Let’s be clear; monthly training and service fees aren’t inherently negative unless they’re being used to enhance a company’s compensation structure. In most cases, these fees are merely an attempt to prop up a struggling business model that operates on thin margins.

This typically doesn’t concern the majority of direct sellers within the company; however, when regulators begin to scrutinize these practices, it could lead to serious repercussions for the company, which would not be favorable.

To clarify what we mean by “enhancing the compensation plan,” consider a situation where the company imposes a monthly fee—say, $39—or a one-time training fee of $499 from each member to maintain their status as active and eligible to earn commissions. In return, these members receive back-office support, wholesale pricing on products, and educational training.

Up to this point, everything seems fine. However, challenges arise when the company channels these fees into the commission pool. If distributors start collecting a share of these fees for every personally recruited member in their downline, this becomes a troubling situation, as it indicates an inflation of the compensation plan.

The central issue is that monthly fees tied to a compensation scheme can only be sustained through constant recruitment of new members—similar to classic pyramid schemes—leading regulators in the Network Marketing sector to approach such businesses with skepticism. This wariness is justified, as these transactions often resemble money transfers from new participants to established ones.

A notable case is Burnlounge, which was shut down by the FTC for this very reason, as their commission structure relied heavily on fees paid by newly-enrolled members, with no legitimate product or service being provided.

The longstanding mantra in MLM—“Companies should never pay commissions on sales aids”—remains relevant today. Fees labeled as “service” or “membership fees,” when lacking genuine market value beyond the member group, align closely with this principle.