4 Reasons: Why Network Marketing is called SCAM?

If someone approach us for any MLM opportunity, we turn around. Cause many of us consider Network Marketing as synonymous of SCAM, which it is not. MLM as a whole concept is not scam, until some genuine products are promoted. And it is scam when objective of companies or leaders is wrong. In every industry there are some exception whose intention make them scams. Same scenario is with MLM, but here exception rate is much higher. Still there some companies like Tupperware, Avon, Oriflame which are known for their quality products, not because they are MLM Companies. This post is about some solid reason, Why MLM is considered scam, even it's legalise in most of countries. Scammy Companies MLM industry is full of scammy companies, very few companies are there which are working in legitimate ways and selling genuine products. Almost all pyramid schemes which are illegal money-circulations pretend as MLM. Most people are unable to differentiate genuine MLM form fraud pyramid schemes. Sometimes ponzi schemes also operate in same way and MLM scams are held. Overpriced dummy products are use to obtain money from members, top promoters get decent commission, so other start trusting scheme and it grow exponentially. Now some new trends are there, Cryptocurrency-Based MLM and Be Millionaire courses are sold by pyramid schemes to lure people. Fraud Promoters MLM Scams are not only limited to pyramid schemes. Fraud promoters put all efforts to ruin reputation of MLM. There some people who knows this company is a scam, but still they promote such scams to earn high commission. As i said earlier, scam companies pay heavy commission to early promoter, this thing make them fire to spread scam. Even in genuine companies fraud promoters exist. All those people who make false claims, do impossible promises, use deceptive recruitment technique and show fake income cheques are part of this. Fraud promoters merely punished for their unethical actions. Lack of knowledge Half information is more dangerous then no information. People who consider MLM as scam have half knowledge about it. Even I have seen some media publication who report MLM and pyramid scheme as same. There are some companies which are operating from many decades and still growing. Amway have suffered from hundred legal action all over world but still it is in action, cause MLM is a legal model. MLM may have flaws but not all occasion are suitable for everyone. Someone who love selling products and interacting people, for them MLM is opportunity. And for introvert it is hassle. Calling someone's profession scam due lack of knowledge is not acceptable. But above that fraud people and companies are mainly responsible for bad reputation and MLM being called scam. No Proper Regulations In many countries there is 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 product using MLM concept. So there should be an authority in every country which check companies' products, profile and plan. Authority should publicly share a list of legal direct selling companies, so that people can check list and then only become part of any company. But it creates problem for new network marketing start-up who maybe unable to impress authority. Morever strict laws should be practice on promoters so they don't fool innocent people and individual level scams can be controlled.

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.

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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.

Scammy Companies

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.

Fraud Promoters

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.

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