Are Network Marketing Companies and/or Distributors legally liable when income claims are made via emails or on 3rd party websites?
Now, the best document I have read on this subject is written by network marketing attorney Kevin Grimes.
In Kevin Grime’s 27 page white paper on this subject he makes it very clear, unless the company provides an Income Disclosure Statement and all that comes with that document, any type of income claim (real or inflated) is illegal.
Now the question that I have is, are network marketing companies and or their distributors legally liable for income claims presented by 3rd party websites?
I ask the question because as I see it the income claims shown, have to come from one of three places.
1. The network marketing distributor, via 1099 or federal tax return.
2. The network marketing company’s accounting department.
3. Someone’s vivid imagination.
In all three of these situation, I do not see where the company and/or the distributors are not legally liable for the income claims if the company itself has not publicly disclosed an Income Disclosure Statement.
I reviewed the top network marketing companies to see what their policies and procedures all state. In each case the P&Ps are very clear, NO income disclosure of any kind is to be used to sponsor new prospects.
In the few cases where income disclosure is allowed, it is only allowed with the prior written approval of the company, and even then only using company approved documentation.
Which brings up an additional question…
Since most network marketing companies have inside of their policies and procedures a policy against any form of income claim, should the company in order to protect itself and its field force, write a letter to the 3rd party website requesting they remove all income claims from the website?
Now, it you are wondering why it really matters, it is simple.
If we as advocates, company owners, and distributors do not ask these questions, and come up with a valid answer then regulators, critics and even the IRS may do it for us.
Think about that one… What if the income claims have been inflated, and the IRS reviews this new public information? Could they audit the distributor, the company or both? What would this do to the momentum and reputation of the company, distributor and our profession?
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