Kevin Thompson MLM Attorney

I appreciate the Nashville Business Journal's article here. I've always enjoyed tinkering with tech tools. It helps me see the trends before they hit. AI is going to be a big deal in the legal business.

Why this Nashville attorney made an AI copy of himself - Nashville Business Journal Can AI replace your attorney? See why his local attorney created an AI agent of himself.

There's a lot of delicious irony here. Andrew Left, now charged for committing financial fraud, was one of Herbalife's vocal critics (and short traders) during the Ackman v. Herbalife feud. His "research" was frequently used to support Ackman and other critics' arguments against Herbalife.

SEC.gov | SEC Charges Andrew Left and Citron Capital for $20 Million Fraud Scheme Secure .gov websites use HTTPS A lock () or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Lina Khan, Chair of the FTC, is a unifying figure. She's one of a few figures in DC that both Democrats and Republicans want out. She's one of the worst FTC chairs in modern history, operating completely unrestrained by the institutions around her i.e. Congress, Supreme Court, etc.

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Rodan & Fields announces a change to its model, going with a straight single-level plan.

Rodan + Fields Announces New Path to Growth /PRNewswire/ -- Rodan + Fields ("R+F" or "the Company")—a brand known for delivering proven results in skincare and haircare through science-backed,...

Understanding the recent ruling regarding "Chevron Deference."

Bear with me, this is important.

“Chevron deference” refers to a landmark Supreme Court ruling that was published back in the Reagan era. The court decided in 1984 that judges should defer to federal agencies in interpreting ambiguous parts of statutes. Just on its face, it was GROSSLY unfair in my opinion. It makes little sense that a regulatory agency, with the power to sue, penalize, and shut down businesses, gets the benefit of having courts defer to their own "interpretations" of the law. OBVIOUSLY, these interpretations shift based on who occupies the White House. It's bizarre that anybody thought it was fair (due process?) that the aggressor suing you had the benefit of having courts "defer" to the aggressor's viewpoint. To boil the ocean, regulators were acting as judge and jury.

This is no longer the case. I'm sure you all have heard about the Supreme Court overturning the Chevron case, but you might not know the significance of this seismic ruling. It's an incredible development in our industry. Super positive.

Implications for Us

The network marketing industry has been bullied for decades by an FTC that refuses to clearly state the rules of the road. Instead, the FTC issues "guidance" that amounts to the FTC's "interpretation" of Section 5 of the FTC Act (the Act used when they allege a company to be a pyramid scheme). This guidance shifts with the political winds, most notably when the FTC rescinded its own guidance from 2004. This guidance was viewed as favorable by those of us that harp on the details. And with a few keystrokes, the FTC thought it could nullify it.

I'm not going to bore you with the details. I'll just summarize: the FTC guidance, in my opinion, is...less valuable. The only interpretation that matters is what comes out of the courts. And our industry has GREAT precedents from the courts i.e. Neora and Burnlounge.

THE FTC HATES THESE CASES. For example, in its recent letter sent to the DSSRC regarding the FTC's "standards", which was sent before the Chevron case was overturned, the FTC bloviated for positions that were soundly rejected in the Neora case. The agency is accustomed to bulldozing its will on the industry, regardless of what the courts are telling it. This is no longer the case. While the FTC wants to expand its influence in the industry, it's ability to do so was dramatically limited when the Chevron case was overturned.

Times are changing. There's a vibe shift happening in the country and for once, the agencies are having to play defense.

Send a message to learn more

The FTC pushed out new guidance for the network marketing industry. The last time they did this was 2018. Check out another law firm's analysis. I agree with the content. It's a problem.

"Despite its length, the Guidance conspicuously omits any reference to last fall’s landmark decision in FTC v. Neora where the district court rejected many of the same theories that Staff now recasts as guidance, such as an amorphous prohibition against a ​“focus” on recruitment."

This FTC is off the rails. The only solution is a political solution. Keep this in mind in November.

