A recent article in the Business Standard notes the difficulties officials have with determining the validity of a multi level marketing business. In September this year, top officials of the MLM company, SpeakEasy in Asia were arrested for allegedly duping its 1.2 million investors (panellists).
One of the biggest problems with MLM companies is the reliance on creating a down line for an income. Once a MLM company requires a seller to recruit new members to make any money the companies compensation scheme can slide into pyramid scheme territory. So how can you tell if your MLM company is not quite above board?
One of the simplest tests is to establish how much income is made from selling products and how much is made from signing up new recruits. If you are solely making money from sign-up fees from new recruits then you're not selling a product any more and you're moving into potentially illegal activity - after all, how are your new recruits going to make money with the business if the only income they can make is from signing up new recruits? It all gets a bit sticky. If you're unsure about a network marketing business you can check if they're registered with your local Direct Marketing Association.
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