Is the company a Pyramid Scheme or Legit Marketing?

March 19, 2021

Since COVID hit the world really hard in 2020, many people are turning to a variety of at home businesses to make some extra cash. A very popular form of making money is selling products online. But the question may arise: How do I know if it is a pyramid scheme or it is legit marketing? And it is a very important question as one is legal in the United States and the other is illegal in the United States.

What is the Federal Trade Commission of the United States?

First, the Federal Trade Commission of the United States is an independent government agency established by the US congress in 1914 to protect American consumers.

“Protecting consumers and competition by preventing anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education without unduly burdening legitimate business activity.”

In other words, according to the Federal Trade Commission website, “The FTC protects consumers by stopping unfair, deceptive or fraudulent practices in the marketplace. We conduct investigations, sue companies and people that violate the law, develop rules to ensure a vibrant marketplace, and educate consumers and businesses about their rights and responsibilities.”

Now let’s continue with defining a pyramid scheme?

What is a pyramid scheme?

There are many different forms of pyramid schemes. However, one very common sign of pyramid schemes is companies requiring their members to recruit new people in which recruiters receive a commission for each recruiter they recruit.  In other words, if you get paid for each person you recruit, it is a pryamid scheme.

There are also pyramid schemes that require you to invest large amount of money up front and have exagerated earnings. Pyramid schemes usually do not have any real products. Pyramid schemes are illegal because the pool of new recruits eventually runs out. There is not a never ending pool of recruits. The earth’s population is limited. The end result is the pyramid scheme collapses. Beware! Here is more information about pyramid schemes and the FTC.

What is Legitimate Network Marketing?

Legitimate network marketing companies will have real products in which members/distributors can make commissions without requiring any new recruits. In other words, it will pay you based on real sales of goods to retail customers. In addition, these are products consumers can use on a daily basis. Neither will they be sold at exorbitant prices.

Important questions to consider before getting involved with a network marketing company:

  • Do I want to be a salesperson?
  • How much money do I want to make?
  • Is it a product or are they products that the general public will use on a daily basis? Does the company offer new products for consumers?
  • What is the risk of investment with money and time?
  • How long has the company been around? Do they have a solid reputation?
  • What do the reviews say about the products and the company?
  • Does the company have a good refund policy?
  • Are you in a position to talk to trustworthy distributors for the company? Do they actually get paid and on time?
  • Do you personally love the products in order to sell them? Why do you want to sell them?
  • Which products of the company do I personally want to feature?

Well I hope this has clarified the difference between illegal pyramid schemes and legitimate network marketing.

Would you like to make a little extra cash that does not pay you for recruiting distributors? A very popular MLM that popped up in the United States in 2019 after selling products to the European general public for over 70 years was FARMASi. which pays their distributors 50% commission on the products sold. FARMASi distributors do not get paid any commission for new recruits. If you would like more information about FARMASi, click on this link.




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