MLM watchdogs monitor MLM businesses to protect consumers from potential abuse. Federal agencies watch MLM companies to prevent illegal pyramid schemes. Watchdogs investigate product claims and purchase sales kits to investigate growth strategies. They also provide helpful tips to consumers and job seekers to avoid MLM scams.
An MLM watchdog is an individual or other party who monitors the activities of MLM businesses to make sure that consumers and the public are protected from the results of these types of businesses. An MLM, or multi-level marketing business, is a business that recruits through a “downline network” in which independent salespeople work on a commission basis. Some specific aspects of MLM companies are open to abuse by those who create the companies.
Federal agencies closely observe the business setups of MLM and similar companies to see if their growth strategies constitute an illegal “pyramid scheme.” Pyramid schemes exist when the method of payments and overall business plan is likely to end up with a split of the business and cash consolidation by those who have raised money from recent customers. MLM focus groups help provide more insight into a multi-level marketing business plan.
MLM watchdog groups also look into the claims that multilevel marketing companies make about their products. MLM business setups use a wide variety of products to generate income, but many of them are known to make inflated claims about their product lines in order to build interest. Independent salespeople often want to profit from inflated inquiries to recruit more salespeople.
In order to actually make multilevel marketing activities transparent, an MLM watchdog can buy “sales kits” from an MLM company and investigate how that activity creates growth. When the company relies on commissions for new members, this can trigger a red flag for those who are investigating. The company may fall into an illegal category.
MLM watchdog groups also publish online or print news that reveal how multilevel marketing businesses work. A portion of the proliferation of MLM companies with a bad business plan fall prey to those who may not understand how the typical MLM setup works. The MLM Watchdog can provide consumers and job hunters with helpful tips on how to find real jobs and not the MLM scam type jobs. Often, job seekers can be persuaded to represent an MLM business that may not have their best interests in mind, and a greater understanding of multilevel marketing business models helps the most vulnerable part of the job market avoid being ripped off by unscrupulous MLM founders and core staff.
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