Whenever I see hype, it raises a huge red flag for me. It’s a sign of something that is driven by recruitment, and does not have a long term future. In the case of efusjon there was bucket loads of it.

The company began in 2008 and was formerly launched in January 2009. It experienced rapid growth until their Facebook Application Launch failed miserably and a lawsuit was filed against it by MLM attorney Kevin Thomson in late 2009.

The lawsuit was filed in an effort to get the company to change its business model to protect its distributors from promoting an illegal pyramid scheme.

Since then it has been on a gradual decline. In late August 2010, it sent this letter to its distributors…

Dear eFusjon Distributors:

It is with great sadness that we announce today that we must cease the direct sales multi-level marketing business of eFusjon, Inc. as of September 1, 2010.

The independent contractor distributor agreements will terminate as of this date. See Distributor Agreement, Section 7 (“The Agreement shall continue in effect between the parties hereto until either party terminates the Agreement…”). Qualified distributors will receive their last compensation check for the month of August, less offsets against any amounts that are owed to the Company, on September 10th. Any commissions due will be available in your “Hyperwallet” account until October 31, 2010, after which date you will need to contact the corporate office (to access your “Hyperwallet” account please go to www.efusjonpay.com, or contact customer service for assistance). The Company will send refunds of the $30 membership fee to those distributors who became members in August 2010.

This was a very difficult decision for the Company and not one we had hoped to make. When the owners started eFusjon in 2008, we envisioned a unique and successful MLM business with healthy and unparalleled beverage products. The goal was to market these products through independent distributors via the MLM direct sales business model. Distributor performance, however, has been steadily declining for over a year now, and as a result, so has the Company’s revenues. The Company can no longer maintain a marketing model that is not generating the funds needed to grow a viable business. In short, the Company’s MLM business model is no longer a sustainable marketing strategy.

With a certain level of optimism, we also announce today our decision to explore other opportunities for the eFusjon product many of you have come to love. For some period of time, you may continue to enjoy eFusjon products through purchases (without compensation) on the eFusjon website www.efusjon.com.

Lastly, we extend a sincere and heartfelt thank you to all of you for your dedication to eFusjon over the years and for standing by our product and the Company during the height of our success as well as through more recent challenging times. We share your disappointment about the recent turn of events, but are cautiously optimistic about the future of eFusjon and eFusjon’s unparalleled, healthy beverages.

With gratitude,
The eFusjon Corporate Officers

I’m writing my opinion not to condemn the company, but to educate.

This is a drum that I’ll be beating for many years to come because: I want people to be educated about this industry of network marketing and to choose wisely for their long term future.

This is another event that will ruin the aspirations of many people and leave them with a bitter aftertaste of the profession of MLM. It doesn’t serve our industry at all, but there are valuable lessons to be learned.

Time and time again, hyped up start up MLM companies with “revolutionary” compensation plans have proven themselves incapable of staying in business. And yet, the glitter, the dollar signs shine so brightly that greed completely takes over any common sense.

My mentors have taught me that whenever a company explodes and then collapses, it’s because of greed and ego.

efusjon came on to the scene competing in the bloated energy drinks market. The product wasn’t the first of its type, wasn’t really anything extraordinary, and it certainly wasn’t value priced.

The retail commissions were a joke. Distributors would have lost money if they tried to retail the product at recommended retail price, taking into account shipping costs.

Since you couldn’t retail the product, there was no other reason to get involved than to take advantage of the “revolutionary”, 3 x 15 forced matrix compensation plan. And to keep your position in the matrix, you had to order 48 cans of the stuff every month whether you wanted to or not.

The company had clear intentions to expand very quickly with an application that would exploit Facebook to tell the whole world about efusjon. That was promptly and rightly shut down by Facebook itself – the beginning of their decline.

The company never had a long term vision, and the people it attracted reflected that. People got involved in this to get rich quick.

Now it has suffered the same fate as the overwhelming majority of new MLM startups – it did not last the first 2 years.

If you want to build long term wealth in network marketing, don’t be blinded by greed and ego. Choose wisely. Find a true mentor with a servant’s heart…

You may find this a little bit worrying. You may or may not believe it could happen to you. But it does happen… more often than you think. It’s already happened with two major companies in 2010.

