MLM operations need to be sales based, and transparent to pass regulatory scrutiny. Distributor compensation must be based on retail sales and based on recruitment, and income disclosures must accurately reflect the earning reality for typical distributors. There should be an easy way to cancel auto-ship or subscription-type offerings. Strict training and oversight of distributors help ensure rules are followed.
Companies should make sure that they have the four key metrics to assess if their business is safe and sound from legal and compliance related risks.
1. Real customer revenue indicate that the customers are purchasing the products.
2. Having a healthy distributor-to-customer ratio.
3. If company compensation plan balances personal purchases and retail sales.
4. Take down violate posts immediately.
