Multi -level marketing companies sometimes face claims to operate as pyramid schemes because they are partially structured. Sales representatives both in illegal pyramid plans and in legal multi -level marketing companies sell products or services while hiring people to join them. These businesses caught Zeitgeist by discovering their illnesses thanks to the Doieseries and Podcasts (Lularich) and Podcasts (“The Dream”).
Much less attention is the software that strengthens these companies. In the digital age, software companies are what enables the multi -level marketing industry to work. And if experts appear as a pyramid scheme of their customers, we are weighing how guilty software companies can be.
Mark Eiglarsh, a penalty lawyer who previously deals with multi -level marketing cases, said, olmak It is a very dangerous area to be in it ”. “Onus [the software companies] To do everything they can to examine the companies they do, if a prosecutor question them, they say, ‘Here are the lengths we get’.
Software companies that serve multi -level marketing companies have been for more than twenty years. This lower industry usually works with smaller and medium -level multi -level marketing companies that do not have resources to form their own software. These companies are also different from payment processors such as Square or strip not designed for the special needs of the multi -level marketing industry.
The largest, multi -level marketing software may be a company’s spine, configuration of commissions, follows sales, and determining whether sales representatives meet their goals. When participants in a multi -level marketing company want to watch the money they earn from their products or new members they bring, they enter a portal provided by companies such as Florida -based Bydesign Technologies.
However, what makes this software different from other offers is the ability of the industry to customize the unique compensation structures. Although there are some variations, compensation structures typically seem to be a trees in a multi-level marketing company-a new person brought to the “branch of a sales representative of a sales representative. In addition to the sale of a product or service, sales representatives can also be paid for what people under this tree bring. This structure can spread as the company grows. The software helps to manage it.
“Technology and technology presentation is probably one of the biggest challenges for direct sales companies, Jose said Joseph Mariano, President of the Trade Group of the Direct Sales Association.
Mariano said that the multi -level marketing industry of the direct sales association represents companies that make up approximately 90 percent of the total sales volume. The site lists 92 members ranging from home names to smaller shops such as Amway and Herbalife. Many software companies listed among 129 suppliers sponsored the annual conference of the direct sales association, including Jenkon, Exigo and Flight Commerce.
However, multi -level marketing software can also allow problematic privatizations.
“Narrative [a multi-level marketing company] ‘We offer you an opportunity and the people you see you have succeeded have the opportunity we offer to you,’ ‘he said.
For example, some multi -level marketing companies quietly allow some new participants to come to the company higher than others on the tree, and that a company has given more success because of resident people who help to meet the minimum sales requirements. Others can move people from one “branch to another, which can change the earnings of the affected. Pyramid schemes can also raise new participants higher in the tree, but only moving people are not equal to illegal activities.
“This does not mean that the company that makes up the software has made these decisions, KE Keep said. “It is said that we want the software to work like this.”
Legal landscape: against pyramid schemes and multi -level marketing companies
According to the Federal Trade Commission (FTC), illegal pyramid plans may seem to be “remarkable” to multi -level marketing companies. How the compensation works is one of the main factors that regulators use to distinguish them.
Organizers use a two -way test to determine whether a company works as a pyramid scheme:
- If a company’s sales representatives need to pay to sell their products or services,
- And if sales representatives can earn a “prize ında for real customers such as payment for recruitment.
Lois Greisman, Director of the Department of Marketing Practices of FTC, said, “You should look at the money flow,” he said. “In fact, you should look at the incentive structure and where the incentives are.”
Mariano said that direct sales association members should follow a ethical rules to protect their membership status, including prohibiting the money from taking money to hire other salespersons.
However, the software companies go down to details about whether they can account for a multi -level marketing company accused of being a pyramid plan.
According to Rebecca Tushnet, Professor of Harvard Law Faculty, being aware of complaints against a customer or having information that the platform is used for illegal activity can make them guilty.
Tushnet said, “If you contribute to the illegality of something and know what you do – or if you should know in a reasonable way – then you may be responsible.
For example, FTC previously filed a lawsuit against technology companies that activate illegal Robocalls through their sounds through the internet protocol products, although companies were not behind them.
And then there is a compensation structure. Hamline University Professor of Economics Stacie Bosley said that the sales representatives of software companies should have a “interruption” between real sales and income from recruitment. He said that if his revenues bends greatly to recruitment, it should be a red flag.
However, Santa Clara University Law Professor Eric Goldman said that such an analysis could bring a thorny confidentiality problem and whether it hurts customers’ confidence in software companies.
Mariano said that many software companies in this field advised their multi -level marketing customers about how to comply with the law.
Rallyware, a company, provides software to multi -level marketing and other types of company, but does not provide compensation management as a service. Nevertheless, the contracts made with customers, according to Rallyware senior writer Alec Nidenthal, said that these companies earn money within the boundaries of the law.
Software companies testified in court
Several multi -level marketing -oriented software companies refused to be contacted for this article or did not respond to the requests for interviews. However, a legal case sheds light on how these companies can be intertwined with multi -level marketing companies and potential pyramid plans.
In 2017, FTC filed a lawsuit for the leadership of a multi -level marketing company called Infinity 2 Global, alleged to be an investment opportunity. Witness as an expert witness for the case. The Federal Government claimed that Infinity 2 Global was a pyramid and ponzi plan. Operations were possible through a software platform provided by Texas -based Trinity Software.
Trinity, “for the most advanced sales vehicles for [multi-level marketing] & Party Plan Organizations. No rod. “Software was called to pay for the sales representatives commissions of multi -level marketing companies and to witness other features as well as CEO regulators.
Trinity has created an infrastructure on how compensation was handled in Infinity 2 Global, and the sales activity, the bonuses in which people live in the structure of the company, how much each product contributes to the general profit of the company and what the company’s profit margin is. The software also enabled people to change people in the “tree” compensation that may affect their income; Trinity CEO Jerry Reynolds stated that his company refused to do it himself, and instead Trinity is coaching to get written permission from everyone affected by such a shift before changing the “tree” compensation to customer companies.
The features of this data were used by the federal government to claim that the Infinity 2 Global was operated as a pyramid scheme. Reynolds said he would not work with any company if he thinks that the compensation plan is not applicable. In this information, Trinity said, “Who was distributed, who won, and who was lost” and called for patterns such as ”.
Orum I’m not doing it because special, ”he said. “If they start to have difficulty in paying, I will run some queries and see if their jobs are in the way of their jobs, so I can be prepared as a businessman… I’m about to pay for payment.”
Reynolds did not respond to interview requests.
The three leaders of the program were convicted of conspiring to make posts and securities for fraud, and one was also sentenced to tax evasion after the money laundering and prosecutors were proved at the hearing. [the company] He was operating as a pyramid plan. ”According to a statement of 2022 in Kentucky’s Western region, two were sentenced to 10 years and 4 years in prison, one of which was ordered to pay a fine of 100,000 dollars.
Mariano said that all software companies could not access financial information such as real sales for a company. For those who do this, the guilt would be dependent on the realities of each of these conditions ”.
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