UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.

1. Both Medifast (NYSE:MED) and YTB International have 10 levels of commission payouts. That means on any given sale of actual products or services, the person selling it will receive a small commission, while 9 other levels will receive a total commission exceeding the seller’s commission.

2. Medifast and YTB both have seemingly “low” startup costs, with fees of $300 and $400 respectively. Yet this fee looks far more significant when compared to the minimal fee of $10 charged by Avon to new business builders. In reality, charging each new recruit several hundreds of dollars to join can add millions to the company’s bottom line each year.

3. Neither Medifast nor YTB have disclosed the average income for one of their coaches or business builders. YTB will now start disclosing this in July 2009 pursuant to a settlement with the California Attorney General, but apparently believed in the past that potential recruits didn’t need to know such things.

4. Medifast and YTB both do not disclose their “churn rates.” They purposely do not disclose the number of people recruited during the year or the number of people who quit the business during the year, effectively concealing the failure rates for recruits.

5. Neither Medifast nor YTB disclose the amount of revenue the company receives from actual retailing of products or services, versus how much revenue is actually derived from recruits who are personally consuming the products or services. This is an important distinction because revealing such numbers would show a potential recruit the true market for sales to third party, bona fide customers.