MLMs Vs. Pyramid Schemes

In my experience most people in MLM don’t know anything about pyramid schemes. This leads to a lot of people spreading around erroneous information like a grade school kid on the playground. The best source of pyramid schemes is the FTC, the group that is designed to help protect consumers. The FTC article The Bottom Line About Multi-Level Marketing Plans, explains in detail how some MLMs are illegal pyramid schemes.

There’s a myth that because MLMs involve a product, they can not be pyramid schemes. This is false. According to the FTC, MLMs with products can be illegal pyramid schemes.

How do you tell the difference between an MLM and a pyramid scheme? The aforementioned article is pretty clear, but there’s more information out there from the FTC:

A number of MLM products such as juices and shakes have a majority of the money made via recruiting other distributors who simply buy and consume the juice themselves with no sales to outside participants. These are illegal pyramid schemes according to the FTC.

If you are considering joining a pyramid scheme here is How an MLM Can Show It Isn’t an Illegal Pyramid Scheme. Make sure the MLM has “no minimum purchases to qualify for commissions” and that “commissions are not paid on products ordered by other distributors.”

Also, just because one one MLM is legal it doesn’t mean another is. Since only some MLMs are illegal pyramid schemes, we can’t assume that because Tupperware appears to be legal that something like One24 is.

Finally, Corporate America is Not a Pyramid Scheme. The income in corporate America is not created by recruiting others who recruit others who recruit others, etc. Also, don’t try to compare MLM to owning a franchises or being a real estate agent like many distributors. Those are poor irrelevant analogies.

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