Part 2: Policies, Procedures, Rules & Regulations



For more than 40 years, the network marketing and multi-level marketing industries have been vigorously monitored by such federal and state agencies as the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), U.S. Postal Service, State Attorneys General, and State Corporation and Security Commissioners. In general, these agencies viewed network marketing in a skeptical light because of spurious past experiences. Although the past 40 years have produced some resounding success stories, regulators continue to keep a watchful eye on the industry.

Numerous aspects of various network marketing programs attract the concern of certain government agencies. The two areas which are most prominent are the methods by which a company attracts new distributors, and the basis on which incentives are rewarded. For example, demanding payment from an individual in exchange for the right to sell products, and basing bonuses or commissions on the successful recruitment of others into the network (unrelated to the sale of the company’s product), are illegal.

Since 1979 the FTC has been refining its definition and acceptance of legitimate direct sales or network marketing programs. In its landmark decision concerning a four-year action with Amway Corporation, the FTC found that most aspects of the Amway marketing program were legal because: (1) no compensation was paid for recruiting, (2) compensation was linked directly to product sales, (3) the company provided a comprehensive inventory buy-back policy, and (4) the company required its distributors to sell a certain percentage of their purchased products to retail customers who were end users of the product.

The resulting FTC ruling opened the door for legitimate entrepreneurs to seek out people eager to build independent businesses through the networking form of product distribution. It was this condition that provided the groundwork for Market America to launch its powerful marketing plan and unique compensation program.

Since the FTC ruling, there has been an evolution of network marketing and multi-level marketing programs. Today almost every conceivable product is merchandised using network marketing. The industry has become intensely competitive with companies competing for independent distributors to join their ranks. This competition has resulted in the development of a variety of compensation structures. It has also stimulated further scrutiny of marketing plans and their compliance with the laws enforced by various regulatory agencies. Although there are contradicting interpretations of certain legal limits by the various agencies, Market America has meticulously observed even the most stringent of these regulatory interpretations and has continuously maintained a conservative posture of cooperation and compliance with regulatory agency interpretations and directives.

The Market America marketing plan has been designed to meet these regulatory requirements. Each Independent UnFranchise® Owner is sponsored into the organization by another UnFranchise Owner. The Management Performance Compensation Plan (MPCP) offers UnFranchise Owners the potential for significant financial rewards based on product sales. The plan has no inherent limitation, so each Independent UnFranchise Owner has an equal opportunity for success if the requisite hard work is put into the marketing plan.

The marketing plan was developed to avoid negative incentives and/or pitfalls and to minimize limitations frequently inherent in other network marketing programs. The Market America marketing plan contains retail sales requirements to ensure regulatory compliance. One interesting observation is that the very design of our marketing plan eliminates the potential for abuse or misrepresentation. The design of our plan is such that economic incentive is based entirely on products reaching end users. Under the plan, when an UnFranchise Owner places product orders, Market America asks for customer receipts or other proof that at least 70 percent of product orders were sold to end users or retail purchasers. Furthermore, UnFranchise Owners must produce 200 Personal Business Volume and a minimum of two customer sales totaling $200.00 before becoming qualified UnFranchise Owners eligible to receive compensation credit for the Group Business Volume generated by UnFranchise Owners in their sales and distribution organization.

Only submission of a nominal subscription fee is required to participate as an UnFranchise Owner in the compensation program. As an UnFranchise Owner, compensation is paid only on sales volume accumulated by qualified and active UnFranchise Owners who have satisfied their minimum activity requirements. An UnFranchise Owner occupies a Business Development Center in the binomial network structure and qualifies to build a marketing organization and earn commissions by first meeting specific sales and personal Business Volume requirements.

The marketing plan includes a policy for buying back all currently marketable products or literature purchased within one year of return date from UnFranchise Owners who are terminating their UnFranchise Businesses, or purchased within 30 days of return date for UnFranchise Owners not terminating their UnFranchise Businesses. The policy requires that product first be offered to upline UnFranchise Owners to avoid a chargeback of MPCP compensation previously earned. The total process for a return usually takes less than 30 days if the UnFranchise Owner follows the procedures set forth in the Market America UnFranchise Manual. Compensation must be charged back, in the absence of a buy-back by a sponsoring or upline UnFranchise Owner, because the product was never sold to an end user. Sale of products to the ultimate consumer is a fundamental requirement for the earning of compensation in the marketing plan. The policy also allows for customer returns and full customer refunds on the product from the selling UnFranchise Owner within a 72-hour period from the date of purchase. 

Market America has also engineered a means by which UnFranchise Owners can avoid the temptation of making extravagant product or income claims. Video, audio, and printed presentations relate exciting, objective information about the company plan and products. One of the biggest potential problems in the network marketing industry is misrepresentation by a distributor in business presentations. UnFranchise Owners are contractually obligated to understand the marketing plan and present it properly. Executive Coordinators are contractually obligated to train, supervise, and monitor their organizations and guard against misrepresentation. Market America encourages UnFranchise Owners to use only company-developed marketing tools in group settings and prohibits unauthorized income claims or use of unauthorized literature or marketing tools. All other materials must be sent to the company for prior approval. This practice minimizes the risk of misrepresentation.

Market America has established a Legal Department to oversee UnFranchise Owner ethics and policy enforcement to ensure that the company’s operational standards remain intact and that each UnFranchise Owner honors all applicable federal, state and local laws. The company is represented by credible and experienced legal counsel in the areas of regulatory compliance, multi-level marketing law, securities law and business opportunity law. The strength and future of Market America depends on innovative products and marketing, but the company equally relies on UnFranchise Owners who adhere to its policies and procedures.

All Market America Independent UnFranchise Owners are required to comply with all policies, procedures, rules and regulations set forth in this UnFranchise Manual, and these may be amended from time to time. Part 2 of the UnFranchise Manual is included as part of the Independent UnFranchise Owner Application and Agreement and is legally binding, as are the other terms of the Application and Agreement. 

Market America honors all federal, state and local regulations governing good business practices and requires all Independent UnFranchise Owners to do the same. The company is a direct sales company marketing products through Independent UnFranchise Owners. The policies, procedures, rules and regulations herein are applicable to all Independent UnFranchise Owners and Market America.