Some “network marketing” company managers are so stupid, that they don’t even know what their primary asset is. With their massive greed and over inflated egos, they let the distributors do all the hard work, then they pull the rug out from underneath.

Imagine building a network marketing downline up to the point where you’re earning $46,000 per month, then in the first days of the New Year, you get this letter in the mail…

Dear Independent Representative,

We would like to take this opportunity to thank you for your continued support of Body Electric, and to announce some very exciting changes and enhancements to our program.

Body Electric has spent the past 5 years developing a huge base of satisfied customers through both direct sales and network marketing. We’re very pleased with how our large our customer base has grown. We choose to make our valued and loyal customers our number one priority.

As we move forward into this new year, Body Electric has elected to renew our commitment to provide excellence and service and support to our customers. In 2001, we will offer lower prices, expanded specials and an exciting reward program. Of course we will continue to provide the best products available. Our customers get results, we like it that way.

To more effectively focus on our loyal customers, we are eliminating the need to qualify for bonuses. We have replaced the present commission structure with a one-time referral payout for new customer orders. Anyone who is a customer and refers a new customer will receive a bonus on that first order. It’s our way of thanking you for helping us spread the good news on Body Electric’s unique products and philosophy.

We hope you are as pleased with these program enhancements as we are. Thank you again for your support of Body Electric. We hope you will continue to enjoy the benefits of our exceptional products, and hope you will continue to promote our products to others.

With best wishes for a happy and healthy new year,

Sincerely Yours,

Body Electric Vice President of Operations

“We hope you are as pleased with these program enhancements as we are”… Can you believe this company had the nerve to write that after effectively terminating all of their distributors?

“We are eliminating the need to qualify for bonuses”… You don’t have to worry about qualifying for that $46,000 monthly residual bonus anymore.

Body Electric sent this letter to their reps in early January 2001. Four years later, the company got its just deserts – it went bankrupt.

The two major companies who have done exactly this in 2010 are XELR8, the makers of the Bazi nutritional beverage in January, and iLearningGlobal in February. Fruta Vida/Pro Image waved goodbye to their reps in April 2009.

These companies were digging themselves into a financial hole, and for them, shutting down their MLM operations seemed to be the best way (easiest?) out.

In the case of XELR8, being a publicly traded MLM company, they had stockholders to please. That move has backfired as revenues are well down and the stock price has tanked. Hmm, it turns out their real assets were their hard working distributors.

What emotions do you feel when this happens to You?

Richard Dennis was a top earner at Body Electric when he unexpectedly received this news. That day he felt an overwhelming burden of responsibility on his shoulders for the pain of his faithful team.

When you get to the top, you feel very close to the people who’ve been with you all the way. They’ve put their trust in you to lead them, to help them achieve their dreams. They believe in your best judgement, your choice of vehicle…

I can only imagine it to be gut wrenching.

How do you make sure this doesn’t happen to you?

Read your Policies and Procedures!

Body Electric had every legal right to terminate their MLM pay plan. So did iLearningGlobal. Here’s exactly what they laid out in their Policies. There is no easier exit clause than this…

“… iLG reserves the right to terminate all Marketer Agreements upon 30 days notice if the Company elects to: (1) cease business operations; (2) dissolve as a business entity; or (3) terminate distribution of its products and/or services via direct selling channels.”

It was written. They had every intention of using it. And they did.

Don’t stake your future on companies who can do this to you at their will. It’s just not worth the risk.

iLearningGlobal is the second major MLM company to terminate it’s pay plan in 2010, and therefore all of its distributors. It follows XELR8′s painful decision to go direct sales in February. It was announced on March 17 that iLG will cease distributing it’s products via MLM and go to a more traditional retail sales model.

This decision will be hugely detrimental to the many distributors who have put their belief, faith, trust and energy into the company for their future. It will be especially so for the top distributors who will bear the responsibility of emotions from their entire downline team. It’s also bad for the entire MLM industry as many will lose confidence in it as a vehicle.

iLearningGlobal began in early 2008 with Brian Tracy, a global leader in personal development, as one of its founders. It was in pre-launch for about year before it officially launched in March 2009. Come March 2010, the company has failed its hard working distributors.

It will continue as a company, but it’s MLM business model, like most new MLM companies, did not survive the first two years. In an open letter to all of its distributors, iLG explained its reasons for terminating the MLM pay plan. Here’s an excerpt from that letter:

Much has changed in the marketplace during the past two years. When we began, streaming HD quality video was a unique and distinct advantage, public perception of online video training and higher end pricing was the norm, speakers continued to protect most of their content and the global economy was still perceived as strong.

