Tuesday, 22 September 2009

Yet US-based racketeers are billionaires

Typically, your naive young friend, Trivedi, doesn't have the beginnings of a clue what he's talking about.
In order to distinguish between an unlawful pyramid scheme (i.e. premeditated closed-market swindle) and a lawful direct sales business, the fundamental question is whether rewards paid in connection with recruitment are linked to, or are derived from, the sale of goods, and/or services, to the public (i.e. retail sales). Without sufficient retail sales, the money to pay rewards can only come from the purchases of the participants themselves. Without profits from retail sales, the only conceivable method for participants to earn profit is through further recruitment. Any scheme with insufficient retail sales is, therefore, fundamentally unlawful.
Senior Federal Trade Commission economist, Dr. Peter Vandernat, devised a test to determine the authenticity and legality of any so-called 'MLM' scheme. Obviously, this comprises one simple measurement - the percentage of retail sales which are actually occurring. Vandernat's test set a figure where, in general, if at least 70% of all purchases by the participants are actually being resold to retail customers, then the scheme can be considered capable of paying lawful commissions. If any so-called 'MLM' scheme falls beneath the 70% retail sales standard set in Dr. Vandernat's simple test, then it is a premeditated closed-market swindle which is incapable of paying profits to the overwhelming majority of its participants, but which is hidden behind 'retail sales' which do not exist.
Dr. Vandernat has co-authored an academic paper with William W. Keep, 'Marketing Fraud: An Approach to differentiating Multilevel Marketing From Pyramid Schemes. This was published in the Journal of Public Policy and marketing in the Spring of 2002.
Interestingly, in the recent UK investigation of 'Amway,' it was discovered by government accountants that more than 90% of participants weren't even trying to conduct retail sales. On the contrary, they had all been taught to duplicate a ' Proven 2-5 Year Plan to Achieve Total Financial Freedom.' This comprised purchasing a regular quantity of grossly over-priced goods and services from 'Amway UK' and recruiting friends and relations to do the same, etc. etc. ad infinitum. The rolling failure /loss rate for UK 'Amway' participants over a period exceeding 30 years, was found to be (effectively) 100%. Yet the US-based racketeers who operate this scheme are billionaires.
Indian Judges didn't need the assistance of Dr. Vandernat to deduce that 'Amway' is a pernicious fraud. However, it is a racing certainty that the scheme as operated by 'Amway India Enterprises' (but centrally-controlled by the billionaire bosses of the 'Amway' mob in the USA), falls well beneath the 70% retail sales standard set in Vandernat's test.

Perhaps Trivedi would like to have a little side bet on this ?

David Brear

1 comment:

Tex said...

You're WRONG. Read the "Legitimacy" section below:


You TOTALLY misunderstand the 70% rule. Get a clue.