Documents for MLM company’s site

Ivan Mashin

Table of contents:

Network marketing is rapidly developing both in Russia and abroad, which makes it necessary to create a legal framework. Currently in the Russian Federation there are more than 150 MLM companies selling products through direct sales. Even taking into account the lack of a legal framework, companies are trying to organize relations with their partners and site’s visitors in a legal and competent way. So it is extremely important for MLM companies to place on their website the necessary legal documents about company's activity, its structure, data collection and legal relations with partners.

For MLM companies profitable and elaborate MLM compensation marketing plan is a challenge. While there are many plans available in the industry, there are many factors to consider deciding on the best compensation plan.

Why is it necessary to put legal documents on MLM companies' websites?

Technologies have led to a dynamic growth in the supply of goods and services via the Internet. Direct sale systems have become the most popular scheme for product promotion, and entities implementing this scheme have become known as MLM companies.

The block of legal documents has to be placed on the website of the company, because, firstly, the rules of its use and rules of cooperation with partners (distributors) have to be established, secondly, the legal documents mitigate risks of dishonest use of the information on the MLM company website, and also protect the company from any claims connected with use of the personal data of the users and company partners. Thus, the main page of the MLM company website should contain privacy policy, user agreement, cookies policy, marketing plan, terms of delivery and exchange (if the company is engaged in commodity business).

Privacy Policy

Privacy Policy is a document defining the list of Personal Data (PD), required by the company, the order of their collection and processing. Features of Privacy policy of MLM companies are that sites assume registration of the partner (distributor) and creation of a personal account where their "achievements" will be reflected - amount of sales and attracted partners, and also their level in company system. Registration requires user's first and last name, e-mail, phone number, etc. This is one of the points regulated by the Privacy Policy. The second aspect is that the site user, clicking on the box and putting a tick in the pop-up window of the Privacy policy, gives indefinite irrevocable written consent to any means of processing personal data.

This document must necessarily contain references to the legislation under which it is drawn up. It depends on the country where the company is registered and performs activity. If we're talking about the European Union, MLM companies registered in an EU member state must draw up a Privacy Policy, according to the General Data Protection Regulation.

The existence of this document is necessary because it mitigates risk of claim against the company for illegal use of personal data. The user automatically consents to their use by ticking the box that pops up.

User Agreement

The main document on the MLM company's website is the User Agreement. It defines how the MLM company will cooperate with a partner, what benefits the partner will receive, how they will move up the company's ladder, what their rank and level of income will depend on, what rights and obligations the partner has.

As we said in our previous article, validity and essence of the contract does not depend on its name. A user agreement is most often framed as a distribution agreement under which the partner buys products from the company and independently markets and sells them. We would like to note that the partner in this case will not be a party to an employment contract and labor law will not apply to these relations. In order to avoid disputes we recommend MLM companies to require the partner to register as an individual entrepreneur. This will allow MLM company to avoid tax in favor of the partner and to solve the issue of application of the Law "On Protection of Consumer Rights", since the goods will be purchased by the partner for business purposes.

There is also an option of governing relations between company and a partner with public offer to conclude a remote purchase agreement. In this case, the contract should contain a section regarding the ordering and payment procedures. Such way of regulation makes it obligatory to have the document "Terms of Delivery and Exchange".

Cookie Policy

A cookie policy is a document regulating the collection of data about company's site visitors, about their actions on the website, such as registering or clicking on link. A cookie is a text file that web servers request and then add their own information and store on your hard drive. Cookies allow the web server to know the date and time you visited their site, as well as any other information they think they need. They are used to both store and retrieve information about visitor.

Marketing Plan

In multi-level marketing companies, creating profitable and elaborate MLM compensation marketing plan is a complex task. While there are many plans available in the industry, there are many factors to consider when deciding on the best compensation plan.

A company's MLM marketing plan is a set of provisions that describe how bonuses are awarded to the company's partners (distributors). It is a correctly made marketing plan that determines successful sale of goods and services in the market.

On the basis of the mentor’s marketing plan, partners build their personal sales.

Taking into consideration the fact that there are many different network marketing companies, each of them develops its own unique marketing plan. However, a few basic types should be distinguished:

Classic Plan (UniLevel)
Matrix plan
StairStep plan.

The first type has no limitations on scope, i.e. in the first generation there can be unlimited number of attracted partners. All distributors work equally, buying goods at the same price.

The second kind limits the number of partners that the main partner can fund in the first generation. The participants are in single matrix. Partners receive income as long as the minimum sales goal in each matrix block is achieved.

According to the third type of marketing plan the charge of bonuses to partners is carried out proportionally to (1) turnover of the company (the more turnover - the bigger reward), (2) their partner position in the general system and (3) the position of those who were financed by them. The rank of the partner is determined by personal sales volume. These are the "steps" in this marketing plan.

We have reviewed the basic documents, which should be placed on the main page of the MLM company website. A4 will provide you with a full range of services regarding the creation of an MLM business. Legal documents compiled by A4 lawyers, will not only allow to competently govern the process of business activities, but will create the image of reliable company that will be safe to work with.