NewsMontana News

Actions

Despite amnesty period, unregistered MLMs still operate in Montana

Despite amnesty period, unregistered MLMs still operate in Montana
Posted at 6:25 AM, Jan 17, 2022
and last updated 2022-01-17 08:25:10-05

HELENA — Multi-level marketing is a multi-billion dollar industry in the United States with sales representatives working in every state. In order to legally operate in Montana, multi-level marketing companies have to register with the state, but an MTN News investigation found some companies operating here are not compliant with state law.

According to industry statistics, around 16.7 million people in the US participate in multi-level marketing, nearly 143,000 of them are in Montana. These people act as sales representatives for larger companies. Some well-known multi-level marketing companies include Mary Kay, Arbonne and Herbalife—all of which are registered to operate in Montana.

Montanans that participate in MLMs

“The reason to register, and we’ve been registering multi-level marketing companies in Montana since 1999, is to make sure it’s actually operating as a multi-level marketing company, and not as a pyramid scheme,” Montana Commissioner of Securities and Insurance and State Auditor Troy Downing said.

Pyramid schemes are illegal in Montana. Downing said the difference boils down to compensation. In legitimate multi-level marketing companies, representatives make money from products being sold—in other words, even if they do not recruit anyone to sell under them, they can still make money. In pyramid schemes, Downing said representatives largely make money from fees from someone joining under them.

“Really, what we are trying to do is protect the consumers from those ones that are not actually MLMs, they’re pyramid schemes trying to pretend they’re MLMs,” Downing said. “That’s what we’re trying to do.”

MLM Legal Action

The state has taken action against companies illegally operating in Montana. According to Downing’s office, they recently brought legal action against six MLMs illegally operating in the state. Five of those cases settled, resulting in more than $20,000 in fines and nearly $10,000 in restitution.

But, the state cannot protect consumers against companies they do not know about. Downing said companies should register before starting business in Montana, but not all of them do.

On Nov. 9, 2021, Downing’s office announced an MLM registration amnesty program. Noncompliant companies that registered with the Montana Commissioner of Securities and Insurance Office by Dec. 15, 2021 faced a reduced fine of $1,000 instead of the $5,000 fine for operating in the state without prior registration.

“Our amnesty program allowed (companies) to do a ‘mea culpa,’ come in and register, and we’d vet them,” Downing said.

Downing’s office said 19 multi-level marketing companies registered during that amnesty period—two registered prior to starting business in the state, 17 had previously been doing business unregistered.

MLMs with Montana

“That represents about 4,200 participants in these MLMs,” Downing said.

According to the Montana Commissioner of Securities and Insurance Office, 38 multi-level marketing companies are now registered with the state. Another 105 companies are members of the Direct Selling Association—a national trade association for the multi-level marketing industry—and thus allowed to operate in Montana.

MTN News found there are still unregistered multi-level marketing companies operating in the state, including LimeLife, LuLaRoe, DoTerra and Park Lane Jewelry.

  • LimeLife is a skincare and makeup company, and according to its website, there are seven representatives operating within 75 miles of the 59601 zip code in Helena.
  • LuLaRoe is a clothing company, and according to its website, there are 15 LuLaRoe representatives operating in Montana’s big cities.
  • DoTerra sells essential oils, supplements and wellness products. In response to a form we filled out on the company website, MTN News was matched with a representative in Montana.
  • Park Lane Jewelry is a jewelry company, and its website matched MTN News with one representative selling in the 59601 zip code.

MTN News reached out to each of these companies to ask why they were not registered with the state.

LimeLife sent a generic form reply saying “our team is reviewing your inquiry and will provide a response shortly.” MTN News has not received another response from them. LuLaRoe responded saying they were working to file with the state. DoTerra and Park Lane Jewelry did not respond.

Downing said the representatives selling for these companies in Montana are not at fault. Rather, his office is trying to bring the companies into compliance and make sure they are operating by the law.

“We don’t have an issue with multi-level marketing companies, you just have to follow the law and you have to register,” Downing said.

A full list of multi-level marketing companies registered following the amnesty period can be found here, and Direct Selling Association member companies can be found here. More information about multi-level marketing companies in Montana can be found on the Montana Commissioner of Securities and Insurance website.