Affiliate Marketing MLM Convergence How To Profit Kevin Grimes

Affiliate Marketingand Network Marketing

. . . When Two Worlds Collide

Kevin GrimesPartner

Grimes & Reese, PLLC

How could this happen to me?


I’m a good person. I couldn’t possibly be an MLM


I’m a good person. I couldn’t possibly be an MLM.

Denial.



DenialIt’s not my fault.



Denial.It’s not my fault.Resignation



Denial.It’s not my fault.ResignationHow many of you have seen an affiliate

program that pays affiliates on more than their own personal sales efforts?

This is a cat

This is a dog.


You can avoid or deny the fact that you have a dog . . . But that does not change your reality



If you have one, there are certain things you need to do.



If you have one, there are certain things you need to do.Get shots



If you have one, there are certain things you need to do.Get shotsGet a license



If you have one, there are certain things you need to do.Get shotsGet a licenseGet some obedience training



If you have one, there are certain things you need to do.Get shotsGet a licenseGet some obedience training (for yourself)

Introduction

Definition of Multilevel Marketing

Introduction

Definition of Multilevel MarketingThe legal essentials

Introduction


Compensation planAffiliate/Associate/Distributor AgreementPolicies and ProceduresState registration

Introduction


Compensation planAffiliate/Associate/Distributor AgreementPolicies and ProceduresState registration

Hot spots


A person or business entity


A person or business entityWhich distributes goods or services


A person or business entityWhich distributes goods or servicesThrough independent agents, distributors,

or contractors



or contractorsAt different levels



or contractorsAt different levelsIn which participants may recruit other

participants


Through independent agents, distributors, or contractors

At different levelsIn which participants may recruit other

participantsCommissions, bonuses, and other

compensation is paid on the sale of such good or services


At different levelsIn which participants may recruit other

participantsCommissions, bonuses, and other

compensation is paid on the sale of such good or services

Or the actions or performance of the additional participants

The Bottom Line

If you pay an Affiliate on the sales of someone he or she brings in – you ARE a multilevel company

What is the significance of being an MLM?Multilevel marketing is a regulated

industry


industryThe good news



It does not require foreign corporation registration in all 50 states




It does not require massive disclosure documents like franchises and business opportunities.

What is the significance of being an MLM?Multilevel marketing is a regulated industryThe good news


It does not require massive disclosure documents like franchises and business opportunities.

It does not require that you post bonds or set up trust accounts (at least in the U.S.)


industryThe bad news

It does require state registration in a few states



It does require state registration in a few statesIt does have some statutory limitations or

requirements




requirementsAt Cost requirement




requirementsAt Cost requirementSpecific contractual pieces (Georgia and Louisiana)

Anti-Pyramid StatutesEverything you wanted to know, but were afraid to askDefinition

Anti-Pyramid StatutesEverything you wanted to know, but were afraid to askDefinitionYou cannot pay affiliates merely for

bringing in or signing up another affiliate

Anti-Pyramid StatutesEverything you wanted to know, but were afraid to askDefinitionYou cannot pay affiliates merely for

bringing in or signing up another affiliateCompensation must be paid on the sale of

goods or services to end consumers

The Legal Essentials

Review of the compensation plan


Review of the compensation planAffiliate/Associate/Distributor Agreement


Review of the compensation planAffiliate/Associate/Distributor Agreement

IRS Section 3508Georgia clausesAt cost requirementRescission rights if cost exceeds $25


Review of the compensation planAffiliate/Associate/Distributor AgreementPolicies and Procedures

You need Policies and Procedures that articulate appropriate and inappropriate affiliate behaviors.


Review of the compensation planAffiliate/Associate/Distributor AgreementPolicies and ProceduresState registration as an MLM

Hot Topics -- Affiliates . . . Are TheyIndependent Contractors or Liability Timebombs?

Audience participation time


Are affiliates independent contractors or are they agents of the company for which they are selling?



They are both



They are bothIn the contract and tort law areas, they are

independent contractors


In the regulatory and tax areas . . . They are agents!



So what?



So what?If they are your agents, YOU are

responsible for what they say and do relative to the marketing of your products.


So what?If they are your agents, YOU are

responsible for what they say and do relative to the marketing of your products.

Do you ever wonder why MLMs are so restrictive regarding Internet marketing?

Hot Topic -- Compliance

The regulators’ expectations


The regulators’ expectationsIf we can find out about them, YOU can find out

about them.


The regulators’ expectationsIf we can find out about them, YOU can find out

about them.You do something about them, or we will do

something about you.


The days of the Wild Wild West are gone.


The days of the Wild Wild West are gone.The primary function of compliance is

education.



education.A lot of the law surrounding sales and

marketing is counter-intuitive.



education.A lot of the law surrounding sales and

marketing is counter-intuitive.Just because it is true, doesn’t mean you can

say it.


To know what your affiliates are doing, you need to monitor them


To know what your affiliates are doing, you need to monitor themBeing passive isn’t enough


To know what your affiliates are doing, you need to monitor themBeing passive isn’t enoughBeing reactive isn’t enough



It is essential that you are pro-active.



It is essential that you are pro-active.You need to regularly monitor what your

affiliates are saying and doing.



It is essential that you are pro-active.You need to regularly monitor what your

affiliates are saying and doing.

If an affiliate won’t repent . . .

Is there more?

Is there more?

Like Ginsu knives, there is A LOT more!

Is there more?

Like Ginsu knives, there is A LOT more!The FTC’s three advertising requirements

Is there more?


Fairness

Is there more?


FairnessNon-Deception

Is there more?


FairnessNon-DeceptionSubstantiation

Is there more?



Income claims

Is there more?



Income claimsGoing international

Is there more?




The Internet has effectively erased certain borders

Is there more?

The FTC’s three advertising requirementsFairnessNon-DeceptionSubstantiation


The Internet has effectively erased certain borders

It has not erased legal borders

What happens if you mess up as an MLM?

What happens if you mess up as an MLM?The FTC’s Silver-Bullet, One-Shot,

Judicial Assassination Litigation Strategy that kills companies before they even know they are dead.



How it unfolds.



How it unfolds.How it ends.




How much money to you make?




How much money to you make?Give it all to us.




How much money to you make?Give it all to us.Don’t worry if it is off shore – We’ll get it.

Going MLM . . . Are you kidding?

Leave it to a lawyer to scare everyone to death.



MLM CAN be done correctly.



MLM CAN be done correctly.MLM is EASY to do correctly.



MLM CAN be done correctly.MLM is EASY to do correctly.Most importantly, MLM has the potential

to geometrically grow your business.



MLM CAN be done correctly.MLM is EASY to do correcctly.Most importantly, MLM has the potential

to geometrically grow your business.Come on in! The water’s fine.

Thank You!

Kevin GrimesGrimes & Reese, PLLC

615 Hoopes Avenue

Idaho Falls, Idaho 83401

www.grimesreese.com

[email protected]

Phone (208) 522-2600

Business

Affiliate Marketing MLM Convergence How To Profit Kevin Grimes