While we have continued our quest to be the cutting-edge leader in our industry, we find ourselves facing a vastly different environment. HD video streaming is more common, authors and speakers are giving away a great deal of content, online communities are low-cost or no-cost and discretionary spending is at a record low. All of this has challenged our pricing structure, particularly under our network marketing model.

While iLG’s decision is very unfortunate and traumatic for its distributors, it really should not have come as a surprise if distributors were aware of iLG’s intentions in the beginning. In their Policies and Procedures and Terms and Conditions, it said they could they could terminate the MLM pay plan at anytime with a 30 day written notice. And they did!

From Terms and Conditions Document point five (5) which is available at marketer.ilearningglobal.tv:

“… iLG reserves the right to terminate all Marketer Agreements upon 30 days notice if the Company elects to: (1) cease business operations; (2) dissolve as a business entity; or (3) terminate distribution of its products and/or services via direct selling channels. Marketer may cancel this Agreement at any time, and for any reason, upon written notice to iLG at its principal business address. iLG may cancel this Agreement for any reason upon 30 days advance written notice to the Marketer.”

This is why it’s so important that you, as a professional network marketer to read your company Policies and Procedures, and Terms and Conditions, so that you’re aware of your agreement and relationship with your company.

In my opinion, if a company has this clause in their contract, it’s fairly clear evidence that the company does not intend to remain as it is for the long haul. The company owners and operators had clear intentions to change the business model at some point in time and guess what? They did.

iLearningGlobal will stop paying residual income to the field and change its business to a traditional retail sales model, where it may eventually not pay any commissions at all. (It may become just a subscription service for ex-distributors who still believe in the product.)

It’s not the first Personal Development MLM company to cease its network marketing operations. Several before it have come and gone in a very similar fashion.

In the late 1990′s, The People’s Network (TPN) merged with Pre-Paid Legal. If it had not done that, TPN would have failed and dissolved as a company. I read reports that today, most of the top producers and earners in Pre-Paid Legal were originally from TPN. (Please feel free to agree or disagree by posting a comment.)

On BetterNetworker.com, Daegan Smith tells his story about how the two personal development MLM companies that he had built to the top level, Financial Freedom Society and Success University, failed under similar circumstances. Daegan paints a very clear mental picture of how his 3 years of hard work vanished right before his eyes.

MasteryTV.com is a personal development TV channel on the internet. It used to distribute it’s services through MLM. It is now a free service.

While personal development is critical for long term success in network marketing, history tells that it doesn’t stand up well as an MLM product in and of itself.

Here is my view on why this is so…

1) Information is not tangible, no matter how good it is. There is no power in information in and of itself. Power comes from the actions you take after absorbing the knowledge. Getting good information into people’s hands through network marketing is a great concept, but it doesn’t work unless the people know how to put it into use.

In the audio version of his book “The Slight Edge”, Jeff Olson, former CEO of TPN gives his own insight as to why the company failed. He talks about how information itself can’t solve problems. You first need the right environment and associations to make it work.

Then you need a processor. Most people expect to get results in a “quantum leap” after learning the tips and tricks. But in reality, getting results is a process of learning and applying, learning and applying.

2) There’s not enough of a mark-up on the price to pay the distributors and the trainers. iLearningGlobal had some very successful coaches conducting their training in many different areas from real estate, to marketing, to business management.

I imagine paying these people for their training would have been very expensive because their time is very valuable. But you also have to make the information value priced, otherwise most people won’t be able to afford it. Therefore, the profit margin would not have been sufficient enough to cover the costs of the trainers and pay the distributors.

The reason why MLM companies who sell nutritional supplements, weight loss products and skin care do significantly better than companies with other products is because there’s a very high mark-up on the products. The raw ingredients required to manufacture those products literally costs pennies on the dollar, yet they can sell products at premium prices because the market allows them to do that.

My thoughts go to Brian Tracy, who had the vision to put iLG together, and all the distributors. It demonstrates just how important it is for the company owners and managers to have experience as successful network marketing distributors. Brian Tracy did not have that experience and this is unfortunate the result.

