Is it better to raid in secret or raid in plain sight?

    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.

    Epic Era_MLM_Pre-Launch Founding Leaders

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    The purpose of this article is to explore the current “deal making” culture in the MLM industry. Quite frankly, it’s getting pretty stupid.

    Raiding in Secret

    Another word for “raiding” is “stealing.” But I’m not taking it that far. “Raiding” typically occurs when a leader strikes a special deal with a new company, violates his contract with his or her existing company, solicits the downline for the next new thing, conveniently fails to disclose the existence of the special deal, generates a decent commission for a year or two, possibly gets sued, seeks out another deal, wash, rinse, repeat. This is what I call “raiding in secret.” It’s a dirty / uncomfortable secret we deal with in the industry. It’s one that rarely gets discussed outside of the inner-circle because both parties instinctively know that it’s wrong. In the scenario of the private deal, there exists an understanding between the company and the recipient that there’s going to be a contract violation somewhere between the networker and their existing (or previous) MLM. This contract violation can even be factored into the contract negotiations i.e. “if you get sued, we’ll cover the legal fees.” I have always known about this side of the industry. There are companies out there like to cut deals and then turn around and sue their own distributors when they leave for other deals. It’s naive for me to think that these sorts of deals will end. After all, there is the occasional special deal that’s legitimate i.e. the networker waits for his or her old contract provisions to expire, starts from scratch and leverages his or her skill to build a large downline FAST. But…that’s rare.

    I’ve written about this process in the past in two separate articles. The first is titled Master Distributors: good or bad? In the article, I talk in general about these deals and discuss the importance of disclosing the existence of these deals. In the second article, titled Revised FTC Endorsement Guidelines: Part 1 (Master Distributors),” I talk about the new disclosure requirements published by the FTC when it comes to these sorts of deals. Bottom line: disclosure is key.

    Raiding in Plain Sight

    Epic has recently announced, very publicly, that they’ve got $100,000,000 available for “experienced networkers.” The payment terms are published in a separate PDF, found below. Basically, if leaders can keep up with various performance metrics, they can earn additional income. While it caps out at $20,000 per month, Epic leaves room for some negotiation:

    Are these still not big enough for your dreams and what you know you are capable of? Contact us for details on Epic Performance Programs beyond our $20,000 program.

    How is this raiding in plain sight?

    Watch the video above, titled Epic Puts $100,000,000 on the table for deals. In my opinion, there’s more to this than “paying for performance.” When you offer networkers $20,000+ per month in addition to commissions in exchange for 120,000 group volume points in six months….you know it’s quite likely (I’m putting it mildly) that the networker is transitioning distributors from another downline. And when that happens, it’s likely the distributor has some contractual restrictions for that kind of activity i.e. non-solicitation, non-compete, etc. There’s a better way to go about building a business. Plus, this sort of activity will invite mass litigation from the industry in general as leaders start migrating towards Epic (if that ever occurs). The claim will likely be “tortious interference,” which occurs when one company encourages people under contract with another company to violate the agreement.

    Is this good for the industry?

    In my opinion, it’s not. Companies invest years (sometimes decades), thousands of hours and millions of dollars building up their brands and goodwill with its leaders. If all of that effort can be taken by way of a confidential agreement with one of its top leaders, it’s bad for our profession. And what about the distributors in the downline? They’re the people that trust the leader to make good decisions. If they’re not in the know on the special deal, they’re really not in a good position to make an informed decision. They get lost in the shuffle. They get used. Is it in their best interest to uproot their organizations and follow the leader? In most cases, the answer is no.

    Disclosure: I’m a conservative, free-market man. I believe in the power of the markets. However, in order for markets to work, information needs to be freely exchanged. In the case of these special deals, the public is never made aware of the deals; hence, the public / distributors are at a significant disadvantage. The market is manipulated.

    Conclusion

    There are no shortcuts to success. When I competed in the decathlon in college, I was met each year with one or two athletes that talked big. They were motivated for a month, bragging about their inevitable success. Within months, they quit. Success is a grind over time. It’s a long, arduous process. Through week after week, year after year of work, the power of compounding takes over. When I see a company trying to skirt around the work, I just shake my head… If you’re not willing to grind it out, you’re not developing the muscles necessary to win. Cutting these sorts of deals to take advantage of the investments made by other companies…it’s dishonorable.

    What do you think? We’ve never had a company publish these sorts of deals before. Is it good or the industry? Bad?

    +Kevin Thompson

    If you’re reading this via email, please click this link.

      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.

      • BlissBrooke

        Right on Kevin. These type companies have no interest in the well being of our profession, enhancing our image in the market place or good will. They only have fast growth in mind. Although it fosters more of the same pyramid scheme mentality this company will get what they deserve…BK. The owners are naive at best. Has anyone done any due diligence on their ability to pay these head hunting fees?

        “History is the Greatest Purveyor of Wisdom. Some people choose to learn from it. Others ignore it…at their just peril” RB

        • Chester St Andrews

          Couldn’t have said it better Richard! I quote you all the time as being a Custodian and Ambassador to the MLM industry. Keep up the great work 🙂

        • Kevin Thompson

          Thanks for your feedback. I was wondering about their ability to cover the head hunting fees. If there’s not really $100M there, it creates a host of other problems.

          • Butch Garey

            Kevin, the $100,000,000 will only be paid out if the rep performs. There will be some who sign the agreement and not make the requirements. I believe the company is requiring for the rep to reach at least 50% goal in order to remain in the contract. Personally, if I was the company executive in charge of this program I would put a stipulation on it that newly sponsored reps/customers will have to be in the system for at least 3 months as active orders in order to draw a special bonus check. I have witnessed people slamming in new recruits from another opportunity only to see them drop out after a couple of months.

