Talk Fusion Gives Me a Taste of Medicine

I got a call from Talk Fusion’s lawyer today. And the lawyer made threats. The lawyer tried to appeal to my “economic self-interest.”

This made me angry.

And then I thought for a second, this is exactly what I do sometimes. On occasion, I get asked to do things that I’m not fond of doing. Publicly, I’ve made it clear that MLMs should never send Cease and Desist letters unless there’s malicious intent and serious harm. Otherwise, it’s a gun that kicks harder than it shoots.

In my recent post regarding Avon’s departure from the DSA, I referenced some companies “slipping through the cracks” and getting into the DSA. In particular, I mentioned Talk Fusion. And specifically, I mentioned that they sell $2,000 products. In order to clarify, they do NOT sell $2,000 products. Their premium pack costs $1,500.

The video is here, and the segment that led to the call is between 10:30 and 11:05.

Candidly, I could have made my point without referencing specific companies. But, it’s there and I’m not pulling it down or editing the video as requested by their lawyer. The comments were based on my opinions, they’re innocuous and they were completely immaterial for the main purpose behind the video. In other words, I’m not going to be bullied and intimidated into doing something I’d rather not do. I never implied that Talk Fusion was a pyramid scheme. While I have my opinions on the subject, I kept those opinions to myself. In order for me to form a definitive opinion, it would take a lot of work.

Pyramid scheme analysis is very fact intensive and depend on a number of factors, as I’ve made clear in this Battle over BurnLounge article. With Talk Fusion, based on their compensation plan, participants appear to be able to enhance their earning potential based on the starter packs they buy (p. 11). It’s likely possible that participants can qualify for these higher levels by selling the packages (instead of buying). At the end of the day, it boils down to whether the participants are “ultimate users” for purposes of pyramid scheme analysis. In BurnLounge, one factor the court analyzed when concluding that the majority of the BurnLounge customers were NOT ultimate users was by looking at the purchase patterns between participants and third-party customers. In BurnLounge, 67% of participants purchased the $450 item. 17% of the customers bought the same thing. This disparity in percentages led the court to conclude that the participants were buying the premium items primarily to qualify for more money. Do Talk Fusion customers purchase the $1,500 packages at a comparable clip as their participants? Are there requirements to buy the premium products to qualify for bonuses? I lack the data; thus, I’m not 100% sure.

The point I’m making: the point of the Avon video was not directed at Talk Fusion. They need to put on their big-boy pants and get over it. In fact, they should try living in Herbalife’s shoes for a day. Herbalife has been dealing with attacks for over 2 years, and they’re being called worse things than “weird.”

I’ve sent Talk Fusion’s lawyer a message and invited him to write a message for my site. If they want to publish anything here to clarify anything that needs clarifying, I’ve given them that ability.

With all of this being said, they’ve piqued my interest. I do intend on learning more about their business. If you’ve been in Talk Fusion and you’d like to share your experience, please hit the Contact button above and educate me.

MLM Startup Conference – DS Edge #4

Ultimate MLM Startup Conference

The Direct Selling Edge conference for MLM startups is back!  The event kicks off on Thursday, January 10th in Las Vegas.  See below for a link to purchase your ticket.  The details for the conference can be found on our MLM Startup Conference page. We received some great feedback after our last conference and we’ve made the agenda even better. In addition to our already stellar lineup of MLM professionals, we’re very pleased to announce our latest guest at the DS Edge Conference. Len Clements.

I’ve written in the past about Len Clements. Len Clements’s influence in the network marketing industry cannot be understated. I can say with 100% certainty that Len is one of the most knowledgeable individuals in the country with respect to the direct sales industry. Len will have a segment dedicated to separating fact from fiction in the network marketing industry. We will also have the following speakers:

 

Donna Marie Seretella: As the founder of Direct Selling Solutions, she leads MLMs and leading distributors in the areas of compliance consulting and distributor compliance relations.  She’s literally written the book on the subject.  We’re very excited to have her again!

 
 

Karen Clark: Karen is the founder of My Business Presence, a social media training company for network marketing companies. She began her direct selling career as an independent representative who achieved the highest title in her company’s compensation plan in just seven years. Karen now works with independent consultants of direct selling companies to master the world of internet marketing, including the effective use of social media. She’s also the co-author of two books, Incredible Business and Direct Selling Power.
 
Daren Falter: Daren is a MLM celebrity. Daren has experienced success both as a distributor in the field and as a company owner. Daren wrote one of the most widely read books in the network marketing industry: How to Select a Network Marketing Company. Daren will be speaking about one of the most important topics: Recruiting Top Leaders. It’s going to be fun!
 
