Retail sales requirements within an MLM opportunity is perhaps the most decisive issue facing the industry today.

Proponents of pyramid schemes argue that affiliate purchases of product should count as retail sales. I myself argue that to permit as much would open door for product-based pyramid schemes to operate freely.

This stance is strongly rooted in the definition of an MLM pyramid scheme which, regardless of the company, has commonality with respect to a lack of retail sales.

If you start trying to change the definition of a retail sale instead of encouraging retail sales activity itself, you’re just trying to make excuses for pyramid schemes.

I’ve held this opinion for years here at BehindMLM and it forms the base of pretty much every MLM review I’ve written.

On December 15th the FTC published an article that all but confirms retail sales are indeed only sales to non-affiliates.

Penned by Lesley Fair, a senior FTC attorney, the article in question is titled “Dismantling a pyramid: Lessons from the Vemma settlement”.

Although not explicitly directed at anyone in particular, to me it reads like a directive aimed squarely at the MLM industry itself.

Fair begins by going over
the FTC’s allegations against Vemma
. Namely that it was a pyramid scheme with little retail activity taking place.

According to the FTC’s complaint, rather than marketing the company’s health drinks to the general public, the defendants encouraged participants
to qualify for bonuses by buying products themselves and recruiting others to do the same.

The result, the FTC charged, was a classic pyramid scheme that compensated participants mainly for enrolling others in the network,
rather than for retail sales
based on legitimate consumer demand for Vemma’s beverages.

In stopping Vemma from paying affiliates to recruit new affiliates, Fair claims the
settlement

shifts the focus away from signing up new recruits and puts it back where it belongs: on selling products to people who aren’t part of the network structure.

By doing this, the company incentivizes sales over recruitment.

Couldn’t be more clearer.

The second half of Fair’s article goes on to cite similar regulatory action by the FTC against
Herbalife
and
Fortune Hi-Tech Marketing
.

Are the Vemma settlements, the FTC’s $200 million Herbalife order, and the recent action against Fortune Hi-Tech Marketing (FHTM) striking a familiar chord?

They should because … the raison d’être for any legitimate business
is to sell products to people who aren’t affiliated with the company.

This isn’t just a theoretical point.
An MLM’s compensation plan should reward real sales to customers outside the network.

That’s not how Vemma and Herbalife operated, and the FTC alleged that both companies ran afoul of the law in different ways.

The FTC orders require Vemma and Herbalife to change their business models to comply with the law, and given their different business structures, use different remedies to rea

🤖 Quick Answer

What is the FTC's position on retail sales requirements in MLM companies?
The FTC considers retail sales a critical factor in distinguishing legitimate MLM businesses from illegal pyramid schemes. Companies lacking substantial retail activity to non-participants are viewed as operating pyramid structures, regardless of product involvement or affiliate compensation claims.

Why do authorities distinguish between retail and affiliate purchases in MLM operations?
Retail sales to genuine external customers indicate legitimate business activity, while affiliate-only purchases suggest schemes designed primarily for recruitment. This distinction prevents companies from disguising pyramid structures through product sales exclusively to participants rather than consumers.

What defines an illegal product-based pyramid scheme according to regulatory standards?
An illegal product-based pyramid scheme relies primarily on recruitment rather than genuine retail sales, lacks authentic external customer demand, and generates income predominantly through affiliate purchases rather than real market distribution and consumption.

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