A network marketing company must keep it’s distributor force and grow it, otherwise there is no network marketing company. That’s not an easy thing to do for the companies, considering there are endless competing opportunities. Individual reps have a high tendency to quit, or jump to another company in order to find success.

So in order to keep their reps from leaving, they need to make themselves look good. Companies need their reps to think they are the best thing since sliced bread. But… some MLM companies are willing to lie, or use deceitful practices to paint a glowing image of themselves, desparately trying to retain their distributors and gain new ones.

They don’t lie directly. However they don’t tell the full truth either. They use voodoo, black magic, sorcery to twist the facts and spin the numbers. There are a lot of facts they can spin to make themselves look like a great opportunity.

One of the facts they can spin is retention of distributors. A perfect example of how bad MLM companies are at retaining their distributors is the now defunct Excel Communications.

(Excel is no longer an existing company. Excel’s parent company filed for Chapter 11 Bankruptcy in 2004. When it did so, it terminated all Excel distributors and did away completely with the Excel business, but kept the customers that Excel reps worked so hard to obtain.)

Anyway, because Excel was once a publicly traded company, it had to disclose its figures to investors who would buy its stock. In the public record, Excel showed a one year retention rate of 6 to 7%! Not 67%… 6% to 7%.

Now that’s not smart business…

Imagine in a year, you spend a lot of time, money and energy buying advertising, doing meetings, doing 3 way calls, talking to everybody you know and you manage to sponsor 100 people. Well, at the end of the year, you’ve only got 6 to 7 people left still building the business.

You’ve probably also got maxed out credit cards, shattered emotions and broken dreams. Not to mention people hide when they see you coming. That’s a reality that a lot of people can relate to.

Now, some MLM companies like to brag that they have a high retention rate. Some like to brag that they have over a million distributors. Some like to brag that they are a billion dollar company.

Here’s a general rule of thumb: Whenever you see a company bragging about their statistics, your chances of success in that company are not going to be very high. A good company does not need to brag about its achievements.

A while ago, there was one company that said they retained 96% of their people. That’s pretty amazing isn’t it? Well they were taken to court by the government, for lying.

It was 96% retention for 1 month. If you brought 100 people into the business at the start of the month, by the end of the month, 96 will remain – not too bad. But… by the end of the 2nd month, half of the 96 people would have stopped their autoship (i.e. quit). By the end of the 3rd month, half of the half remaining would have stopped their autoship.

Can you see how the company was deceiving people? The average person doesn’t stop to think about whether this figure is valid for 1 month, 1 year, or 10 years. They just assume that the company would retain 96% of their people for the long term.

As for the companies who brag that they have 100,000, 500,000, even 1,000,000 distributors, they don’t tell about the ones that are inactive. A company may have a million distributors, but often, only 50,000 of them are ordering products and building the business.

Companies also like to tout that they’re in massive growth. They say things like…”Our sales are up 40% this year”, “Our distributor force has grown by 200,000 over the last year”. But when you take a closer look, all that growth is happening in the new countries that they’ve entered. In your own country, there’s no growth at all!

A lot of stagnant MLM companies do this. They hit a glass ceiling in the country of their origin, where they’ve become a household name, so they decide to open up in another country.

They open in a foreign country with a lot of fanfare and excitement and heaps of people sign up. But after a few months, the business begins to die because they don’t have a duplicate-able system. So they then open in another country and the process begins again.

That’s the side you don’t often see, because the companies don’t want you to see it. They spin it to make it look all rosy.

The bottomline is it all doesn’t matter. It doesn’t matter how many distributors your company has, it doesn’t matter how much revenue your company turns over in a single year, it doesn’t matter what the retention rate for the company is. Prospects don’t care about any of this stuff.

What really matters is how many people on your team are making money. If people on your team are making a profit, no matter how small, you are going to retain them. They will duplicate. If most of the people on your team are spending more money than they make, then you don’t have a sustainable business. It’s as simple as that.

The first step to MLM success is obvious. It’s to make a list of your friends and family and get rid of them completely by constantly annoying them with your deal. That’s exactly what your “successful” upline mentor told you to do right? So now that you’ve exhausted your warm market and severed all of your close relationships, what do you do? (First of all, congratulations, you haven’t quit yet.)

