Law Articles
2025-03-28
MLM
Multi-Level Marketing, Direct Selling and Artificial Intelligence AI: Where Legal Issues Intersect
Charlotte Wu, Partner Lawyer, Zhong Yin Law Firm
charlotte.wu@zhongyinlawyer.com.tw
charlotte.wu@zhongyinlawyer.com.tw
Multi-level marketing and direct selling occupy an important position in the market as business models, while the recent development of artificial intelligence (AI) has brought revolutionary changes to the business field. However, the combination of these areas also brings a series of legal issues. This article will explore the relationship between multi-level marketing, direct selling, and AI, and elaborate on the related legal problems.
Definitions of multi-level marketing and direct selling:
Multi-level marketing (MLM) and direct selling are business models in which products or services are sold directly to consumers through a network of distributors. In the MLM model, distributors can recruit other distributors and earn commissions from their sales. Direct selling, on the other hand, typically does not have a multi-level structure, and distributors earn commissions solely through personal sales.
Applications of Artificial Intelligence (AI):
The rapid development of AI technology has had a significant impact on the multi-level marketing and direct selling industries. AI can analyze vast amounts of data and information, providing precise marketing strategies and customer insights, helping businesses sell and promote products more effectively. Additionally, AI can automate the sales process, improve efficiency, and offer personalized customer experiences.
In a world where AI applications are becoming increasingly mature, it is conceivable that in the near future, there may be AI software developers who can create various marketing tools for direct selling or multi-level marketing companies, including potential AI customer service tools, AI complaint resolution tools, AI product efficacy explanation tools, AI organizational team coaching and motivation tools, and so on. The introduction of these tools may also raise the following legal issues, which are worth our attention and consideration.
3.1. Consumer Protection:
The multi-level marketing and direct selling industries often involve consumer protection issues. Some substandard direct selling or multi-level marketing companies may attract investors through false promises and exaggerated earnings, which may constitute fraud. When using AI, direct selling companies should ensure that their sales and marketing strategies are transparent and legal, and comply with consumer protection regulations. Especially now, the internet is filled with marketing promotions of varying quality, AI developers and direct marketing businesses should ensure that consumer protection is still taken into account when using AI tools..
3.2. Privacy and Data Protection:
AI requires a large amount of data to train and provide accurate results and recommendations. In multi-level marketing and direct selling, companies may collect and process consumers' personal data to further optimize the AI tools being developed or used. This raises issues of privacy and data protection. Companies should ensure compliance with relevant privacy laws and regulations, obtaining the necessary consent when collecting and using personal data from consumers or direct sellers.
3.3. False Advertising and Deceptive Promotion:
In the sales and marketing process using AI technology, companies should be careful to avoid false advertising and deceptive promotion. With the current technology, some AI-generated content may be composed of trained text combinations, which could be misunderstood as real and reliable information. According to news reports, there have been instances abroad where AI-generated document content contained errors or cited false cases, leading to misunderstandings as real cases. Therefore, companies have a responsibility to ensure that their generated content is accurate and legal, and complies with relevant advertising regulations.
3.4. Whether the introduction and use of AI tools will affect the state of adhesion among organizational leaders, their uplines and downlines in the direct sales team.
If the use of AI tools can significantly replace product efficacy explanations, customer service, complaint resolution, and even team motivation (for example, developing an AI tool that can send encouraging personalized messages to everyone in the direct sales team), then one thing to consider is that these tasks are usually performed by customer service personnel, nutritionists, and trainers hired by the company, and heavily rely on organizational leaders to maintain the morale of their direct sales teams. Therefore, the use and functionality of these AI tools may either weaken the role of multi-level marketing leaders or provide them with more time and flexibility to focus on more "critical" tasks that can only be accomplished through personal interaction, which AI tools cannot replace. Alternatively, will the convenience brought by these tools affect the situation of "switching lines" within the same direct sales company or "job-hopping" between different direct sales companies?
The combination of multi-level marketing, direct selling, and artificial intelligence brings new opportunities and challenges to business. However, this combination also raises a series of legal issues, including consumer protection, privacy and data protection, false advertising, and issues related to pyramid selling models. Governments and relevant legal institutions need to strengthen regulation and formulate corresponding laws to protect consumer rights and maintain a healthy and fair market. At the same time, businesses should also practice self-discipline to ensure legality and compliance, creating a sustainable business environment.
