An MLM watchdog is an individual or other party that monitors the activities of MLM businesses to make sure that consumers and the general public are protected from the results of these kinds of enterprises. An MLM, or multilevel marketing business, is a business that recruits through a “downline network” where independent sales people work on commissions. Some specific aspects of MLM businesses are prone to abuse by those who create the companies.
Federal agencies look closely at MLM business setups and similar companies to see if their growth strategies constitute an illegal “pyramid scheme.” Pyramid schemes exist when the method of payouts and general business plan are likely to end in a breakdown of the business and cash consolidation by those who have collected money from recent customers. MLM watchdog groups help to provide more information about a multilevel marketing business plan.
MLM watchdog groups also look at the claims that multilevel marketing businesses make about their products. MLM business setups use a wide range of products to generate income, but many of them are known to make inflated claims about their product lines in order to create interest. Independent sales people often want to profit from inflated claims to recruit more sellers.
In order to effectively make multilevel marketing activities transparent, an MLM watchdog may buy “sales kits” from a MLM company and investigate how that business creates growth. When the business is based on commissions for new members, this can set off a red flag for those who are investigating. The business may fall into an illegal category.
MLM watchdog groups also post news online or in print that reveals how multilevel marketing businesses work. One part of proliferating MLM businesses with a bad business plan is preying on those who may not understand the workings of the typical MLM setup. The MLM watchdog may give consumers and job hunters helpful tips about how to find real jobs and not MLM scam type employment. Often, those who are looking for work can be talked into representing an MLM business that may not have their best interests in mind, and more knowledge about multilevel marketing business models helps the more vulnerable part of the job market avoid getting ripped off by unscrupulous MLM founders and core staff.