Did your “successful” upline mentor then tell you to go buy expensive leads? Some people will tell you that the quickest way to build your network marketing business, get it going and earning commissions, is to buy hundreds, even thousands of targeted leads. After all, getting your business in front of the right prospects is one of the hardest aspects of this business and takes the most work.

So in buying leads, or effectively outsourcing your marketing, you have short-cutted one of the biggest obstacles in the process of building your downline. Great. All you have to do is establish a good relationship, introduce them to your team, show them how good the products are and get them to do the same as you did and your destiny is built. Umm… no…

Buy leads is not duplicatable

Buying leads does not work, it doesn’t duplicate. The vast majority of part time networkers trying to build additional income from home will never be able to make it work.

Here’s why…

Remember back to the last time you received a call from some person you didn’t know, pitching you on something. Perhaps you were in the middle of dinner with your family. Did you like it? I doubt it. I bet you were angry that somebody you didn’t know, who got your number, trespassed on your private time.

Ninety-six percent of the world’s population is sales resistant. They hate to be sold, especially by somebody they don’t know. Buying and cold calling leads is a huge waste of your time and money.

And here’s why it won’t work for the 96% people who are building their network marketing business part time…

Firstly, they don’t have the resources to spend the hundreds or thousands of dollars every month on leads. Secondly, people simply can’t take that much rejection on a daily basis – it’s a huge blow to their self confidence.

I’ve heard from many network marketers who persisted through the terrible reactions of their bought leads. Of those who they were able to contact, they were typically sworn at, hung up on. Most of the leads weren’t even real people, nor contactable.

I count myself lucky, because I have not personally spent many thousands of dollars buying leads. I have personally heard the stories of successful MLM mentors who in the past have spent upwards of $2000 per month buying leads from several different lead brokers. These were full time networkers. None of them had any success.

Some were able to sponsor a few people, but none of them stayed to build the business. They all quit, because they weren’t able to duplicate the results.

Selling MLM leads is big business

If your upline is telling you to buy leads from a particular company, I would question his motive. Does he have a vested interest in refering you to that lead company? Does he own or have a share in a lead company.

They have been many, many cases where the upline has sold leads to their downline team members without them knowing by refering them to a particular lead company. This is obviously dishonest and lacking integrity but is made infinitely worse by the fact that this strategy simply does not work! And the upline knows it!

In order to keep you buying their leads they put on the guilt trip, they tell you it’s your fault. If you go to them for counsel, they will tell you “You’re not doing enough”, “You’re just not doing it right”, “You’re not using the script properly”, blah, blah, blah.

Some lead companies will charge you double figures for what they tell you are “premium, interviewed, fresh hot, specifically qualified for your opportunity” leads. But when you call them, it turns out they’ve already been called dozens of times and are begging you for advice on how to get off the list.

How the crooks source their leads

I feel very sorry for the poor, unsuspecting internet browser who filled out some random lead capture page on how to make money from home, and then all of a sudden, he is pounded over and over again by complete strangers because the crook who operated the capture page sold him 20 times as a fresh hot lead.

Here’s another example of how the lead brokers come up with their “highly qualified MLM leads”…

They start a pre-launch MLM company promising to the world the latest and greatest innovative product along with the most lucrative pay plan ever in history. Hurry, hurry, get your position in this ground floor opportunity right now. Some of them will charge you a fee, some of them you can get in for free.

Weeks, perhaps months roll by and their marvelous product never arrives. Then all of a sudden, they shut the prelaunch down and never start the MLM company. They never intended to start the MLM company. Their intention was to build a list, a genealogy that they could sell as qualified MLM leads for millions of dollars.

Don’t buy leads. At Mentoring For Free, we teach you to generate your own targeted leads that want to speak with you, and we teach you how to do using free tools available on the internet. And by the way, we teach you for free.

I used to think being associated with a heavy hitter was a good thing, because I saw them as successful business builders. At least in the pictures they show you, they dress for success, they drive the best cars (usually a Mercedes or a BMW), they live in mega houses with luxury furniture. They walk around with their chest puffed out and they speak with an attitude.

I used to think being associated with heavy hitters was a good thing because I believed that some of the “success” that they displayed would rub off on me. Many other people I’ve met used to think that too. But let me tell you, it’s not a good thing, because a heavy hitter cannot help you become successful.

