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March 23, 2020
Brattle Economists Publish Law360 Article Addressing Recent Working Paper That Overstates an MLM's Potential to Become a Pyramid Scheme

Brattle Principal Branko Jovanovic, Associate Pablo Robles, and Senior Research Analyst Jeremy Smith recently authored a Law360 article titled “A Look Into FTC’s Thinking on Pyramid Scheme Potential.” The article summarizes and discusses the assumptions and key messages of a working paper by current and prior Federal Trade Commission (FTC) authors titled “Alchemy of a Pyramid: Transmutating Business Opportunity into a Negative Sum Wealth Transfer.”  

Brattle’s team addressed some weaknesses in the assumptions underlying the conclusions of the working paper, which may overstate a multi-level marketing (MLM) company’s potential to become a pyramid scheme. They also discussed some improvements in transparency and adjustments to compensation plans that MLMs can make to reduce their risk of being considered a pyramid scheme.

The full article, “A Look Into FTC’s Thinking on Pyramid Scheme Potential,” is available below.