doesn’t know him better, but that’ll change over time.

As for me, I’ve been a lone operator in MLM law for close to eight years. I’ve literally had to reinvent the wheel, and it’s been a good exercise for me and it’s been good for the clients. Now, it’s refreshing to have an extra set of eyes on these matters. He’s got more gray hairs than myself and his feedback is going to be priceless.

Another point: Kevin is going to focus a lot on his FDA law practice. There’s huge opportunity there to be “the guy” and Kevin is the guru when it comes to FDA regulations. In fact, he wrote a 430+ page ebook regarding dietary supplement marketing.

Everyone, I’m honored and proud to introduce you to KG! As my good friend said, “Two Kevins are better than one” ;)

ps, I hope you had a wonderful Christmas holiday and a Happy New Years. I’m overflowing with abundance and gratitude for the friends, family and partners in my life (including YOU). Cheers to a prosperous 2015.