Multi Level Marketing vs Pyramid Schemes

So What's the Difference Between Multi-Level Marketing & Pyramid Schemes?

Multi-level marketing is a distributor system in which products and/or services are sold by independent distributors, usually in the customer's homes. The multi-level company will encourage a distributor to build and manage a sales force by recruiting, supplying & training others to sell the products or services. In addition to individual sales, a distributor is compensated on what their sales force sells. Successful distributors who have recruited and trained a large number of sellers also have to assume ongoing wholesaling and managing responsibilities.

Pyramid schemes, on the other hand, concentrate mainly on the supposedly quick profits to be earned by selling the right to recruit others. The merchandise or service to be sold is largely ignored and little or no mention is made regarding a market for the products. In order for everyone to profit in a pyramid scheme, there would have to be a never-ending supply of potential and willing participants. Obviously, there isn't. When the supply runs out, the pyramid collapses and most participants lose their investment. Pyramid schemes are illegal throughout the United States. Keep in mind, however, that it is difficult to prosecute these schemes; most often the money invested is lost.

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