FTC Restores Rigorous Enforcement of Law Banning Unfair Methods of Competition

Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by Retric on Thursday November 10, 2022 @04:01PM (#33553296)

Multi level marketing is closely related but distinct from a pyramid scheme. The critical difference is the actual generation of profits and the health of the organization through time.

Franchise agreements can similarly look really sketchy on the surface especially with a large buy-in, but it’s hard to argue a Mcdonald's franchise agreement is a scam due to the real profits and costs involved. Which isn’t to say every franchise agreement is a good investment.

Where things break down for MLM is really the specific business model and percentages involved. If say 4% of a sales guy’s check gets sent to the chain of people who recruited him then no big deal. However, large percentages or large buy can quickly become very problematic.

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Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by mjevans on Thursday November 10, 2022 @05:11PM (#33554239)

Franchise agreements should have a very narrow path to the top of the chain. Maybe a state / locality, country, and global entity at most and that entirely for tax zoning / similar reasons.

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Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by pessimizer on Thursday November 10, 2022 @06:41PM (#33555281)

Non-MLM franchises don't make their money from sublicensing at all. It isn't like one McDonald's franchise is being paid by other McDonald's stores. It's single-level marketing. So I don't know that the distinction is so fuzzy.

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Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by bombcar on Thursday November 10, 2022 @07:08PM (#33555579)

Some franchises are basically scams against the franchisee- subway and Quiznos were famous for not caring much at all and being willing to sell a franchise to anyone with some money (normally franchises are protected from similar franchises within a given area).

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Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by specialist on Friday November 11, 2022 @02:41PM (#33565709)

This is also SOP for the value-added reseller (VAR) scam.

One notable exception are car dealers. They somehow secured themselves durable lucrative carve-outs before the VAR thing matured.

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Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by Retric on Thursday November 10, 2022 @07:12PM (#33555614)

I was bringing up one of the more sketchy parts of many MLM companies, the out of pocket cost before someone can actually make money selling product.

The point was buy in can absolutely be used as part of a scam see many 90’s MLM “companies”, but it may also be part of a perfectly reasonable business model.

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Re:FTC Restores Rigorous Enforcement of Law Banning Unfair M... by akiselev on Thursday November 10, 2022 @06:58PM (#33555461)

There are plenty of bad franchises (remember Quiznos anyone?) but McDonalds is probably the best counterexample. Opening a new franchise is almost impossible these days and McDonalds does a lot more due diligence on someone acquiring an existing franchise (with right of refusal) than anyone ever did on SBF or FTX.

Even the scammy MLMs these days come with buyback clauses due to FTC agreements so the MLM meme of someone getting stuck with a garage full of product they can’t sell is largely a leftover from the 90s.

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