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How to Identify Multi-Level Marketing Scams


Multi-level marketing scams, known as get-rich-quick self-employment schemes, work-at-home scams, pyramid schemes, and pre-packaged small businesses, usually require an up front fee, ranging from $30 to tens of thousands of dollars. It's important to avoid these scams, as they are not legitimate business opportunities. Here's how:

Don't Plan to Make Money by Recruiting Distributors

It's most likely a multi-level marketing scam if the majority of all of the money you earn comes from recruiting others into the program. This is not a legitimate business opportunity, but rather a pyramid scheme. These scams promise an endless line of new distributors, and therefore more and more money. Pyramid schemes are illegal and you should avoid them at all costs.

Don't Pay for a Business Opportunity

Run from any business opportunity that requires you to pay a membership, or buy lots of their inventory, before you can start your business. These scams make money by getting you to pay them money, and by getting you to sign up others to do the same.A legitimate business opportunity will meet the needs of customers. The costs associated with that are marketing and operational costs. Membership fees for the priviledge of starting a business are not typical.  If you have to pay to start your business, it may be a scam.

Ask Tough Questions

Jon M. Taylor of the Consumer Awareness Institute has testified before the Federal Trade Commission on the dangers of multi-level marketing scams and has published numerous papers on the topic.  He identifies questions to ask when evaluating an opportunity, to see if it's a scam, in "12 Tests for Evaluating a Network Marketing (MLM) 'Opportunity'".  Some questions he suggests you ask are:

  • Were you approached primarily on the basis of the actual value and need for the products - or for the "opportunity?"
  • Is it likely the products could be sold successfully on their own merits without going through a MLM distribution system?
  • Does the MLM company focus on legitimate products of value to consumers, or does it emphasize fleeting trends and timing, and exotic or secret formulas?
  • Can you as a distributor make a good income for the time you spend selling the products - without recruiting a single person?
  • Would distributors several levels above you - who had nothing to do with the sale - receive as much or more total payout per sale (including commissions and bonuses) from the company as you would get for selling the product or providing the service?
  • Are the company's wholesale prices low enough to allow a respectable profit when marking up for resale - at a retail price that is still competitive with comparable products through other sources?
  • Has the recruiter been devious or up front in his or her inviting attempts?
  • Are conferences and training programs, audio and video tapes, etc., free of charge (as is the case elsewhere for company sponsored programs), or are you expected to pay for them - as another revenue source for the company and upline?


Multi-level marketing scams are flourishing and are appealling to those who want to work from home. Avoid "opportunities" that promise a fortune when you pay to sign up, and stick to proven business ideas.



Daphne Mallory, Esq. is the co-owner of Mallory Writing Services and has written more than 100 articles helping home based business owners and entrepreneurs start and market their business. You can learn more about her here.

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