 
 
 
 
 

Conference Agenda

DS Edge – 2013 Agenda
 
 
We’re also happy to be working once again with MLM software guru, Mel Atwood, MLM software provider from YourSolutions.net. Mel brings an incredible level of commitment, energy and passion to his work for MLM clients.  Whether he’s serving as the Vice President at the Association of Network Marketing Professionals or adding value as a fellow DSA supplier member, Mel’s activity inside and outside of his software firm adds tremendous value to the industry.

And of course, Jay Leisner of Sylvina Consulting will provide tremendous value regarding compensation plan design. Jay has an amazing ability of taking complex principles regarding compensation design and explaining them in terms that are easy to understand and actionable.

Satisfaction is 100% guaranteed.  

At the end of each day, from 5 until 8 pm, you’ll have the the opportunity to meet with conference speakers for 30 minute appointments at no additional cost! Add the six hours up and you’re easily walking away with over $1,000 worth of consultation.

Register Now

Click the link below to purchase your ticket. Details on hotel accommodations are included on that page. Reference the “Edge Conference” and you’ll be able to reserve a room under $40 a night. The deal they’re giving our attendees is fantastic.
Eventbrite - Direct Selling Edge Conference for New and Young MLM and Party Plan Companies

I sincerely hope to see you there!

Testimonials

    • Definitely worth the money. As a matter of fact, after 30 minutes, I think I got my money’s worth. I found out that my business plan was not legal and by the end of this, I’ve learned all the tools and information to make this work. It’s a really good program.  Zach Taylor
    • Thank you for the most crucial information supporting my Party Plan Business. This 2 day class was exactly what I needed! Great job by everyone! Absolutely every aspect of my business was covered. Thank you again. Cheryl Wollrab
    • I was amazed at the information. I thought it was going to be a broad stroke event to get you with different vendors. I was very surprised to see all of the targetted topics, how in depth they went into discussing very important issues, for anyone whose considering getting into the MLM business as a startup company. Mike Duke


Written by +Kevin Thompson

Aces Radio Live

I was invited as a guest host on Troy Dooly’s and Jim Gillhouse’s radio show, Aces Radio Live. The show covers weekly topics affecting the MLM industry. Connect with Troy on his website, MLM Help Desk and connect with Jim on the Jim Gillhouse Fan Page. Enjoy the recording below. We discuss a lot about the tool industry and discuss ways to improve the MLM industry in general.

Listen to internet radio with ACES Radio Live on Blog Talk Radio

DSEF and Earnings Claims

The Direct Selling Education Foundation, created by the DSA, was established to help spread positive information about the many benefits of the direct selling industry. They prepared a very clever video below that illustrates the struggle a distributor goes through when presenting the financial opportunity to prospects. Should you call your time share a “summer home?” Should you refer to your 18 foot fishing boat a “yacht?” Should you talk about the opportunity to earn millions upon millions of dollars? In basic terms, it’s mandated by the Federal Trade Commission for marketers to provide income disclosures whenever above average income is presented. It’s perfectly normal for distributors to discuss the income opportunity, especially when the prospect is presented with enough data to make an informed decision. However, it’s highly unethical and arguably illegal when a distributor grossly exaggerates their personal results in the enterprise.

Do you have any suggestions to help curb aggressive income claims?

IRS Webinar on Taxes

Disclaimer: I hate taxes. I hate talking about taxes and I hate paying taxes. As such, I’m no expert. Nonetheless, as Robert Kiyosaki points out, income tax is the largest expense incurred by EVERY business. Given the large amount of taxes incurred, minimizing tax liability is nonnegotiable. The question then becomes: how much can I write off as business expenses? In the direct selling profession, this is always a challenging question to answer. For distributors in the field, the line is usually blurred between personal expenses and business expenses. Where more deductions lead to lesser taxes, the temptation is to push the envelope and claim EVERYTHING as business expenses.  During this webinar organized by the DSA, the speaker gave some insights on how to determine if an expense is legitimately deductible.  See below for the slides.

In a nutshell, the takeaways are as follows:

  • Business expenses are deductible when they are both “ordinary and necessary”;
  • Keep good records. When the IRS knocks, they’ll want to see substantiation all deductions;
  • Maintain separate bank accounts separating personal from business expenses;
  • When the line is blurred between recreational and business travel, keep all expenses separate and maintain records;
  • Purchases for personal use are not deductible;
  • Not all training expenses are deductible. Be sure there’s a specific purpose for the training;
  • If there’s a long history of loss in the activity, it could weight against you when claiming a deduction;
  • Personal competency matters. The more seasoned you are in the endeavor, the less flexibility.

See the slides below. There’s not much additional information; however, it’s a good summary.

