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Take Action Now!

To add your name to this petition, send an e-mail with "Retail Rule" in the subject line. Include your name, address, phone and email.

If you prefer, you may print it and mail it to:

Consumer Response Center
Federal Trade Commission
Washington, DC 20580

To help us manage our peition drive, if you mail it direct, please email PSA, with

"We the undersigned, petition the members of the US Federal Trade Commission to immediately adopt and enforce a formal rule that defines and regulates all multi-level marketing businesses based upon actual retail sales activity level."

in the body of your message

To Prevent MLMs from Operating as Pyramid Schemes

The Retail Rule Petition

We the undersigned, petition the members of the US Federal Trade Commission (FTC) to immediately adopt and enforce a formal rule that actual retail sales activity level be reported accurately and in a form that can be independently validated.

  • Without requirements for audited retail sales levels, any sales program that is based upon an uncontrolled, ever-expanding base of resellers (distributors, agents, independent representatives, etc.) is an inherent pyramid scheme.
  • The financial results of enrollment schemes based on recruiting distributors rather than retailing the majority of goods to non-distributors are inevitably the same -- the vast majority of enrollees suffer financial losses. Their losses are transferred directly to the MLM company and tothe top levels of upline distributors (perpetrators or founders) who harvest the bulk of the profits from the program. Only a small fraction of recruits can ever realize the advertised income potential that is claimed to be available to all.
  • A 70% retail requirement level has been applied in various agreements between state Attorneys General offices and multi-level marketing companies charged with violating pyramid scheme statutes.
  • A 70% retail requirement level assures that rebate payments to upline distributors are based upon actual consumer sales and not primarily upon recruitment of new distributors and are not, therefore, “recruitment fees.”
  • Reclassifying distributors as “end-users” and allowing wholesale purchases by other distributors” to count as “retail” sales are evasive devices regularly employed by pyramid marketers.
  • Adoption of rules or policies regarding retail sales levels - without audited verification for each and every retail sale - is regularly employed as a deceptive maneuver by pyramid marketers. Internal reports by the multi-level marketing company are not acceptable, as such reports in the past have been falsified in a variety of ways. Reporting of compliance with such retail rules are suspect when distributors are warned that their distributorships could be cancelled if they do not state that they have complied.
  • Rebates that are paid to upline distributors based on the volume of "purchases" by the downline -- with no verification provided for subsequent retail sales activity outside of the distributor network-- are actually recruitment fees, not commissions on "sales." This is especially true where sales are made at reduced wholesale prices in order to meet volume requirements for distributors to advance to higher levels in the distributor hierarchy or to qualify for ever-increasing volume bonuses.

We therefore petition that

  • This rule requires audited verification of actual retail sales from all authorized distributors
  • At least 70% of such sales be certified as made to persons outside of the distributors' network and immediate families, and
  • Percentages of actual sales at retail prices be documented and submitted for periodic independent audit.



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This page last updated on 1/23/2005