Most MLM programs are legitimate businesses, however consumers must be aware of MLM scams. A true MLM program will sell products to the general public without requiring them to pay anything extra or any hidden costs. They will not force consumers to join the MLM system to be a distributor themselves. These types of systems pay commissions to distributors based on actual product sales, not for recruiting. However, there is a danger that any program that concentrates more on new members rather than product sales could be a MLM scam.
An example of a MLM scams is an illegal pyramid scheme. This is where a company promises huge profits from investments into their program. The money is actually made from drawing new people into the scheme rather than actual retail sales of real products. Many pyramid schemes pretend to sell actual products, they actually don’t. A signal that a program is such a MLM scam is when you never see actual products. Products consistently on backorder or orders that never arrive are also signs of a scam.
Another MLM scam is called a Ponzi scheme. This is very similar to a pyramid scheme, however the main difference is in a Ponzi scheme there is not an actual product to begin with. Also, no commission is paid to recruit new members. The operators make their money off the sting by promising huge, quick returns from an investment. The money collected from new members is used to pay off other members that have been in the program longer. They are given a small return compared to the huge promises. The largest part of the money goes into the promoter’s pocket.
Be on the lookout for these signs of MLM Scams
-If the plan is more interested in drawing new members and offers you high rewards for such be suspicious. Why would you want more competition?
-Watch out for companies demanding that you invest in a large amount in inventories before starting your business. You are probably the only customer they care about.
-If a company offers outrageous claims about miracle products, be skeptical. Most medical advances have come about through years of study, not overnight successes.
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