Law360, New York ( June 26, 2014, 11:30 AM EDT) -- Many Internet-based ventures promote the opportunity to earn incentives for recruiting new members or customers. These programs are called multilevel marketing ("MLM") programs, and in the eyes of the law they may be illegal pyramid schemes. In FTC v. BurnLounge Inc., the Ninth Circuit recently applied pyramid scheme principles to an Internet-based MLM, providing useful guidelines for industry but few brightline tests to identify the characteristics that separate lawful MLMs from scams.[1] While legal actions against pyramid schemes are familiar in the law, enforcement actions are still coming to grips with the new kinds of programs facilitated by the ready availability of Internet platforms, social media and spam. Promoters of online MLM programs would be well-advised to familiarize themselves with the BurnLounge opinion and to understand the rules to which their operations must conform....
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