Pyramid Marketing – Is it legal?

A pyramid marketing scheme (illegal in most countries) is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, often without any product or service being delivered. In layman terms it means that there are no real products or services on offer or, if there are, then it is not of prime importance that they are bought or consumed to make the pyramid marketing scheme work. In these cases, it is usual that the products or services form part of the ‘recruitment’ package. The pyramid marketing scheme relies on the recruitment of others with the promises of riches if the people that are recruited recruit others. As the scheme gets under way, the individuals at the bottom of the pyramid who fail to recruit sufficient numbers often end up losing money and a stock of unsaleable products! Pyramid marketing schemes consistently rank in the top ten lists of consumer complaints received by the FTC and state consumer organizations according to Sergio Pareja of Consumer Law & Policy Blog. However, legitimate Network Marketing or Multi-Level Marketing businesses can be distinguished from the illegal pyramid marketing schemes because a) they have substantial sales of products and services to end-users b) they only pay-out a percentage on product/service usage c) & if there are products involved, they guarantee to buy-back stock from a disenchanted distributor. For more information have a look at an excellent article in Wikipedia- Pyramid marketing scheme.

See also related article The $100m Network Marketing Club.