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Legal consultation

Barbarian Diordieva - the lawyer, an analyst.
If you had legal issues, the problems connected with realisation of your rights, and also the questions, concerning legislations, write.

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Career and work

МЛМ - legal business, instead of a financial pyramid

According to some information, almost two million citizens of Ukraine work as distributors more than hundred companies of direct sales or the network marketing, advancing in our country the production or services. Everyone faced offers on cooperation or on purchase of their goods, probably.

Newspapers and magazines, shining this theme, traditionally state network marketing a negative estimation, equating the network companies to financial pyramids of "type МММ». Nevertheless, «МММ» already is not present, and many network companies mark the decade in the market of the CIS. And ten years for business — figure solid, it you will not reach a deceit, without accurate strategy of business. We will try to consider objectively the economic and socially-psychological mechanisms allowing effectively to work this kind of business.

The goods — money — the goods
To begin with we will clear a situation: the network companies essentially differ from financial pyramids. More in detail about it more low. The main difference — the network companies, as well as companies of direct sales more habitual to us, sell, to be exact, advance on the market concrete production or services. That is you the hands can touch that, for what pay money. Pyramids collect money for something virtual. Actually the distributor of the network company is the consumer of production which has liked it financially interested on its further sale.
Key link in system MLM - the distributor. It substitutes for itself(himself) the whole staff of managers: on advertising, on sales, on service of clients and on shots. Network distribution is, as a matter of fact, франчайзинг at which the distributor for payment very moderated for such business buys the right to use the firm trade mark to advance its goods, to earn money under the scheme developed by firm. Thus it remains the independent businessman with the free initiative. Earnings of the distributor depend only on a sales volume, made not only to it personally, but also the group generated by it. And in no event from quantity of the people "enlisted" by it and their payments.
Therefore in the solid network companies, as well as in traditional trading business, possibility to earn is at any beginner, and not just at «a pyramid top». And probability of success for the neophyte of network marketing by and large same, as well as for the "fresh" owner of a booth. Only the success сетевика will depend on other factors which were giving more in to its personal control — its abilities, forces and spent time. But not from presence of "roof" and bribes, as in business traditional. Certainly, the stable and considerable income gives only big, in some thousand persons, a trading network. To create it it is uneasy, and having created, it is necessary to support in working order. Therefore promises of fast and stable earnings without efforts of you are the certificate неквалифицированности offering to you this business. Or one of swindle signs. Network marketing — work difficult enough.

For what we pay and that is had
To distribution of all or parts of production network or direct methods pass many companies of "traditional" marketing orientation. Through the companies of network marketing vitamins, dietary products, cosmetics, washing-up liquids more often are on sale. Besides, it is possible to buy books, magazines, works of art, ware, clothes, канцтовары and set of kinds of a foodstuff. The list can be continued and continued, almost every day to it the new goods are added. The reason — high efficiency of sale through a network of independent distributors. It speaks simply: in network marketing there are no expenses of the company for traditional advertising and creation of a traditional infrastructure for goods advancement — representations, warehouses, service and shopping centres. More precisely, this infrastructure is created, but distributors, instead of the company. For this purpose the company returns to the network to 70 % of the means received from realisation of production. Means according to the marketing-plan — in dependence of the size of a returned bonus (discount) on volume of realised production come back.
These distributors spend means at own discretion — for personal needs or on creation of representations, the educational and service centres, other industrial requirements. Advertising is present only «person to person» or, speaking Russian - "face to face".
Happens, that the network companies advertise traditional means the trade marks, but never — production. Thanks to other mechanism of distribution of profit at the network companies its a little big part goes on scientific workings out and application by manufacture of the goods of expensive high technologies.
The network companies presume to grow up to themselves natural components for production on own fields, to conduct expensive clinical tests, to apply space technologies. Vitamin complexes and food additives of the network companies naturally join in a metabolism of the person, cosmetics and hygiene means possess therapeutic effect, the household chemical goods are effective and are thus deprived any irritating properties.
Though production of the network companies, as a rule, is more expensive than retail analogues, the price is often justified even by simple profitability of network production. And its quality often is one of the main arguments in favour of the decision of the person to join in network activity. Nevertheless many network companies give the wide quality assurances assuming the refund for not liked (not speaking about rejected) the goods.

Network — not a pyramid
Millions people have achieved success in network business, but not less — was disappointed. The reasons of disappointments — and an initiative and organisation lack, and insufficiently qualitative training, and simply habit to negative outlook on life. However behind the performances of the press warning against employment by network marketing, stand not only disappointed.
Network marketing — the strong contender for traditional trade and advertising. Their efficiency is reduced developing high rates by the realised consumption and direct sales. Powerful opponents network дистрибьюции are the pharmacological industry and traditional medicine. They do not accept filling of the market by preparations of the preventive action replacing traditional synthetic medicines or reducing in them requirement.
Using disappointed, external similarity of network structure with a pyramid, and also the cautious relation of people to all new, these forces also try to interfere with development of network business. And it has begun in the USA. So, the Federal medical association punches at present the law on prohibition of application of natural medical products, motivating it is their inefficiency.
More often the network companies accuse of construction of a roguish financial pyramid. However it just that question to understand in which is simple enough. Definition of "a financial pyramid» contains in already mentioned decision of Federal court of the USA according to which signs of a financial pyramid are:

- Absence at the company using steady demand in the free market of the goods;
- High starting payment;
- Payments for attraction of new members;

- Absence of a guarantee of return of this payment at the decision of the distributor on the termination of cooperation with the company.

