If someone approach us for an MLM (Direct Selling) opportunity, most of us will turn around as we consider Network Marketing as synonymous of SCAM, which it is not.
When the objective of MLM companies or promoters is wrong then we can say there is a scam but MLM as a concept, it is innocent.
In every industry, there are some impurities whose intentions make them evil. The same scenario is with MLM, but here impurity frequency is much higher.
Primarily I judge MLM companies on the basis of products or services they offer, it is the easiest way to differentiate genuine MLM from a scam.
There are companies like Tupperware, Oriflame which are known for their products, and not because they are MLM Companies.
This post is about some solid reasons, why MLM is called a scam even it’s legalized in most countries.
MLM industry is full of scammy companies, very few companies are there which are working in legitimate ways and selling genuine products.
Almost all illegal pyramid schemes which do money-circulation pretend to be MLM. And most people are unable to differentiate between these genuine MLM from fraud pyramid schemes.
Sometimes ponzi schemes also operate in the same way and MLM scams are held.
As MLM also involve member and their money, they all seem same.
Pyramid schemes as MLM use overpriced dummy products to obtain money from members and pay heavy commission to top promoters, so other start trusting scheme, hence it grows exponentially.
Now some new trends are there, Cryptocurrency-based MLM and Be Millionaire courses are sold by pyramid schemes to lure people.
MLM Scams are not only limited to pyramid schemes. Fraud promoters put all their efforts to ruin the reputation of MLM.
Even after knowing a pyramid scheme, fraud promoters participate in such scams to earn high commissions. As I said earlier, scam companies pay heavy commission to the early promoter, this thing makes them fire up to spread scam.
Even in genuine network marketing companies fraud promoters exist. Below are some traits of such people.
- Making false claims
- Doing impossible promises
- Using deceptive recruitment techniques
- Showing fake income cheques
- Presenting rich and busy life on Instagram
Fraud promoters merely get punished for their unethical actions. Network marketing companies have to be strict with their distributors. Dos and don’ts should be taught to every distributor to control their actions.
Lack of Knowledge
Half knowledge is more dangerous than no knowledge.
People who consider whole MLM as a scam have half knowledge about it.
Even I have seen some media publications that report MLM and pyramid scheme as same.
Most people keep distance from MLM after hearing bad experience of others or getting looted by fraud promoter or company. It is acceptable but people don’t try to understand what was wrong and blame the MLM concept.
There are some companies which are operating for many decades and still growing.
Amway has suffered from more than a hundred legal actions all over the world but still, it is in action, cause MLM is a legal model.
MLM may have flaws but not all occupations are suitable for everyone. Someone who loves selling products and interacting with people, for them MLM is an opportunity. And for introverts, it is a hassle.
Calling someone’s profession a scam due to lack of knowledge is not adequate. But above that fraud promoters and companies are mainly responsible for bad reputations, so they have to make changes first.
No Proper Regulations
In many countries, there are no proper regulations for network marketing. Ponzi schemes and pyramid schemes are illegal but they can easily function pretending as MLM.
Any company can start promoting products using the MLM concept. So there should be an authority in every country which examine companies’ products, profile, and plan.
Authority should publicly share a list of legal MLM companies so that people can view the list and then only become part of any MLM.
But it creates problems for new network marketing start-ups who may be unable to impress authority.
Moreover, strict laws should be practice on promoters so they don’t fool innocent people and individual level scams can be controlled.