By Jon M. Taylor, Ph.D.
Consumer Awareness Institute
Network marketing (NWM -- a.k.a. multi-level marketing/MLM, consumer direct marketing, etc.) developed from pyramidal concepts which initially led to pyramid schemes, chain letters, and chain selling. While pyramid schemes are illegal, many NWM programs have managed to circumvent Federal Trade Commission (FTC) rulings and applicable state laws.
Legislation and court cases have defined pyramid schemes as plans which concentrate on commissions earned for recruiting new distributors and which generally ignore the marketing and selling of products and services. But a NWM program that some regulators may not classify as an illegal pyramid scheme may for all practical purposes still be a pyramid scheme. Pyramidal elements remain for most programs, leaving participants with little chance of financial success (usually resulting in losses), except for a tiny percentage at the top of a hierarchy of distributors.
The following tests should help you avoid programs in which you will only be wasting your money, time, and effort.
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