Submission Number: 00009
Received: 1/12/2011 7:54:48 AM
Commenter: Jon Taylor
Organization: Consumer Awareness Institute
Agency: Federal Trade Commission
Initiative: Trade Regulation Rule on Disclosure Requirements and Prohibitions Concerning Business Opportunities - FTC File No. R511993
00009-57282.pdf Size = 1180 KB
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RE: Serious problems with the latest staff report – especially in the light of new information – and a #10,000 challenge, Part 3
Following is a quote from the staff report on the Business Opportunity Rule released in October:
"It further determined that other disclosures required by the proposed Rule, such as prior recruits, are not likely to help potential recruits evaluate the risk of participating, because all participants in the MLM have a financial incentive to enlist new recruits."
Only a person who lacks understanding of basic statistics would make such a statement. The total population is crucial to any statistical investigation. The attachment with this comment from my e-book that addresses this includes Chapter 6 which helps establish the total population, making analysis with any integrity possible. Assumptions and evidence regarding attrition and retention are crucial in the analysis of average loss rates, as presented in chapter 7. But again, a person grounded in statistics would understand this clearly. Eliminating all dropouts and only counting “active participants,” as MLMs do in their reporting of average incomes, skews the reporting of rates of success and failure. My analyses in Chapter 7 corrects for these statistical distortions.
Chapter 5 provides realistic costs of conducting an aggressive recruitment campaign, which I found from my research and experiential testing to be very expensive. This establishes a far more realistic breakeven bar than the zero cost of participation assumed by MLM promoters. In my analysis in Chapter 7, I even allowed for such costs to be reduced to 10% of what I experienced to give MLMs every realistic benefit of the doubt.
Chapter 3 presents information on market saturation, as opposed to total saturation. You can just skim that, as it was treated in prior comments. Chapter 4 compares the excessively high costs of MLM products with comparable products sold elsewhere, making MLM products not retailable. This again shows that the only way to really profit from MLM is through aggressive building of a downline – not by selling products, as the DSA claims.