What Is Multilevel Marketing ?
Multilevel marketing (MLM) is a strategy some direct sales companies use to get existing distributors to recruit new distributors who are then paid a percentage of their recruits’ sales. The recruits are the distributor’s “downline” Distributors also make money through direct sales of products to customers. Amway, which sells health, beauty, and home care products, is an example of a well-known direct sales company that uses multilevel marketing.
How is Multilevel Marketing Working ?
Multilevel marketing is a legal business strategy, though it is controversial. One problem is pyramid schemes that use money from new recruits to pay people at the top rather than those who perform the work. These schemes involve taking advantage of you by pretending to be engaged in legitimate multilevel or network marketing. You can spot pyramid schemes by their greater focus on recruitment than on product sales.
Is Multilevel Marketing Legal ?
An issue in determining the legitimacy of a multilevel marketing company is whether it sells its products primarily to consumers or to its members who must recruit new members to buy their products. If it is the former, the company is likely a legitimate multilevel marketer. If it is the latter, it could be an illegal pyramid scheme.
The Federal Trade Commission (FTC) has been investigating multilevel marketing companies for several decades and has found many with practices that are difficult to determine as legitimate. According to the World Federation of Direct Selling Associates, there were at least 116 million independent representatives among its members worldwide as of 2017. Wery few earn a meaningful incomes from their big efforts. To some observers, this reflects the characteristics of a pyramid scheme.