Licensed Masters
Star's Edge Information Letter
MLM vs Pyramid schemes

From the Guardian Heart
February 22, 2001
Certain financial schemes being forwarded to Masters violate principles of exchange. People operating with integrity intuitively feel the wrongness of being out exchange with someone. People who reach the level of Avatar Master have a level of awareness and self-determinism that often leads to a willingness to take risks, including financial ones, to create success. However, not every marketing or financial opportunity that presents itself is a legitimate exchange for those involved.
Multi-level marketing is a system of selling in which you sign up other people to assist you, and they, in turn, recruit others to help them. Some entrepreneurs have built successful companies on this concept because the main focus of their activities is their product and product sales.
However, some multi-level distributorship schemes omit the idea of exchange and focus on recruitment. They operate as a "pyramid," claiming participants can earn lots of money by concentrating most, if not all, of their efforts on recruiting distributors rather than selling a product. State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.
The success of a pyramid distributorship for each and every distributor depends on continuously getting additional people to join the pyramid. However, there is a practical limit to how many distributors can be found and to how many product units they can sell or use. Plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people -- except perhaps those at the very top of the pyramid -- lose their money.
The Avatar Master licensing agreement prohibits a Master from recruiting clients of Star's Edge, either on the Master's own behalf or on behalf of any other person or entity. This means that using the Avatar network for recruitment into financial schemes, whether legitimate or not, is a violation of the Master's license.
To know whether to follow an opportunity, use discernment. The United States Federal Trade Commission investigates and prosecutes fraudulent or illegal money making schemes. They provide the following tips for telling the difference between a legitimate multi-level marketing plan and an illegal distributorship or other pyramid-type scheme.
1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive inventory. These plans can collapse quickly -- and also may be thinly-disguised pyramids.
3. Be cautious of plans that claim you will make money through continued growth of your "downline" -- the commissions on sales made by new distributors you recruit -- rather than through sales of products you make yourself.
4. Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn't mean it's true! Ask the promoter of the plan to substantiate claims with hard evidence.
5. Beware of shills -- "decoy" references paid by a plan's promoter to describe their fictional success in earning money through the plan.
6. Don't pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant or lawyer.
7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering -- especially when the claims about the product or your potential earnings seem too good to be true.
The FTC website contains more information and some descriptions of common schemes. It can be found at http://www.ftc.gov/ftc/consumer.htmAnother website, called "kNOw Fraud," sponsored by AARP, Council of Better Business Bureaus' Foundation, Department of Justice, Federal Bureau of Investigation, Federal Trade Commission, National Association of Attorneys General, Securities and Exchange Commission, and the U.S. Postal Inspection Service may be found at
http://www.consumer.gov/knowfraud/index.html
NOTE: Laws are changed from time to time and laws vary across states and countries. Do not rely upon the general information presented here without discussing your specific situation with a legal professional.

Approved and accepted by the Senior Avatar Council on February 22, 2001.

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