The "present", trading network companies should have warehouses and clearing settlement possibility for the goods, invariable "game rules" — marketing-plan, an openness of data about financial results and quantity of distributors, and also long existence of the trade mark in the market.
To the one who has become interested in the possibilities offered by any company of network marketing, it is necessary to specify the mentioned details. Besides, there are some more signs of "solidity" of the network companies — such, as advancement of the goods by them and services daily, instead of single demand, the goods and the services made by the company, and also aforementioned guarantees.

It is a little history
To network marketing already almost 70 years. Direct sales have appeared even earlier. To buy the goods not in shop, and at the direct-sales representative many consider more convenient — it is available individual, taking into account interests of the concrete buyer, the approach, satisfaction from dialogue, and delivery of the goods to the house …
In 1934 in the market of the USA there was company Nutrilite making vitamins and food additives for a healthy food. Its founder, the doctor and businessman Charles Renborg, has been occupied by more working out of production, than trade. And when the increased demand has started to demand a lot of time for its satisfaction, Charles Renborg has simply suggested the consumers to be engaged in distribution of vitamins Nutrilite. Later it has developed system of payments of commission fee which included both percent from an individual gain, and percent from a sales volume of the involved partners.
So there was a first marketing-plan — in network marketing it reflects dependence of earnings of the distributor on the trading gain received by firm with its participation. The first marketing-plan has appeared crude enough, and quarter of the century after two enough successful distributor Nutrilite, Рич де Вос and Джей ван Андел, have improved it in own company Amway (American Way — «the American way», dream, a way of life).
Having appeared in the market with a series of household means on a natural basis, in the first years the company left on mullions-strong turns. In 1972 parent Nutrilite became affiliated company Amway. With Amway one more page of history of network marketing is connected. In 1974, after the loud scandal connected with creation in territory of the USA by one of financial pyramids, deceived millions people, activity of all companies though by something reminding a pyramid, it has been forbidden. In 1979, after long and loud litigation, Amway has defended the right to the business. In the decision of Federal court it was noticed, that business Amway is not a roguish pyramid, and also signs that and which became now the cores критерями definitions of the normal MLM-COMPANY unlike the obvious and latent financial pyramids have been listed.
After the litigation which has served by very good advertising Amway and network business as a whole, the similar companies have started to grow as mushrooms. In many countries laws on the network marketing have been passed, the similar bill walks somewhere and in bowels of our parliament.

What advantage of it?
It is interesting to note and some social aspects of network marketing. It successfully develops in the conditions of crisis and unemployment. Actually, to penetration into the CIS countries network marketing is obliged to our diasporas abroad. For many emigrants network marketing became way to achieve quite good financial results.
The similar picture is observed and at us — teachers, doctors, the engineers who have remained without earnings on a speciality, find in network marketing application of the not demanded abilities. Probably, it all the same the best variant, than turns at labour exchange. The network companies have shown also high enough кризисоустойчивость — in the conditions of the Russian collapse of summer of last year their turns at first have a little fallen in connection with reduction of purchasing capacity of the population, and then have again grown — at the expense of the new shots which have left in network marketing from traditional business or from service. It is possible to assume, that in the conditions of deeper destruction of the developed social infrastructure (for example, the events similar Yugoslavian or Chechen), the established multilevel networks become, along with related communications, a basis of functioning of economy. From the outside, without desire of participants to destroy them it is almost impossible.
Other social aspect of activity of the network companies — granting of wide open space for display of the business initiative of citizens. Traditional business not always allows to make it for it is connected with necessity of the big starting capital, high risk, and also necessity of "roof" in the conditions of an astable and opaque legislative field. Initiative, responsibility for the destiny, not occupying before in the lead positions in mentality of the Soviet people, now leave on the foreground for to be responsible for us there is nobody more. It is necessary or suffer from безотцовщины, or to build the life independently.
Network marketing gives the chance to people to solve in the civilised and fair way the material problems, to develop a deep positive self-estimation and confidence of the individual possibilities. All who has achieved material results in network marketing, began the business with zero, in traditional business such much less, and in our country and for a long time.
Let's mention as well advanced by firms of network marketing a high consumption level, so, a biased attitude by the life. Production of the network companies is focused on strengthening of ideas of a healthy way of life, that also has great value for a society as a whole.
In our countries activity of the companies of network marketing is characterised by propensity to партизанщине. However the tendency to lawful activity recently was outlined. The network companies seriously develop schemes of payment of taxes (despite ordinary opinion, that сетевики taxes does not pay). For сетевиков the taxation form the simplified form of the reporting on enterprise activity is ideal. The network companies will certificate production agree to the Ukrainian legislation. Legal bases of their activity are developed. Leaders of the network companies wish to do the business on the lawful bases and to learn it all interested persons.

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