Why is Multi Level Marketing Illegal?
Some sources say that all MLMs are essentially pyramid schemes, even if they are legal.
Federal Trade Commission (FTC) states: “Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors.
They’re actually illegal pyramid schemes.
Some are pyramid schemes.
Why is a pyramid scheme illegal?
As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal. Pyramid schemes have existed for at least a century in different guises. Some multi-level marketing plans have been classified as pyramid schemes.
Is direct selling illegal?
Any program offering big money but claiming “no selling required” is illegal. Products or services provided by Direct Selling company must be legitimate one, that people would buy at the retail price at the open market (without participating in the compensation plan).
Is network marketing legal?
Network marketing is a legitimate business. While some people do make a lot of money through network marketing, their financial benefit is always the result of their own dedicated efforts in building an organization that sells real products and services. Pyramids are illegal and are based on taking advantage of people.