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1 – 2 of 2William W. Keep and Peter J. Vander Nat
This paper aims to analyze the evolution of direct selling – a retail channel that successfully sold products ranging from cosmetics to radios to automobiles – to multilevel…
Abstract
Purpose
This paper aims to analyze the evolution of direct selling – a retail channel that successfully sold products ranging from cosmetics to radios to automobiles – to multilevel marketing (MLM), an industry now apparently heavily reliant on selling to itself. As the courts have found some MLM companies to be pyramid schemes, the analysis includes the overlap between the legal MLM model and an illegal pyramid scheme.
Design/methodology/approach
The development of direct selling in the USA was examined, followed by the factors contributing to the design and growth of the MLM model and its non-commission-based compensation structure. Then, the key legal decisions regarding illegal pyramid schemes operating under the guise of MLM, the relative stagnation of direct selling and the state of the MLM industry were examined.
Findings
As the MLM model operates on the dual premise of retailing through a network of distributors and recruiting new distributors to do the same, it was found that federal regulators and the courts consistently focus on the “retail question” – the existence and extent of sales to consumers external to the distributor network. The authors argue that without a significant external customer base, internal consumption by an ever-churning base of participants resembles neither employee purchases nor a buying club.
Social implications
As the MLM model facilitated the growth of pyramid scheme fraud, creating victims rather than customers, this research highlights successful efforts to regulate this type of consumer fraud.
Originality/value
Few papers have been written on MLM and pyramids schemes, and none thus far has taken an historical perspective.
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Keywords
Discusses why there should be mechanisms for the settlement of valuationdisputes. The various forms are: the Lands Tribunals in the UK; localtribunals and courts; arbitrations;…
Abstract
Discusses why there should be mechanisms for the settlement of valuation disputes. The various forms are: the Lands Tribunals in the UK; local tribunals and courts; arbitrations; pre‐trial reviews; mediation or conciliation; the role of the valuer when involved in litigation; the role of the bench. Suggests a possible system – local tribunals without power to award costs; appeals to a technical tribunal, hearings being de novo, the tribunal having power to award costs; appeals thereafter to the courts on points of law only. Looks at: the differences between the roles of the advocate and the expert witness and the duties of an expert witness. Gives an outline of the rules as to admissibility of valuation evidence; the leading cases and some practical points about giving evidence. Discusses combining the roles of expert witness and advocate.
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