A heavy hitter does not care about legalities. A heavy hitter does not care about what’s right or wrong. All that a heavy hitter cares about is making money, and they don’t care how they make it. They have big, big egos. They can sell and they can close. But… the majority of people will not be able to do business their way.

A heavy hitter will tell you that network marketing is a numbers game, and you should talk to everybody about your business opportunity, nevermind the fact that the vast majority of everybody you talk to will not be right for the business.

They will tell you that getting a “NO” is a good thing. Every “NO” is one step closer to a “YES”. Go get 100 “NO’s”, you’re bound to get lucky sooner or later. Bull. Network marketing is NOT a numbers game. It’s is a business built on relationships.

Heavy hitters are good at selling and closing. They like to be sold themselves. And since they are always after the big money, you’ll find them in Aussie 2 up scams and other pyramid schemes that promise big incomes over short time periods.

Now, 96% of the world’s population is sales resistant. Most people hate to be sold and because of that, they hate selling to other people. But a heavy hitter will tell you that it’s all your fault if you can’t duplicate what they’re doing. They won’t listen to you and they won’t spend any time with you to help you overcome your problems. They tell you that to be successful, you have to become a hard hitting salesman like them. You don’t.

Heavy hitters don’t care about their people. They don’t care about the financial circumstances of the people they are selling to. They’ll be happy to take your last $50 and they won’t feel any guilt about it at all.

In my old network marketing company, at their glitzy conventions, they heavily promoted their tools – monthly subscriptions to books and CD’s, monthly rallies, and quarterly conferences. I didn’t know it at the time, but the tools were where the big dogs made most of their money (not the products). I clearly remember the superstars saying on stage, at every convention, “If you can’t afford to be at the next convention, you ABSOLUTELY need to be there.”

Heavy hitters, while they appear to be successful, don’t have very high retention because they don’t build relationships with people. Their downlines are like leaking buckets, so they are always looking for fresh blood. And because they don’t care about the law, you’ll see them on the internet boasting about how much money they made in their deal to attract gullible victims.

The difference between a heavy hitter and a professional network marketer is as clear as night and day.

A professional network marketer won’t ever close anybody. A professional network marketer will qualify you for his or her business and will glady tell you if their business is not a fit for you.

Professional network marketers focus on building relationships. They don’t chase money because they know that they will be financially rewarded for building solid long term relationships. They listen to, and freely coach and mentor their people. They know the goals and dreams of the people they talk to and they help others achieve success.

A professional network marketer won’t tell you to get 100 “No’s”. They will teach you the skills you need to attract the right people to you, who are going to build the business with you.

Don’t fall into the heavy hitter’s trap. The cheese is enticing, but the force of the spring loaded bar coming down really hurts.

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.

In this world, we have a wonderful industry of network marketing, where there’s an awe inspiring culture of people connecting with each other, believing in each other and helping each other achieve success. However, there is a dark side to this industry that’s taking advantage of the good will of the people who participate in it.

There is an over abundance of pyramid schemes who are masquerading as network marketing opportunities. Pyramid schemes by definition are illegal because they are only sustained by the endless recruiting of new participants into the scheme and they impoverish 99 people for every 1 that benefits from participating.

Being a rep for a pyramid scheme is bad, bad news. Over the past 10 years, the Federal Trade Commission (FTC) has shutdown 17 illegal pyramid schemes and collected more than $90 million lost by victims. But more and more, the Government is not just going after the perpetrators of pyramid schemes, they are going after the top earners as well.

It is best for you avoid pyramid schemes. Unfortunately innocent network marketers get involved in pyramid schemes through a lack of education and understanding the the differences between a legitimate business opportunity and one that’s illegal.

Not knowing better, they are emotionally blinded by the hype of a money making opportunity presented to them by a friend or stranger, only to have a bitter experience spending thousands of dollars on the bogus deal and trying to recruit new people.

So how can you tell if a money making opportunity being presented to you is legitimate or not? It’s actually not too hard, but it may require a little bit of emotional intelligence – remove all the hype surrounding the deal and look at it for what it is. Look at it through the eyes of the Government. An attorney general would ask these two questions:

1. Would a logical thinking person pay this much money for the product or service if there was not a business opportunity involved?
2. Does the income stop when the recruiting stops?

If the answer to the first question is “NO” and/or the answer to the second question is “YES”, then the business opportunity being presented to you is a scam. It’s just that simple.

