Nearly all MLM programs can be considered “product-based pyramid schemes,” or “recruiting MLM’s” – because they thrive on recruitment of new “distributors” – who are the actual customers. Here the term “recruiting MLM” – or “MLM” for short – refers to schemes that are characterized by multi-level endless chain recruitment of distributors as their primary customers.
Recruiting MLM’s incorporate these “Five Red Flags” in their compensation plans:
1. Recruiting of participants is unlimited in an endless chain of empowered and motivated recruiters recruiting recruiters.
2. Advancement in a hierarchy of multiple levels of “distributors” is achieved by recruitment, rather than by appointment.
3. Ongoing purchases (products, sales “tools,” etc.) by “distributors” are encouraged in order for them to be eligible for commissions and to advance in the business ("pay to play").
4. The company pays commissions and/or bonuses to more than four levels of “distributors.”
5. For each sale, company payout for the total of all upline participants equals or exceeds that for the person actually selling the product, creating an inadequate incentive to sell products directly and an excessive incentive to recruit new participants.
WARNING: Where data has become available for MLM companies with these 5 red flags in their compensation plans (which is most MLM’s), approximately 99.9% of participants lose money – after subtracting purchases from the company. You would be wise to avoid participating —regardless of how great the products, how many "respectable" people manage it or endorse it, and whether or not law enforcement has taken any action against them. Your odds of profiting from gambling in Las Vegas are far better. (See “Which Does the Greater Harm,” posted at
www.mlm-thetruth.com)