| ril 20, 2000, the US District court of the District of | | | | people at the top make a huge amount of profits in |
| Nevada ordered Equinox to shut down and liquidate | | | | one swoop. The people at the bottom are making |
| their business. The Federal Trade Commission has | | | | huge payments for these products that are difficult to |
| been watching pyramid-marketing schemes for a long | | | | sell. |
| time. During this time, they have found many fraudulent | | | | Another aspect of a Pyramid scheme is the promise |
| complaints. There are many network marketing | | | | of an ongoing commercial relationship where they will |
| companies that are legitimate, but the FTC is out to | | | | recruit new prospects to operate their own business |
| protect the consumers against fraud. | | | | selling products and services. They may offer training |
| The Federal Trade Commission has proposed new | | | | and advertising for their investment and promises of a |
| rulings for Pyramid Marketing. In the explanation by the | | | | successful career. |
| FTC have alleged violations against Equinox | | | | Since 1990, the FTC has brought 20 cases in pyramid |
| Corporation of state securities laws; deceptive trade | | | | schemes under the Section 5.79. During the time from |
| practices laws, false advertising laws, pyramid laws | | | | Jan 1997 to December 2005, the FTC staff had |
| and licensing requirement laws. | | | | observed 17,858 consumer complaints reporting |
| According to the allegations in the complaint filed with | | | | against pyramid schemes with over $46 million in |
| the court, Equinox operated a multi-level marketing | | | | damages. |
| company that offered distributorships for products. | | | | Just for an example of the kind of money these |
| Because of this, the FTC is watching MLMs more | | | | pyramid schemes took in, one program attracted more |
| closely than ever before. Pyramid schemes come in | | | | than 150,000 consumers who together paid over $80 |
| so many forms that they are hard for us to recognize | | | | million during a 3-year period. With Equinox, consumers |
| them. But they do share one characteristic. They | | | | have lost over $40 million dollars and $20 million. It has |
| promise the consumers or the investors large profits | | | | been shown when consumers join these schemes, |
| based mainly on recruiting others to join their programs, | | | | they make their investment, but eventually drop out |
| but what makes this an important factor is these | | | | losing everything. The drop out rate is shown to be 90 |
| profits are not based from any real investment or real | | | | percent of more, and they will never recoup their |
| sale of goods to the public. | | | | investment. |
| Some companies may claim to have a product, but | | | | So as you research Network Marketing companies, |
| this is a disguise to hide the pyramid structure. There | | | | you will know what you need to look for. If you have |
| are two signs to look for in a multi-level marketing | | | | further questions, you can go the website of the |
| company that will tell you if it is a pyramid. They are | | | | Federal Trade Commission and search Equinox. |
| “Inventory Loading” and a “lack of | | | | There are some really great companies out there to |
| retail sales”. The Inventory Loading is when they | | | | choose from that are totally legitimate. You will need to |
| require you to buy more products than you could ever | | | | do your research in the companies of you choice |
| sell, usually at very high prices. When this happens, the | | | | thoroughly. |