How the Right MLM Software Could Prevent FTC Actions

Every direct selling company deals with compliance on a day to day basis.  Most companies have a compliance officer or an entire department dedicated to staying within the guidelines set forth by an overseeing body.  For the direct selling industry, this body is generally the FTC (Federal Trade Commission).

The recent actions in “Operation Empty Promises” varied from company to company.  Ivy Capital Inc. promised false income opportunities and offered misleading business coaching.  Consumers were approached by telemarketers offering up to $10,00 in monthly income if they invested in training materials offered by Ivy Capital Inc.  Darling Angel Pin Creations told consumers they could earn up to $500 per week assembling angel pins, but nearly all pins were rejected regardless of quality.  All 90 actions were different from company to company, but a similar theme emerged: Compliance.

If the right systems were put in place throughout these companies, many of these legal action may not have been taken.  And in some cases, the companies may not have been forced to shutdown due to their wrongdoings.

The direct selling industry has a long and arduous history with the FTC.  In a landmark case in 1979 the FTC issued a decision against Amway Corp. with regards to price fixing and exaggerated income claims.  This case would go on to set a new standard in the industry for how distributors would market their products and promote direct selling opportunities.

The migration of the direct selling industry onto the Internet created a whole new set of challenges for companies trying to reach new markets and enroll new distributors.  On one hand, direct selling is all about meeting new people and making connections, what personal websites and blogs do best.  On the other hand, the openness of the web easily allows for distributors to stray away from the brand, the company reputation, and most importantly; company compliance.

How to Stay Compliant Online

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When it comes to distributors remaining compliant on the web, there are a few approaches to take.  The first is to restrict distributor activity or to ban open use of the web to promote products or enrollment opportunities.  Unfortunately this is a very common approach in the direct selling industry.  Many companies date back several decades, before network marketing moved online, and are nervous about the possibility of distributors acting out of compliance.  Some direct selling policies and procedures prohibit the use of the company name, logo or any other trademarks outside of the corporate website or company provided replicated website.

The second approach is preemptive compliance, putting the right systems in place so the entire sales force knows what they are expected to do and what to stay away from.  The health and wellness company Vemma is one organization that endorses the use of social media to promote sales and increase recruitment.  The crucial element to an aggressive position like this is to make sure distributors are trained in proper usage and best practices of social media or their personal website.

The third method for distributors to remain compliant online is taking preemptive compliance one step further.  Encouraging and educating the sales force, but also giving them the tools they need to find the balance of compliance and connectivity.

MLM Software for Compliance Online

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At Empowerkit, we have developed a platform that balances company control and compliance with distributor freedom and personalization.  The company can set parameters on certain keywords or phrases to deal with compliance concerns before they become an issue.  Our system allows distributors to create a customized website through a simple visual editor.  Adding photos, videos, testimonials or starting a blog is as simple as can be.  Integrating existing social media profiles, setting up lead capture forms and auto-responders are all great ways Empowerkit allows distributors to maximize their online presence all while remaining compliant.

Giving distributors the right tools to engage with their visitors through a website that they created and know how to use is crucial for remaining compliant and successful on the Internet.

The recent actions brought forth by the FTC shouldn’t scare companies away from the web, but should teach us how to better interact online while staying within the company guidelines.  Training and educating the sales force, having the right systems and tools in place ahead of time is the best way to protect distributors, direct selling companies and the industry as a whole.

Image credits:  Henrique Vicente (Caution), Nicholas_T (The Right Path), Joyseph (Distributor Freedom)

March 11, 2011

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