Kevin Thompson (MLM attorney, co-founder of Thompson Burton) argues that undisclosed "special deals" in multi-level marketing—cash advances, extra volume, placement privileges, guaranteed payments, or multiple positions—are fraudulent or misleading when not disclosed and harm ordinary distributors. He gives an illustrative analogy (a $5,000 pen with a 50% revenue cut) to show why such compensation is a material fact, explains how these deals create synthetic momentum and poor incentives (poaching leaders, easier builds for leaders than recruits), and urges recruits to ask about extra incentives and for companies/leaders to publicly refuse undisclosed deals.
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Hi, everyone. Kevin Thompson here, mlm attorney and co founder at Thompson Burton. And this post is probably going to be one of the most important ones that I've ever done. I'm going to try to keep it short and right to the point. This idea of special deals where companies will pay leaders a fee, you know, money on top of the pay plan, or give them a cash advance or give them volume in a certain leg so the leader doesn't have to build as much or some combination of all the above. Special placement, special privileges. It's fraud. It's fraud and it needs to stop. So here's the thing. It is absolutely legal to give talented people compensation for their services or for their attention or their time. So if somebody is. If they have some skill and experience, you can pay for it. That's not the issue. The issue is when those deals go undisclosed, that's where it's fraud. That's where it's misleading. That's where people get hurt, and it needs to stop. I've been writing about this for four years, and I've tried humor. I've done the academic thing, and here I'm just being more direct. Now, let me give you an example. Suppose I tell you this pen right here, it's got leather exterior, gold. It writes really well. It writes upside down. It's $5,000. It's the most fantastic pen I've ever used. It's amazing. It looks good. It feels good in your hand. It's got the perfect weight. All you have to do is go to acme.com it's $5,000. You'll love it. Buy the pen. Now, suppose I got 50% of the revenue on that website. Now, some of you, internally, you might not have a problem if I didn't disclose that arrangement. Some of you say, hey, it's your business. But it doesn't really matter because the law says that's a material fact that's not known to the public. It needs to be disclosed so consumers can make a good decision. Because if you knew that I was making 50% off of a $5,000 pin, you might still buy it. You might say, hey, I'll check it out. I like Kevin, for example, Tony Robbins promotes things. And I'm a big, big Tony fan. And whatever he promotes, if he gets a cut and it's disclosed, I don't care, because he only promotes things that he finds valuable. I'll check it out. But maybe some consumers, they might not. They're like, the reason he's promoting that pin is because he's making 50%. People can make an informed decision in this industry. Today, leaders are just all over the place chasing deals and companies are participating. They're throwing red meat to the lion. It's like, it's called MLM cocaine. It feels good for a while and it creates a lot of activity, but it ends up killing the person at some point or seriously injuring their health. So every time you see an update on Business for Home, which I love, Ted Knighton, he's awesome, he's a friend of mine. But that site gets used by companies, in some cases, not. In all cases, it gets used by companies looking to create a sense of momentum, a sense of synthetic momentum, fake momentum, momentum that was bought and in those scenarios not disclosed. So whenever you see a leader at a company, whenever you see a big announcement, so and so is going from Organo Gold to wherever. Whenever you see these announcements, feel free to ask them, hey, did you, were there any extra incentives that led you to join? Something as simple as that? Because a lot of cases, these folks, they're paid significant cash advances, they're guaranteed monthly cash, they're given volume, they're allowed to operate via multiple positions. The average distributor, the new person, the person that's drawn to the energy and the excitement, they don't know any better. And they don't realize that the business that they have to build is different from the business that's being promoted. In other words, it's more difficult. So when these leaders come over, they have to build one leg in a binary. But the new person, they got to build two. They got to do it the right way, the way it's promoted, the way it's supposed to be built. And it needs to stop. So what's happening is companies that are in a rush, they can't build the business honorably. So they'd rather poach from these other companies that have some cases invested years or even decades building up the sales force. So if you can, if you can attract the right personality that is vulnerable, that will take a deal and get that person to hype up the company, you can get some low hanging fruit and stimulate growth. It's temporary now, usually long term, it never works. But that synthetic success, that fake success, that fraudulent success, it creates a more favorable recruiting environment, which leads to a lot of people making bad decisions. Some companies that are being raided, they deserve it. For example, Visalis, people are poaching like crazy. The Visalis organization, well, they did the same thing. They used to cut deals, I think they still cut deals. Whether it be from the corporate or whether it be field leaders paying people special deals. So bottom line is it needs to stop. So how does it stop? It stops when you, the average person, the person being recruited. When you ask, feel free to ask, don't be offended. Say Kevin Thompson told me to ask. And if they say no, there was no deal, then that's fine. Okay. Then say, well, that's great. Then you're in a position to make a great decision. Understand, these deals can be cut from the company. They can also come by way of leaders in the field. So if a certain high ranking rep has cash, he can give people certain incentives to join. Those deals need to be disclosed. I'm tired of it. I think you're tired of it too. I think the majority of company executives do not participate in deals and they're proud of, they're proud of that. So those people need to stand up and say, I don't play this game. And then the other folks come out of the closet, show yourself and talk about what's happening. That's it.
