An accurate understanding of the direct selling business model is critical as regulators, judges and policymakers make decisions and policy related to the channel. This paper by leading academics makes a significant contribution to that effort by focusing on debunking misguided assumptions as well as various logical and analytical errors in research.
As noted by author Dr. Chetan Sanghvi, concern about pyramid schemes has rightly focused on the victimization of consumers. But it should also be recognized that pyramid schemes damage legitimate businesses, which further damages consumers. The prevalence of fraud can create a fog of uncertainty and doubt that leads individuals to demur from participating in legitimate businesses. Dr. Sanghvi argues that the antidote is to provide clarity and assurance by establishing clear guidelines in law on what constitutes pyramid fraud.
The article discusses 2024 FTC Guidance on how direct selling companies with multilevel compensation structures should approach their income and earnings reports, commonly known as income disclosure statements.