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Burnlounge Decision!

Burnlounge was held to be an illegal pyramid scheme by the U.S. District Court in California. (See below for the full decision or click here).

There’s an incredible amount of information to learn from this case. The judge, after sitting on this case for over two years, illustrated a number of factors he used while analyzing the Burnlounge model. In yet another case, the court held that the participants inside the program (distributors) cannot be counted as “customers” for purposes of pyramid scheme analysis. It’s imperative for companies to have solid customer numbers from people outside the program. The judge spent a lot of time in this opinion discussing the marketability of the Burnlounge offering. At the end of the day, the true test for marketability is customer usage. In Burnlounge’s case, they only had 3% of their revenue come from customer sales. Burnlounge tried arguing that their sales force should count as customers and that their service was legitimate and well worth the price. The judge was not persuaded by either arguments. In the video below, I do my best to discuss the highlights. If you like this story, “Like” it or +1 it! Enjoy.

FTC v. Burnlounge – Final Decision by kevin_thompson

California Senate Bill 459 – Worker Classification Bill

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If you’re an entrepreneur looking to launch a MLM startup in the state of California, or if you’re a distributor there, this is very important information.  There’s currently a bill on the floor in California titled “Senate Bill 459.”  It’s also been referred to as the “Worker Classification Bill” (click here for the actual proposed bill…pertinent info on page 4, section 2).  The bill is stupid government bureaucracy, plain and simple.  Basically, MLM companies with distributors in California would need to require their distributors to provide additional forms to new people.  If a distributor fails to provide these forms and/or fails to maintain them for a two year period, they could be prosecuted for a misdemeanor if the state requests the forms.  Essentially, the California government is trying to keep its finger on all independent contractors so they can keep better tabs for state taxes.  It’s burdensome, unnecessary and it would dramatically inhibit a company’s ability to grow in California.  If you’re a distributor in California or a business owner, the below letter is a draft letter.  It’s time to go grassroots.  Use the text below as a template.

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California Direct Selling Companies Oppose Senate Bill 459 – Worker Classification

INSERT DATE

Dear Members of the California Assembly:

On behalf of the 2 million California direct sellers and the more than 50 direct selling companies with facilities in California, we urge you to oppose Senate Bill 459 unless amended to protect direct sellers.

Nearly 90% of California’s 2 million direct sellers are women. For many, direct selling is a source of supplemental income and personal independence. The flexibility of direct selling is key to making this business model one that can meet the needs of a diverse group of Californians, each with their own personal goals and motivations. Senate Bill 459 would subject these microentrepreneurs to unnecessary and burdensome notice and recordkeeping requirements.

Direct selling companies support accurate worker classification and already inform independent contractor direct sellers of their status as envisioned by Senate Bill 459 by virtue of existing business practices and documentation. Federal and state laws (Internal Revenue Code Section 3508 and California Unemployment Code Section 650) also recognize direct sellers as independent contractors. These laws already require direct selling companies to give notice to prospective direct salespeople of their independent contractor status within their written contracts. The requirements of Senate Bill 459 are therefore redundant and confusing and would not improve the accuracy of worker classification for direct sellers.

Direct sellers have a thorough, complete, and accurate understanding of their independent contractor status, by virtue of existing law and the ample information given by direct selling companies.  Moreover, direct sellers could be prosecuted for a misdemeanor if they forget to provide a superfluous Employment Development Department form on independent contractor status.  The additional paperwork requirements and the threat of prosecution for a clerical error will discourage direct sellers from expanding their teams, harming untold numbers of Californians who will not have the opportunity to meet their personal and financial goals through direct selling.

In these difficult economic times it makes no sense to subject direct sellers, who have always been properly classified as independent contractors, to new burdens that will disrupt a vibrant business model that affords millions of Californians the opportunity to supplement their family income.

Why make these times harder for people who are trying to make ends meet?

We urge you to oppose S. 459 as currently drafted.

End

 

 

Rick Gutman, MonaVie Black Diamond, moves to Visalus Sciences

In a video post, MonaVie Black Diamond, Rick Gutman, announces his new alliance with ViSalus Sciences.  ViSalus has been making a lot of noise lately given their recent surge in growth.  ViSalus is trying to mold itself as MLM 2.0 for the younger generations…and it seems to be working.  Their recent score of Rick Gutman will certainly put them in the cross-hairs of one of the industry’s largest companies.  After watching Rick’s announcement, the lawyer in me wondered if there was going to be an issue with MonaVie’s noncompete clause.  As I was referencing their policies, I learned that their noncompete does NOT extend beyond termination of the agreement. The language can be found below.