FTC Staff’s Revised MLM Guidance—More Content, Less Clarity The new Guidance updates guidance from January 2018 (that we covered here ) and lays out several principles and issues that Staff intend to consider in evaluating whether MLMs constitute illegal pyramid schemes and/or are otherwise engaged in unfair or deceptive acts or practices, including through....

Two SEC lawyers on the IX Global / Debt Box case "resigned" after they got caught lying to the court.

It's important to remember that the case is still pending. It's an open-issue whether the selling of software licenses for crypto mining is ok. I've seen other companies spring up that have similar offerings. I'd be careful out there.

Two SEC Lawyers Resign After Agency Censured for Abuse of Power in Crypto Case (Bloomberg) -- Two Securities and Exchange Commission lawyers resigned after a federal judge sanctioned and sharply rebuked the Wall Street regulator for “gross abuse” of power in a crypto case. Most Read from BloombergTrump Has Only $6.8 Million for Legal Fees With Trial UnderwayTikTok to Remov...

The more I'm cracking into AI tools for lawyers, the more I think smaller companies will be better equipped to go toe-to-toe with the FTC in the event of litigation.

Companies historically have had to spend millions (sometimes tens of millions) to defends themselves when faced with FTC litigation. Typically companies fold due to lack of resources. If companies work with a firm that's leveraging AI tools, I think they'll have a better shot at hanging in there while controlling the cost. AI is driving cost out of the legal system.

This is a net positive for litigants and a net-negative for regulators because they lose the asymmetric advantage of exorbitant cost. Smaller firms with good tech can punch like larger firms.

I guess the takeaway is that when faced with litigation, I would urge cash-strapped companies to work with firms that leverage tech to keep the costs down.

Rant over.

The FTC, the agency responsible for regulating the network marketing industry, is speaking at an anti-MLM conference in May. It's not too surprising, given their recent posture lately.

At the conference, there's not a single pro-industry speaker. Not one. Bill Keep, the conference founder, has been advocating for the end to the industry for decades. And yet, the FTC is there to, what...educate people? No, this is a meeting where people can put their heads together to discuss creative ways to dismantle the industry. Ideas will include social media activism, censorship on advertising, censorship from banking relationships, attacking pro-industry academics, etc. There will not be a single speaker that acknowledges the legitimacy of the space. And again, the FTC is providing a keynote speaker.

The solution to this problem is political. Despite its historic loss against Neora, the current FTC does not respect the limits imposed by Congress and is still seeking out ways to shut it all down. Aligning itself with a community of critics is anti-democratic and wrong. The cold truth is that the industry is legitimate. Period. It's been around for 70+ years. It'll exist for another 70+ years.

2024 Session Schedule — Multilevel Marketing MLM Conference 2024 Schedule   Thursday May 2ndTIMES IN EDT   9:30am Welcome from William Keep, Dean Tammy Dieterich, TCNJ School of Business.9:35 – 10:00: Keynote: Kati Daffan, Assistant Director, Federal Trade Commission, Division of Marketing           10:00 – 11:00: Session 1: FTC Rulemaking P...

To the terminated employees at Beauty Counter. If you'd like to seek employment in the same industry, send me a DM and I'll make an intro to a great staffing agency. BC has a great brand and I'm sure with your experience, there will be opportunities elsewhere.

This is from Beauty Counter's homepage.

"The Beautycounter business that you knew previously has wound down.

However, I am excited to share the news that I am creating a new company that will allow us to sell the products you know and love- pushing forward the important mission of making the industry, and our world, safer and healthier.

A new Beautycounter is on its way!"

So...why the acid-tone with the termination notice. My best guess: the sellers were not motivated to do Gregg any favors by helping her promote the next thing. I could be wrong. The whole wind down/rollout was an absolute mess.

To the Beauty Counter folks out there, I guess wait and see what Gregg has in store. If she bought the company from Carlyle Group, it would mean she owns the database and could recreated the genealogy. In other words, the org structures would all remain intact.

