The Federal Trade Commission in the US which regulates
multi-level marketers, warned in its revised "consumer protection"
page on its website as follows:
“The Not all multilevel marketing plans are legitimate. If
the money you make is based on your sales to the public, it may be a legitimate
multilevel marketing plan. If the money you make is based on the number of
people you recruit and your sales to them, it's not. It's a pyramid scheme.
Pyramid schemes are illegal, and the vast majority of participants lose money”.
business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans
A pretty simple explanation on that is: would you still make
money to sustain your income if you opted not to recruit new members? As in,
would the product still sell in normal circumstances not induced by the scheme?
Is it a commercial product?
Our government doesn’t offer any clear guidelines on MLM
businesses that is why we should expect a huge number of MLM businesses to come
up.
The reason why Multi-level marketing Businesses are
considered pyramid schemes is because there are a finite number of people in
the world. This means that, even if the entire population of the world joined
the MLM it would still reach an end point where the last people in the chain
lose money effectively. It is estimated that 90% of people who join MLM
businesses actually lose money.
Some of the guideline questions you should ask yourself
before joining an MLM business are:
"What's the company's track record? What products does
it sell? How does it back up claims it makes about its product? Is the product
competitively priced? Is it likely to appeal to a large customer base? What
up-front investment do you have to make to join the plan? Are you committed to
making a minimum level of sales each month? Will you be required to recruit new
distributors to be successful in the plan?"
Bottom line, just don’t rush into any business because of
the success stories of the people at the top of the pyramid.
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