How To Tell The Difference Between An Illegal Pyramid Scheme And An Mlm Opportunity

How To Tell The Difference Between An Illegal Pyramid Scheme And An Mlm Opportunity

In this world, we have a wonderful industry of network marketing, where there’s an awe inspiring culture of people connecting with each other, believing in each other and helping each other achieve success. However, there is a dark side to this industry that’s taking advantage of the good will of the people who participate in it.

There is an over abundance of pyramid schemes who are masquerading as network marketing opportunities. Pyramid schemes by definition are illegal because they are only sustained by the endless recruiting of new participants into the scheme and they impoverish 99 people for every 1 that benefits from participating.

Representing a pyramid scheme is bad, bad news. Over the past 10 years, the Federal Trade Commission (FTC) has shutdown 17 illegal pyramid schemes and collected more than million lost by victims. But more and more, the Government is not just going after the creators of pyramid schemes, they are going after the top earners as well.

It is best for you avoid pyramid schemes. Unfortunately innocent network marketers get involved in pyramid schemes through a lack of education and understanding the the differences between a legitimate business opportunity and one that’s illegal.

Not knowing better, they are emotionally blinded by the hype of a money making opportunity presented to them by a friend or stranger, only to have a bitter experience spending thousands of dollars on the bogus deal and trying to recruit new people.

So how can you tell if a money making opportunity being presented to you is legitimate or not? It’s actually not too hard, but it may require a little bit of emotional intelligence – remove all the hype surrounding the deal and look at it for what it is. Look at it through the eyes of the Government. An attorney general would ask these two questions:

1. Would a logical thinking person pay this much money for the product or service if there was not a business opportunity involved?
2. Does the income stop when the recruiting stops?

If the answer to the first question is “NO” and/or the answer to the second question is “YES”, then the business opportunity being presented to you is a scam. It’s just that simple.

Typically, pyramid schemes and reps of pyramid schemes use a lot of hype and make claims of huge income potential in their marketing because they want (and need) to get as many people into the deal as possible. Hype is a major red flag to be aware of.

Here are some important points to consider in understanding the difference between a legitimate MLM business and a scam.

A Saleable Product

A legitimate business opportunity must have a saleable product or service that you could sell to people who don’t participate in the opportunity. That way, all reps can make still make money even if they didn’t recruit anybody into the deal.

In a pyramid scheme, nobody outside of the opportunity consumes the product. Therefore the only way to earn a commission is to recruit more and more people into the deal.

Pay To Play…

A legitimate network marketing opportunity can NEVER charge you a fee to participate in the business opportunity. When you pay your 0, 0, 0 to join a network marketing company, along with your distributor kit, replicated website, support tools, you must also receive a corresponding volume of product.

A legal MLM company can NEVER compensate you in anyway for recruiting. If you come across anything that charges you a hefty fee just to be a representative, and your sponsor earns a commission on that signup fee, then it is an illegal pyramid scheme.

The “Tools” Scam

You cannot pay commissions on business tools. This law has been in place for about 20 years and for good reason. Tools are there to help you promote the business and the products. Tools are NOT the business themselves because they cannot be used by people who don’t participate in the business.

A website is a tool. If a company is charging you fees to maintain your replicated website and then paying commissions to your upline from your monthly website fees, then this is also illegal. The same goes for books, tapes and audio materials and seminars.

A legal network marketing company can charge you a reasonable fee to use promotional tools, but it cannot pay any commissions on those tools.