      • Russell Alley

        dang discrace if ya ask me-

      • Chester St Andrews

        In my opinion it is a disgrace…he should go back to wall street where he would be right at home screwing people right in front of their faces. So much for the so called “level playing field” this industry promotes right! We all know about those “sweetheart” deals that go on behind our backs but never told about. Distributors going to the top of the plan in a matter of weeks or a few months, I mean come on! I may have been born at night but I wasn’t born last night if ya catch my drift. Yes it is the dirty little secret as you put it Kevin but as I said it is unethical through and through. I am glad you wrote about this because after being prospected at least 10 times to join EPIC I was beginning to lose faith in the biz. A company that begins lying and under the wrong pretense is destined to fail. we will see where they are after all the looting ends.

        • Chester St Andrews

          …red meat into the wolfs den, loved that analogy!

          • Kevin Thompson

            I’m glad you found the article helpful, Chester. Thanks for your comments.

      • Rick Walsh

        I think your speech brings up a vary salient point that you did not mention.
        You stated that distributors are violating their contrtacts with their existing company if they take a payment to move over to another company and move the people they brought to their first company
        Here is my question. Why does the first company have any restrictive contractual relationship with the distributor in the first place. They want the advantage of an independent contractor relationship for their tax advantage, they terminate the distriibutor at will, knowing the distributor cannot afford to fight back, use his or here unpaid commissions to fight them, and take the downline that the distributor created.
        I believe it is the creating distributors organization and relationshiips that are the value, not the supplier of products who hold all of the cards in the relationship.
        If you want your distributors to be independent contractors, then your attention to them and treatment of them is what should hold them, not a manufactured threat of “tortious interference”.
        The company owes its gratitude to the distributor who created the marketplace more than the distributor owes the company for it’s supply of products.
        Threatening any retribution, of any kind, for an independent agent to take his talents and realtionships where ever he or she wants, for whatever reason, is the real “wrong” that occurs in this scenario. Whether you agree with buying distributors or not
        Rick Walsh
        academyofnetworkmarketing.com

        • Kevin Thompson

          Rick,

          Thanks for your comment. First, like it or not, the contract restrictions are there. In my opinion, the non-compete provisions get abused. But the non-solicitation provisions are enforceable in every context and they makes sense. Leaders can solicit their personally enrolled, no problem. Second, the downline develops by way of a partnership between the company and its leaders. I’ve written about this before in the past:

          https://thompsonburton.com/mlmattorney/2011/12/19/chickens-eggs-leaders-and-products/

          Without solid systems and stellar products, the downline never develops. And yes, without leadership, the downline never develops. Both parties have an interest in the organization.

          If you’re in favor of leaders being able to leave, I understand. But when there’s a special deal, they should at least disclose it. It’s disingenuous for anyone to say that leaders should be able to capitalize on their talent when “their talent” comes by way of a confidential fee.

      • Serenabydesign

        Great article Kevin! I am going to share it with my team. This type of stuff happens all the time, but as you said Epic is just being open about it. Poaching hurts the industry, but on the other hand, are you as a company developing your leaders to a point that they don’t want to leave. No matter what they are offered? In traditional business, there is often this kind of thing..the offer of the better job with more money. When someone leaves it hurts. I think it just hurts more in our industry because so much is riding on the downline. When it happens to a smaller company it is hard for them to survive. The good ones are able too though. We have watched it happen over and over. Some companies are able to pull it out, others are not.

        • Kevin Thompson

          I’m not against leaders leaving, Serena. I’m all in favor of the free market working. But I’m not in favor of leaders leaving under the influence of special payment terms that are never disclosed to the people in the raided downline.

      • @Richard… EPIC is the rebrand of eCosway out of Asia. It is reported that the founder of eCosway is a billionaire and since eCosway America was not growing with their hybrid business model of retails stores and network marketing, then he brought in Glenn Jensen to create something completely new.

      • @Kevin, excellent video and article. I have reposted because I like you and Richard I believe this is a bad move for our profession.

        I also wonder if it violates the FTC rules on income claims and advertising. I have yet to see where any of the leaders who have signed deals are publicly making that clear. And I know the company has not disclosed who they cut deals with. So…

        If in the days after the launch we see huge money stories and those stories are in part due to private deals that were cut, would this not at least be a gray area in the regulations for not disclosing the facts?

        • Kevin Thompson

          Good comments, Troy. This will definitely be fun to watch as leaders take the Epic stage.

      • Butch Garey

        Good article Kevin. I always enjoy reading your viewpoint.

        I still don’t have a problem with a master distributor entering into an agreement with a company to help that company build their business. I have several colleagues in the industry along with myself who have done just that. To make my point, in the corporate world outside of the network marketing industry, I have been recruited by and offered sign on bonuses by competing manufacturing companies too. What’s the difference?

        I don’t have a problem with a person showing a check or revealing what they earn in their business as long as they show legitimate money amounts that were earned from the compensation plan alone. What they earn as a bonus is between them and the company. Of course a disclaimer is always needed to remain legal.

        I am with you though on several points. Here is what I don’t like: Leaders jumping from company to company for the next best deal. I have personally had scores of people pulled out from my organization over to other companies by raiders. These “raiders” as you call them (a good name for them) were introduced to these people by me in the first place. Then they come back a year or two later and rip them out from my group.

        Now that Epic has brought the idea of “deals” into the open, many distributors or prospective distributors will come to the knowledge that these types of incentives exist in the industry. I think that is a good thing. Knowledge is power and those who are/were naive will now be “in the know.”

        Is it a bad thing that Epic is doing? Probably, but they are not the only ones currently doing multiple deals. I guess we will have to see how it plays out and learn from it.