I guess there's word that Beauty Counter is going to re-brand and re-launch. There's no way of knowing because their "termination notice" was completely silent of that "exciting update."

So for now, I guess wait for BC to do damage control (or not).

This is terrible news for Beauty Counter ambassadors. The wording of the termination notice just sucks.

Beautycounter Terminates All MLM Distributors, Shutting Down Beautycounter founder and CEO Gregg Renfrew left the company in January 2023. In 2022, Beautycounter named Marc Rey as CEO while Renfrew became the company’s Executive Chair and Chief Brand Officer. In June 2023, Mindy Mackenzie has been appointed interim chief executive officer. In a review about...

The current FTC is so bad, they're becoming a political liability for the Biden administration. The network marketing industry has grown accustomed to being bullied for decades. And we've lacked the political muscle to really push back against the FTC's behavior.

Sure, the DSA talks a lot, but they get nothing done on a meaningful scale. When the FTC files a lawsuit, network marketing companies are at the mercy at whatever judge ends up presiding over the case.

The FTC is now trying to strong arm larger tech companies and they're not having it. People with influence are starting to say "wait a second, this is ridiculous." Here's a short segment with Amazon CEO Andy Jassy on CNBC. He talks about how the FTC would've blocked Amazon's acquisition of iRobot on the basis of "consumer protection." In response, iRobot linked up with a Chinese company that now has access to the layout of consumers' homes.

Be mindful when a government agency promises to be looking out for you. It could be a curse phrased like a blessing.

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This is solid content. It's behind a paywall, but Social Selling News is one of the few publications that's worth the money.

The article discusses the FTC's recent letters to both the DSA and the DSSRC regarding pyramid scheme analysis and income claims.

FTC Staff Challenges Status Quo on Pyramid Scheme, Income Disclosure Guidelines Revised directives to DSA, DSSRC signal a major shift in Commission’s interpretation of existing standardsBy:  David BlandIn a significant move aimed at refining its stance on regulatory compliance within the direct selling industry, the Federal Trade Commission (FTC) staff issued two notab

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Federal Trade Commission Cracks Down on Hamline University's "Uber-Promising" Future

In an unprecedented move that's left academia and ride-sharing enthusiasts alike in a bemused spiral, the Federal Trade Commission (FTC) has launched a scathing investigation against the relatively unknown Hamline University. The charge? Deceptive advertising that has led scores of students to believe their diplomas would be a golden ticket, only to find themselves mastering the art of the perfect five-star Uber ride.

Hamline, most notable in the network marketing industry as the place of employment for scathing MLM expert critic, Tracey Bosley, now finds itself in the hot seat being condemned for the very behaviors they consider abhorrent. Commenting on the allegations, Bosley said, “Look, these students are not bad at math. They know what they’re signing up for. Universities should never be judged by the standards we impose on private businesses. Success is possible, and that’s all that matters.”

Hamline University, long revered for its illustrious alumni and groundbreaking research, is now under fire for what the FTC describes as "grossly unsubstantiated income claims." According to public records, the average cost of attending Hamline University is roughly $50,000 per year. According to US News Best College rankings, the median salary of a Hamline grad is ~$39,409. Spokesperson for the FTC, Gross Leisman, said “This alone is bad enough. Coupled with their 59.1% graduation rate, it’s downright abusive. I mean, the average hourly wage of a brand new Hamline grad is ~$29. The average salary of a plumber in Minneapolis is $34. I mean, c’mon. If we’re going to sue companies for selling over-priced sports nutrition, we need to hold everyone, including our experts and their places of employment, to the same standards.”

While some disclosures are available on the Hamline website, the FTC has alleged that these disclosures are buried in the fine print. Instead, they insist that these disclosures flash on the screen at 10 second intervals, in 48 pt red font, italics, underlined, and overlayed on all of the images containing smiling students.