Typically, pyramid schemes and reps of pyramid schemes use a lot of hype and make claims of huge income potential in their marketing because they want (and need) to get as many people into the deal as possible. Hype is a major red flag to be aware of.

Here are some important points to consider in understanding the difference between a legitimate MLM business and a scam.

A Saleable Product

A legitimate business opportunity must have a saleable product or service that you could sell to people who don’t participate in the opportunity. That way, all reps can make still make money even if they didn’t recruit anybody into the deal.

In a pyramid scheme, nobody outside of the opportunity consumes the product. Therefore the only way to earn a commission is to recruit more and more people into the deal. A classic example of this is efusjon. While efusjon does have a product (an energy drink), the way that the business is structured, nobody can make money selling the drinks to non-participants.

Pay To Play…

A legitimate network marketing opportunity can NEVER charge you a fee to participate in the business opportunity. When you pay your $100, $200, $500 to join a network marketing company, along with your distributor kit, replicated website, support tools, you must also receive a corresponding volume of product.

A legal MLM company can NEVER compensate you in anyway for recruiting. If you come across anything that charges you a hefty fee just to be a representative, and your sponsor earns a commission on that signup fee, then it is an illegal pyramid scheme.

The “Tools” Scam

You cannot pay commissions on business tools. This law has been in place for about 20 years and for good reason. Tools are there to help you promote the business and the products. Tools are NOT the business themselves because they cannot be used by people who don’t participate in the business.

A website is a tool. If a company is charging you fees to maintain your replicated website and then paying commissions to your upline from your monthly website fees, then this is also illegal. The same goes for books, tapes and audio materials and seminars.

A legal network marketing company can charge you a reasonable fee to use promotional tools, but it cannot pay any commissions on those tools.

Efusjon, often spelt with a lower case ‘e’, launched in early 2009 with great hype and fanfare. The opportunity to make enormous amounts of money with efusjon was forcefully marketed on the social network, Facebook. Indeed, some members who used Facebook literally became efusjon extremists.

Well right now, efusjon is being sued in California for operating as an illegal pyramid scheme. The reason for that is the only way for distributors to make money in efusjon is to recruit people into the network.

See, a network marketing business model is sustainable because there is the constant movement of a quality product to the end consumer who’s happy to pay for it. A pyramid scheme is a non-sustainable business model that impoverishes 9 people for every 1 that gets rich.

This case demonstrates that just because a company has a tangible product and is using a multi-level marketing distribution channel to get it into the hands of consumers, it does NOT mean that the company is not running an illegal pyramid scheme.

Now, the Third Pillar of “The 5 Pillars” of Network Marketing is “A Remarkable Product at a Value Price”.

In the case of efusjon, they do actually have a good product. They’ve put a different twist on the bloated, but growing energy drinks market by mixing in health ingredients such as acai berries. They promote the anti-oxidising benefits of the product. No problem. The problem is, the products are not value priced.

The retail price for a case of 48 efusjon energy drinks is $140, or approximately $2.92 per can. That is significantly more than you would pay for a can of Red Bull at a convenience store. But that’s not all…

The wholesale price for the case of 48 cans, the price at which the distributors buy, is $120, but they also have to pay thirty six dollars $36 to get the stuff delivered as well. So that’s a total of $156 for a case of energy drinks that they can now retail at $140!

Who’s going to retail when they’re losing $16 for each case they sell?

The Company does give each distributor a replicated website where they can sell units of the product for $35. But the commission they get for selling the through their website is only 4.5%, or about $1.58 per unit sold.

So under these circumstances, with the product being overpriced and very low, even negative commissions, there is absolutely no incentive for any distributor to retail the product to people not participating in the business opportunity.

To remain in the compensation plan, a distributor must purchase a case of energy drinks every month, $156+. If a distributor fails to meet this requirement, she loses her position pay plan and therefore is no longer eligible for any bonuses. This essentially means that efusjon forces its distributors to buy its product whether they want to or not.

Whilst there is very little incentive for distributors to retail the product, there are huge incentives for them to recruit new distributors. Active efusjon distributors, those on the monthly autoship of 48 cans, are labelled as either “Associate” or “Executive”.

Associate distributors have a position in the compensation plan, but are NOT eligible for bonuses! To be eligible for bonuses, an Associate must become an Executive by enrolling 3 new associates into the network. This requirement obviously drives the behaviour of recruiting – you don’t get paid if you don’t recruit.

