Organize your multi-level direct sales (MLM) network 

You want to distribute your products or services with sales forces in which independent sellers are invited to sponsor new independent sellers, so as to rapidly expand the scope of your distribution network. These independents can be brokers, agents, sales agents, commission agents or buyer resellers (we will call them for convenience direct seller or distributor in this page even if their legal qualification may be varied). 

This direct sales organization is lawful subject to the prohibition of snowball sales and pyramid selling (art. L. 121-15 of the Consumer Code). Direct selling

is when your independent distributors show up and sell your products or services directly to end customers outside of stores or commercial premises, face to face. 

You will have to set up a contractual organisation:
 

• Buyer and reseller of your products; 

• respect for your prices, 

• satisfaction measurement, etc. 

In this regard, you will need to define:
 

• Buyer and reseller of your products; 

• d’organisation de votre réseau de distribution. 

• are not authorized, contrary to their principal, to: 

 

• provide legal advice, 

• provide legal advice, 

This remuneration consists in principle of commissions which are based on the Turnover achieved with the final consumers of the products and/or services. 

Article L. 135-2 of the Commercial Code regulates these remuneration terms.

Our method for drafting deeds for the creation of a direct sales network
 

1. We listen to your objectives and distribution constraints and help you prioritize them to define the principles:
 

• Buyer and reseller of your products; 

• d’organisation de votre réseau de distribution. 

• are not authorized, contrary to their principal, to: 

  

• are not authorized, contrary to their principal, to: 

  

• Buyer and reseller of your products; 

2. Our lawyers, practitioners of direct sales networks, then draft the home distribution contracts and the charters organizing the operation of the network. 

Your home distribution contract and the organization charter the tailor-made direct sales network

The challenge is to build an attractive, commercially effective direct sales network (MLM). Our knowledge of direct sales and our benchmarks will contribute to this. 

The challenge is then to ensure the legality of the direct sales network (MLM) and to protect yourself from risks:
 

• Buyer and reseller of your products; 

• respect for your prices, 

• criminal penalties, since the rules laid down by the Consumer Code on direct sales are punishable by two years’ imprisonment and a fine of €300,000 or 10% of the average annual turnover over the last three financial years (art. L. 132-19 C. consumption).
   

The Prohibited Pyramid Selling System

To understand these issues, it should be noted that Article L. 135-2 of the Commercial Code, as well as Article L. 121-15 of the Consumer Code, guarantee that the gains of each of the independent distributors of the direct sales network can only come from the sale of products or services to an end consumer, and not from resale between the members of the network (i.e. in a market created fictititiously for the sole benefit of the promoter of the network, which would constitute a prohibited pyramid scheme). 

In detail, here is a description of the prohibited pyramid schemes. 

The most basic system is that of the membership chain, prohibited in its terms:

 “(…) is prohibited” The act of offering a person to collect memberships or register on a list with the expectation of financial gains resulting from an increase in the number of people recruited or registered. ” 

The direct seller must make an initial expense, with the most diverse counterparts who have in common to be inconsistent. This amount goes to the promoter of the system at the top of the pyramid.

 The direct seller is encouraged to subscribe to this expense in the hope that in turn, he will obtain gains by having third parties subscribe to the same “status” of direct seller. This seller will only receive earnings resulting from new memberships in the multi-level network. 

But the pyramid scheme can be more sophisticated and be concealed at first glance by its promoter. 

First, it is a question of defining a range of products or services, often at non-competitive prices but difficult to compare, intended for sale to off-grid customers, via a network of multi-level independent resellers. The seller who enters the network must purchase a minimum stock of these products, defined contractually (in addition to various fees, such as training costs, demonstration materials, etc.). 

But given their characteristics, reselling these products is difficult. To sell the stock he has acquired, the direct seller must resell it to referrals by taking advantage of the attraction of the network, and not that of the product.  

Thus, in a sophisticated pyramid scheme, the head of the network ensures its profitability by the initial investment of new direct sellers at the signing of their contract and then by the services rendered between the levels of resellers.