Multi Level Marketing (MLM)
How is a Distribution Structure Reviewed by your German MLM Lawyer?
MLM is a sub-form of direct marketing, the border with distance marketing becoming increasingly blurred. It is thus important for your German MLM Lawyer to identify first the legal area he must focus on regarding the MLM structure under scrutiny. External identification criteria are, on the one hand, the Internet and, on the other hand, marketing through distributors. Your MLM Lawyer must then generally verify whether in fact an MLM structure is a distributorship or a closed buying circle whose distribution partners are actually only end consumers. If your MLM Lawyer determines that such a system does not constitute a prohibited pyramid scheme, he will have to look into the contract lines and review both the distribution contracts and the sales of goods. Regarding the distribution contracts your German MLM Lawyer will then identify the superior sales agents and the sub-agents along with their corresponding genuine or non-genuine contracts, depending on whether a contract is concluded with the company or a sales agent. The German MLM Lawyer will also have to look into the most diverse downline structures, which may consist of a binary tree or a multiple tree structure, depending on how they are linked to an organization’s marketing plan. Based on his legal assessment of this structure, the German MLM Lawyer will verify whether the goods are sold in the name and on account of a third party (sales agent) or whether the goods are first purchased by the distribution partner for the purpose of reselling them (authorized dealer). In a large number of MLM structures both marketing forms are used. Your German MLM Lawyer must then identify the core of the contract system. In his verification described above your MLM Lawyer will, however, have to deal with the difficulty of inconsistent court practice in Germany. In case of cross-border systems, your German MLM Lawyer will also be faced with differences in legislation in the member-states of the European Union, which continue to exist despite harmonization efforts.
INFORMATION of the WORLD FEDERATION OF DIRECT SELLING : http://www.wfdsa.org/about_dir_sell/index.cfm?fa=schemes2