Tuesday, December 28, 2010

Repurchase Plan

Any compensation plan that requires a monthly purchase of product or service in order for distributors to earn a commission is problematic. It is fairly common for MLMs to incorporate the pay-to-play feature as a prerequisite to eligibility to participate in their compensation plans. The legal problems associated with a pay-to-play plan arise because product or service sales cannot be distinguished from distinguished from distributor enrollment. Therefore, the questions arise whether the mandatory product or service purchases are actually:

1) a disguise for a head-hunting fees and/or
2) and inventory loading game. If the answer to either of these questions is yes, the program is a pyramid because commissions are actually paid based on recruitment rather than bona fide product sales. Regulators will always presume that the answer to both questions is yes if a plan follows the pay-to-play format, so MLM companies will be cast into the difficult position of trying to convince regulators that their presumptions are unfounded.

Repurchase Plan Software

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