WHAT TO DO WHEN YOUR COMPANY
TAKES YOUR MONEY!
Contact an MLM pro distributor lawyer. I am a Expert Witness in arbitration and court cases and can provide you with items I will need to help your case. I also have an overview of many cases. Several are listed in this publication. We have others that prefer not to be listed. Sadly in general, for them to handle a case for one person (see the note on class action suits and costs) the amount of commissions owed needs to be over $50,000 in the near or immediate future. If you want to front all the money for the case they will do it for less.
Go to the regulators and consumer protection agencies (if the lawyer in above agrees). If you can't afford the lawyer this may be your only route. Remember you can allege fraud has occurred, but make sure you use the words, "I allege." Check with your local attorney when drafting this letter or pay one of the MLM distributor lawyers to review it!
"DISTRIBUTOR TERMINATION"
Your editor gets 2 to 10 calls a month from good folks that have been terminated by their parent companies. Over the years I have developed a kind of classification for "types of terminations." Let me share it with you so you can have an inside look at some of the pain and grief that goes on inside our offices. Suggestions are welcomed for additions and deletions. Our first principle is that there is never a good reason for terminating a distributor. That gets tempered with experience and time. Here are some of the reasons that distributors get terminated and some seminal insights to different situations. None of them are "perfect" descriptions of what happens nor is any case black or white. Most termination cases end up a mix of any number of these scenarios. A real case may end up a little bit of #1, a lot of #3, and a touch of #4. Mix and match your choices to what is really going on and you will get a 100% fit!
1. The Greedy Company Owner that has figured out that he has more to gain from terminating a top earner that to lose. The loss ratio in their head is that more of top distributor Gogettum's downline will stay if he or she leaves. They save $50,000 a month (in commissions to Gogettum) and sales only drop $20,000. The company comes out $30,000 ahead. If this happens once or twice to distributors you know, its' time to get nervous! Mr. Greedy Owner may be testing and is about to figure out the execution formula in a cost benefit analysis. If Mr. Greedy gets away with it 2 times out of 3, he is $60,000 a month ahead with money in his pocket!
2. The Desperate Company Owner is in a hard cash crunch. Sales may be dropping and his style is too high. Or the company may actually be in dire financial condition and needs the money to continue operating. A sad train of thought settles in, in the Company Owners head, "The distributor has already been well paid for his efforts, so why should the company continue to reward him?" This is also a subset of the thinking of "Mr. Greedy Company Owner", and it is as old as direct sales itself (not just MLM). A subset of this is being seen in "Wild West" Binary Compensation plans today where the plan is paying out too much. If "pay stops" are put into their Binary Pay plan it is going to lose its glamour. The Desperate Company Owner starts termination, (or makes qualification extremely difficult) for top earners who often have multiple earning positions.
3. The Alarmed Company Owner begins his termination process because it is reported that distributor Gogettum is working another MLM company Sequentially. Some major players in the industry do this on a regular basis. They build a company to $20-30,000 a month then, leaving all their leaders and distributor intact, they quietly move on and start building a second company for "insurance." This is an accepted way of doing business. The problem is that the Alarmed Company usually panics and pulls the pin, terminating Gogettum. Distributor Gogettum has no choice but to sue, or go back and raid his downline. We prefer the suing route.
An Oct 1999 Modification - The first three belong to "bad" company acts the next 3 "shaky" distributor acts. Over 100's of cases that I have dealt with I have found there is another area of concern. The "Viperous" Upline who stands to financially gain from the termination of one of their downline. A quick example is if the downline has a large 6th level producing massive income. This is out of the pay reach of the "Viper" upline who proceeds to create fraudulent problems the downline is charged with. The downline gets terminated and the Viper benefits. I have also seen this done because of personality clashes.
4. The Egotistical Company Owner has a personality conflict with top distributor Gogettum. This distributor becomes a burr under the owner's saddle and he can't wait to find an excuse to terminate he/she. The top distributor suddenly finds that secret top leader meetings are being held and he/she is being excluded. The Egotistical Owner has other distributors spy on the target distributor and to find "violations" of policies and procedures. A word on Mr. Egotistical's behalf: Sometimes, but not always, distributors in such scenarios are "pains in the know what", thinking they know more about running the company than the owners themselves. They haven't walked in the owner's shoes and had the responsibility of running a company. We have two big egos colliding here!
5. Mr. Ego Distributor doesn't like the way that the company is being run so then decides to do his own thing. Another company has offered to make them "King Kazuba" of that company with percentages of the gross earnings as an inside secret bonus. They go in to rape, pillage, and plunder their downline and anyone else's they can pirate. In their mind, the Company is evil and this is really justified. Sometimes I swear that this is a psychotic crusade on part of the distributor and is conducted in a high state of hysteria. Your editor has been in the downline of a Mr. Ego doing this and had to physically deter him (can you believe that) from raping my downline! The failure rate is high!
6. The top distributor: "Mrs. Moneyplus" that figures starting his/her own company will make them a lot more money than being a distributor. They team up with others or try to start their own company. This results in an open war of survival between the two. It is natural that the parent company terminates the distributor! Why fund the competition? The damage to downlines can be horrific. Years ago your pacifist editor threatened to sue my upline in a case like this, to protect my downline. To be realistic though this is how most new company's spring up. It goes all the way back to when two guys split from Nutrilite and started first, American Way, then Amway. That was a bitter battle as recounted by some of the old timers. Your editor considers it part of the normal progression of the NetWork Marketing business. Not pretty, but natural! Termination is going to be automatic!
