As a professional network marketer, you should always conduct your business in an ethical, open manner with integrity. It’s your duty at all times to conduct your business according to the laws of the MLM industry. There are certain things you just can’t do, or you’ll be breaking the law.
One of those is making an income claim, or showing off how much money you’ve made to potential prospects. You can’t make recruitment claims either. These are strictly against the law. Are you surprised? I don’t blame you if you are, because you the all hype and hooplah on the internet everyday. You think it’s normal.
Here’s what I found in Google Ads after searching several network marketing related terms: “I recruited 3619 in 13 days – See How”, “Make $1050 Today Online”, “Make Huge Monthly Network Marketing Profits”, “$1250-8K Residual for 1x$325″. Every single one of these advertisers are breaking the law.
Let’s do a case study to understand why making income claims are illegal. The case in point is BurnLounge.
BurnLounge was shut down by the Federal Trade Commission in 2007. The FTC filed a lawsuit against BurnLounge for operating as an illegal pyramid scheme because it primarily paid commissions to participants for recruiting other participants, rather than retail sales of product.
For those who don’t know, BurnLounge sold opportunities for people to have their own online digital music store. Reps had their own websites where people could come and download popular albums and earn a $0.50 commission (woohoo!). Here was the problem: BurnLounge charged it’s reps $30 to $430 per year to have a storefront (a BurnLounge website) and paid commissions to upline reps for these websites.
With commissions on selling music being so low, BurnLounge reps could only make any substantial money recruiting new reps into the scheme. The FTC saw this as a case of endless chain recruiting.
But the FTC didn’t just file suit against BurnLounge and it’s directors. It also filed suit against some of its top earning reps for making misleading income claims.
In the FTC’s filing against the defendants (i.e. BurnLounge, and individuals involved), one of the reps (a former football star) claimed that he made $300,000, another claimed he had made $200,000 in six months and another claimed he had made $70,000 in 30 days. All of them made those claims at company recruitment events or on training calls.
It’s a amazing, the company didn’t even attempt to stop those people from making those claims.
When these individuals filed their income tax statements, there was a huge descrepancy between what they claimed they earned and how much they filed for tax purposes.
The reason why making an earnings claim is illegal is simple. It’s enticement. When you make an income claim, you are enticing your prospect into the deal. When you say that you or some superstar leader makes $X per month in a business opportunity, the unsuspecting prospect assumes that a lot of people are doing the same, when in fact it’s only one in a million people that ever achieve that level of success.
The bottom line is income claims are typically deceptive. An income claim could be a downright lie. Anybody can put an extra zero on a check, anybody can untruthfully publish that they made $100,000 per month in XYZ Company. The unsuspecting consumer doesn’t think to ask “are they telling the truth?”
And typically, scam artists make claims of earning a lot of money in a very short period of time to entice innocent people into a deal where they are most likely to lose money.
According to Rod Cook of MLM Watchdog, the only way can legally publish your earnings is if you also fully disclose the incomes of every single person participating in the business opportunity.
Never make an income claim, especially on the internet because it has a funny way of remembering things for a long time.
To your MLM success,
Wayne Wu
P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.
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