This is what eFusjon calls “The Power of 3″ – you get three, and help your recruits get three, who help their recruits get three, and we’ll all be rich! (Except those at the bottom who just can’t get three…)

The major perks that makes efusjon so recruitment driven are the fast start bonuses. An associate who signs up a new associate on the autoship program gets $75 in fast start commissions.

So now weigh it up: -$16 dollars for retailing the product, $1.58 for selling 1 unit of the product online, or $75 for signing up a new distributor. Hmmm…

That’s not all. If you help one of your Associates become an Executive within the first 30 days of him signing up, you will receive a one time bonus of $200. This is a classic example of pyramid scheme recruitment incentives – the more people you sign up, the more you get paid.

In summary, here are the lessons we should all learn from the efusjon case…

1. Make sure you have a marketable, retailable product – Nobody could make a living retailing efusjon outside of the distributor network.
2. Be very careful of hype and fanfare – Recruitment driven companies need to use a lot of hype and in-your-face marketing to get people into the deal, otherwise they can’t make money.
3. Understand how you get paid – as the compensation plan drives the behaviour of the distributors in the field.

You can go to the website Class v Efusjon to learn more about the court case.

There is a major scam taking advantage of the upward trend of online shopping. The company is growing very fast, but many people do not realise the whole setup is a scam yet.

A major red flag is the location of the headquarters of this company – it is located in the same place as several other fraudulent operations. I won’t mention the company name, because I don’t want to upset anybody, I just want to help you avoid being deceived.

It’s an online shopping portal where people can go to buy just about everything from laptop computers, to iPhones, to gift cards, to vaccuum cleaners. This company’s aim is the make shopping fun with reverse auctions – where people bid down the price of an item until it’s right for them.

But the company’s product are not the items their selling on their portal. The company’s product is – get this – credits. Specifically, “bidding credits”.

Let’s take a look at how this reverse auction thing works when buying a pair of jeans…

If you were to buy a pair of jeans at a retail outlet for the recommended retail price $100, let’s say $50 would cover the store’s cost of buying the jeans at wholesale and $50 went to the store as profit. No problem. You are happy because you got yourself a new pair of jeans and the store is happy because they made a profit.

Now let’s say you won the pair of jeans under a conventional auction at $80. The seller still paid the wholesaler $50 for the pair of jeans, so he makes a profit of $30 and he’s happy. You’ve made a saving of $20, so you’re very happy and all of the other contestants are happy because they risked nothing by competing against you in the auction.

This reverse auction merchant, would pay the same wholesale price for the same pair of jeans – $50. Just like the retail outlet, he marks it up to the recommended retail price of $100. One hundred dollars is the start price of the reverse auction.

Each time an auction contestant makes a bid, the price of the jeans is lowered by 25 cents ($0.25). The bidding process continues until a bidder likes the price and buys it, but for the purposes of this example, let’s say the auction goes down all the way to its theoretical limit of $0.00.

Here’s the kicker, it costs a bidder 80 cents ($0.80) each time he makes a bid to lower the price of the item by $0.25. You purchase these bids as “bidding credits” in packages of 20, 50 up to 5,000 bids at a time.

If I’ve done my math correctly, it takes a total of 400 bids to take the final price down to zero ($0.00) and it has cost the bidders as a whole at total of $320. The lucky last bidder got the jeans for free so she’s very happy. The company is laughing all the way to the bank with a huge profit of $270 on a pair of jeans that has cost them $50!! But what about all the OTHER PEOPLE who lost? Well, they as a whole, paid for item that they didn’t get. I don’t think they would be too happy.

And that wasn’t enough for the company. The executives have egos so big that they want to compete with the big boys – the likes of Amazon and eBay. They’ve put a compensation plan behind this whole thing and they’re inviting people to become sales reps for their product, “bidding credits”, and build a downline organisation selling bidding credits to their friends and family.

Please understand that bidding credits is NOT A PRODUCT and that people are LOSING MONEY if they do not win an auction. And since there can only be one winner for each item at auction, many, many innocent people are going to lose money playing this game.

There is a way that this company can be legal. And that is if they promoted themselves as a casino, or a gambling site and they were upfront about the risks to their customers. But the way they are currently going about business, they are going to rob a lot of innocent people of their money.