Proceedural Terminations
The problem is that may of the termination reasons listed above lead to proceedural difficulties between the distrbutor and company. They can be as unfair as the reasons for terminations.
1. The company holds a distributor's check without due process or any disclosure of who accussed them of wrong doing. They do not warn a distributor of a suspected violation. They just flat leave a distributor in the dark and penniless. This started to show up in 2000 and passed around Via the DSA. This is a flat criminal act as far as the Watchdog is concearned.
2. The distributor is given notice, then a hearing but it is arbitrary since the the same excecutives that made the decision to terminate. Even if a distributor council is involved it is normally biased to what the company Executives say.
3. On the other hand there are companies that have fairly warned a distributor of suspicious or bad activity in accordance with policies and proceedures. The distributor ignores the warnings and continues with activity that may harm the company until the company is forced to terminate.
MLM IS GOOD!
Where does the average person go when they need to make an extra $100,000 a year? To the Direct Sales Industry! It is the only place in the money "food chain" the average person can make millions with a year or so of spare time. Education and very little in assets invested will make enough money to support the new endeavor from the new endeavor, and end up with a six digit income. All it takes is desire!
If you are a neophyte to the MLM Industry you may have read the proceeding article and said, "Oh, this is a terrible industry!." It isn't! It is part of the sales industry at large. In fact, the MLM industry as part of the Direct Sales Industry is one of the best sectors because there are court cases and precedents to protect the distributor. The majority of companies don't mess with the majority of distributors no matter what they do.
Here is a typical example that occurs thousands of times weekly to Non-MLM salespersons: My friend Chuck was a salesman for a commercial building builder. He developed a market for telephone and cable TV neighborhood distribution sheds. The buildings were cement and stone and weather proof. They sold for about $4000. Chuck worked out a deal where builder did maintenance on them to keep them waterproof. The company collected $100 a month for maintenance. In developing this program Chuck wrote in his contract that he got $25 commission for selling the "maintenance insurance."
Chuck had sold a lot of buildings and maintenance contracts. His base automatic income was about $50,000 a year. One morning his boss called him in and said, "I'm turning your account over to someone else, and by the way you aren't getting your residual income any more!" Chuck got mad and quit, naturally! Lawyers told him it would cost more to collect the owed money than the worth of the money.
At least MLMer's have some protection with court precedents and a generally favorable treatment in state and federal courts. Other parts of the sales industry have nothing!
WHAT TO DO WHEN YOUR COMPANY DOES YOU WRONG.
Your Editors Overview - Rod Cook...
This issue is dedicated to what to do when you run into problems with your company. Most of the problems we have today is with new companies being under funded or illegal (unknown to neophyte distributors). It is estimated that 3,000 new companies (of all sizes) that appeared to be MLM companies tried to start in 1997. Half were illegal and not NetWork Marketing companies. They were what we call Psuedo-MLM's through intent or stupidity. Their illegal structure or pyramidal activity doomed them from the beginning. Of the other 1500 or so 90% are so under funded that it is pathetic. Of the 1500 or so new startups the failure rate is running 90-95%! The only survivors will be well funded (certifiably) with excellent products and marketing skills. The American MLM market is fiercely competitive today!
Included in this issue is the "salvage material" to try to get some of your money back if a company fails. The distributors pay signup fees and buy products from the company. Then the company starts sinking.
There isn't much that can be done in this case, except to try to regain your financial investment. That is why I included articles on getting your money back via credit cards. The problem is that the distributor has invested time and emotional energy to try to get the plan to grow. That is the painful part we have to chalk to education to help the scars heal.
When you file complaints to the Better Business Bureau and Regulators (such as Attorney Generals) don't expect fast action or even conclusive action through any of these venues. File your complaint with the BBB first and then the AG of your home state. See the Attorney General section for details. Sometimes if the company is still operating you can at least get some of your money back. The majority of the time (not always) the company is bankrupt and the owners are broke. It doesn't do much good to kick a dead horse, unless it makes you feel better. If you feel the owners were scam artists and skipped with people's money charge on!
If you join a company then find you don't like the products or can't sell them this a different state of affairs. Most good companies give a minimum of 90 days to return sales kits and products to get a full return. Some companies give up to one year to return products and get your money back. The Direct Selling Association and the Multi-Level Marketing Association makes this return policy highly recommended to their members. States such as Georgia, Louisiana, and Texas have made this state law. If you want out, companies should honor your returns (be sure to call/write first and get authorization). If the company balks start your complaints to authorities and consumer protection groups. Also remember the company can usually back out any commissions paid to you so don't expect a full return if you have been making some money.
If your company terminates you the only actual recourse is civil court. But that sure doesn't stop you from lighting a fire under them by complaining to every regulator and consumer group in sight. If it's a larger company this rarely works. They point out this is an internal contractual matter and not a matter for regulatory intervention. It does make for good documentation that you feel you were done wrong in future court battles. Remember there is weight in numbers! If you are the only one terminated this is not good (odds). If there are several of you, that establishes a larger pattern. The sad thing is that Class Action lawsuits in NetWork Marketing are hard to do? Why? Because most MLM cases span several states. To certify a Class in a Federal District Court runs about $50,000 out of the chute plus the other court costs. Not an easy thing!
Hopefully this issue will help make the NetWork Marketing world a kinder gentler place where more companies treat distributors with a higher degree of respect.
Other TERMINATION Reports
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