Moreover, the university boasted a much higher graduation and job placement rate, a statistic that conveniently omitted the fact that the majority of these positions were behind the wheel of America's favorite ride-sharing service. "We thought we were nurturing the next generation of leaders, thinkers, and innovators," lamented Dr. Ima Pseudo, a tenured professor at Hamline. "But it turns out we were just creating a highly educated fleet of Uber drivers. Who knew? I mean I knew it, I just thought we’d be left alone because we have the most environmentally conscious student body.”

In a statement released by the FTC, Commissioner Leisman expressed her concern: "When a university's outcome is post-grads delivering chicken wings via DoorDash, it's time to reassess their educational promises."

In response, Hamline University's administration has updated their mission statement from “Where Passion Fuels Purpose” to something more pragmatic: “Better Than Minimum Wage, Debt for Decades.”

"The Commission’s above-discussed conduct constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process... The operation of the American judicial system rests on the fundamental proposition that every party who comes before the court is bound by and adheres to the same set of rules."

"For the reasons explained below, the court imposes sanctions against the Commission for bad faith conduct in obtaining, maintaining, and defending the TRO, and denies the Commission’s Motion to Dismiss without prejudice to refile in accordance with the District of Utah’s Local Rules.The Commission’s above-discussed conduct constitutes a gross abuse of the power entrusted to it by Congress and substantially undermined the integrity of these proceedings and the judicial process."

assets.ctfassets.net

We've been writing about California's PAGA law recently. It basically expand's the state's reach to sue companies that rely on independent contractors.

If your company is based out of California, it will be targeted.

Rodan and Fields was just sued on this issue. There will be many others.

https://behindmlm.com/companies/rodan-fields-class-action-alleges-consultants-are-employees/ -96025

Crypto scams really ripped through our industry from 2015 through roughly 2022. The SEC was slow, but they've been thorough. I cannot think of a single crypto-based MLM that has survived through the years.

The losses have been substantial. Consumers lost tens of thousands, sometimes millions of dollars. But to add salt to the wound, think about the opportunity cost.

The pitch for most of these companies was "you missed the Bitcoin rally, get in on this one early." Well, the price of Bitcoin in April 2014 was ~$240. It's currently valued at $62,000.

If an investor put $10,000 into Bitcoin instead of lighting it on fire in a scam, they'd be sitting on $2,583,000. It's mind boggling. Keep this in mind if you see a "hot token" coming in the future. Crypto is making a comeback, I expect to see companies make another go at it.

What's on your mind? We might do an "ask me anything" segment next week. Anything going on in the industry you're curious about?

The Private Attorneys General Act in California is a disaster for companies doing business in California. It's doubly disastrous for companies based out of California.

If a network marketing company is based out of California, it's time for them to pack up and leave.

Read here to learn about it and what it means.

Thoughts A Brewin' Newsletter 7: The California Risk What should the direct sales industry know about California's Private Attorneys General Act, better known as PAGA?

I listened to the Lex Fridman interview with Bill Ackman.

It strikes me as odd that Ackman is passionate about Herbalife because he views it as "bad for the world." Yet the man is a major shareholder of....McDonalds and Burger King. Those entities are not exactly paragons of virtue. So weird.

‎Lex Fridman Podcast: #413 – Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech on Apple Podcasts ‎Show Lex Fridman Podcast, Ep #413 – Bill Ackman: Investing, Financial Battles, Harvard, DEI, X & Free Speech - Feb 20, 2024

To recap the weekend:

We have National Guard troops being sent to Texas to support Texas defy the Federal Gov't;
Direct military conflict with Iran seems imminent;
Funding for Ukraine stalled;
Border solution stalled.

Things seem to be going great.

There's good news on the inflation front. The government will soon need to fire up the money printer, which will be good for asset prices (good for people who own assets, not good for those without).

Trigger Alert: I just signed up for monthly contributions to support BehindMLM. I know some of you hate this publication. But it's a net positive for the industry.

Can you imagine how much traction some scams would get without being exposed by BehindMLM? There are times when good companies and good people get punched without deserving it. Still, I think the pros outweigh the cons. Exposing scams is a complicated and dangerous business.

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