Unfortunately, not every multilevel marketing opportunity is a legitimate business opportunity.
Many pyramid schemes, frauds designed to part the unwary from their money, are disguised.
Like multilevel marketing, pyramid schemes depend on recruiting people to become distributors of a product or service.
Is MLM a pyramid scheme?
Many pyramid schemes attempt to present themselves as legitimate MLM businesses. Some sources say that all MLMs are essentially pyramid schemes, even if they are legal. The U.S. Federal Trade Commission (FTC) states: “Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors.
What’s the difference between a pyramid scheme and MLM?
Amway stresses that the main difference between a legitimate MLM business model and a pyramid scheme is that a legitimate MLM is focused on selling products, not recruiting more salespeople. Pyramid schemes offer money for simply recruiting people.
Why MLMs are pyramid schemes?
Why MLMs are Pyramid Schemes. Multi-level marketing companies (MLMs) are nothing but pyramid schemes. A classic pyramid scheme operates as follows: recruits pay into the scheme for the right to receive compensation from the scheme based, in large part, on bringing new recruits into the scheme.