2.3.4 Sale of Competing Goods or Services.  While a Distributor, you shall not sell, or attempt to sell, any programs, products, or services to MonaVie Customers or Distributors that compete with our Products.  Any program, product, service, or Network Marketing opportunity in the same generic categories as our Product is deemed to be competing, regardless of differences in cost, quality or other distinguishing factors.. . .

Rick Gutman, unless he’s wildly soliciting everyone in his database, appears to be in the clear.

One thing about MonaVie, love ‘em or hate ‘em, is that when the distributors leave, there’s not much litigation.  This is surprising given their itchy trigger finger when they made a legal threat at Ted Nuyten.  In August of 2010, they threatened Ted with litigation after reporting on their decline in revenue in 2010.  Specifically, they accused him of knowingly publishing false information with an intent to defame and disparage.  In August of 2010, Ted projected a 25% decline in 2010 revenue from 2009 numbers.  They demanded that he retract his statements and write “that such statements and figures were and are false and unsupported by fact.”  Ted put the legal threat on his site here.  In the original article that got him trouble, he literally provided two numbers: $785 million in 2009 and he projected $600 million in 2010.  MonaVie alleged that a $600 million projection was “defamatory” and harmful to their reputation.  In this month’s Direct Selling News magazine, they publish MonaVie’s revenue for 2009 and 2010: $785 million for 2009 and $600 million for 2010.  The man was spot on the money…to the digit.  “False and unsupported by fact…”  Really?

Direct Selling Industry Featured in Wall Street Journal

The Direct Selling Industry was recently featured in a 40 page spread in the Wall Street Journal.  The content is fantastic!  The leadership at Direct Selling News did an excellent job putting this material together.  It’s a great representation of this wonderful industry.  See below for the full PDF, which was obtained from Ted Nuyten from “Business for Home.”

Direct Selling Industry in Wall Street Journal

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FTC’s tips for discerning good companies from bad

Debra Valentine, General Counsel for the FTC, provided the following tips for consumers when discerning good companies from bad ones.  She gave the speech in 1998, which makes it a little dated.  BUT, I was doing some research and found this article interesting and thought you might find it informative. To read the complete article, go here.

START

Here are some tips that consumers and business might find helpful.

1. Beware of any plan that makes exaggerated earnings claims, especially when there seems to be no real underlying product sales or investment profits. The plan could be a Ponzi scheme where money from later recruits pays off earlier ones. Eventually this program will collapse, causing substantial injury to most participants.

2. Beware of any plan that offers commissions for recruiting new distributors, particularly when there is no product involved or when there is a separate, up-front membership fee. At the same time, do not assume that the presence of a purported product or service removes all danger. The Commission has seen pyramids operating behind the apparent offer of investment opportunities, charity benefits, off-shore credit cards, jewelry, women’s underwear, cosmetics, cleaning supplies, and even electricity.

3. If a plan purports to sell a product or service, check to see whether its price is inflated, whether new members must buy costly inventory, or whether members make most “sales” to other members rather than the general public. If any of these conditions exist, the purported “sale” of the product or service may just mask a pyramid scheme that promotes an endless chain of recruiting and inventory loading.

4. Beware of any program that claims to have a secret plan, overseas connection or special relationship that is difficult to verify. Charles Ponzi claimed that he had a secret method of trading and redeeming millions of postal reply coupons. The real secret was that he stopped redeeming them. Likewise, CDI allegedly represented that it had the backing of a special overseas bank when no such relationship existed.

5. Beware of any plan that delays meeting its commitments while asking members to “keep the faith.” Many pyramid schemes advertise that they are in the “pre-launch” stage, yet they never can and never do launch. By definition pyramid schemes can never fulfill their obligations to a majority of their participants. To survive, pyramids need to keep and attract as many members as possible. Thus, promoters try to appeal to a sense of community or solidarity, while chastising outsiders or skeptics. Often the government is the target of the pyramid’s collective wrath, particularly when the scheme is about to be dismantled. Commission attorneys now know to expect picketers and a packed courtroom when they file suit to halt a pyramid scheme. Half of the pyramid’s recruits may see themselves as victims of a scam that we took too long to stop; the other half may view themselves as victims of government meddling that ruined their chance to make millions. Government officials in Albania have also experienced this reaction in the recent past.

6. Finally, beware of programs that attempt to capitalize on the public’s interest in hi-tech or newly deregulated markets. Every investor fantasizes about becoming wealthy overnight, but in fact, most hi-tech ventures are risky and yield substantial profits only after years of hard work. Similarly, deregulated markets can offer substantial benefits to investors and consumers, but deregulation seldom means that “everything goes,” that no rules apply, and that pyramid or Ponzi schemes are suddenly legitimate.

END