Beware of MLM Companies that Implement Ponzi & Pyramid Schemes

Even though we live in a fast-transforming digital world, financial frauds are still rampant and continue to haunt us. It holds in the case of MLM companies, too – especially after the introduction of several Ponzi and pyramid marketing schemes. Apart from sympathizing with those having fallen prey to such schemes, very little can be done. The Indian Government has recently drafted regulations to prevent this from happening, but you should still be aware of it and safeguard your interests. This article explains more.

Genuine MLM Companies – Providing Livelihoods and Entrepreneurship Opportunities

Having noted the importance of the Direct Selling Companies, also known as Network Marketing or Multilevel Marketing companies, the Government of India has boosted the Direct Selling Industry by initiating various schemes like Make in India, Skill India, Women Empowerment, and Startup India. The industry has reciprocated by being in line with these schemes providing jobs to millions during the severe pandemic and contributing significantly to the Government’s revenues. Genuine MLM business models incorporated by Amway, Oriflame, Qnet, Tupperware, and Herbalife continue to provide livelihoods to millions – before and after the Covid-19 pandemic.

MLM Business Models are Genuine but, Beware

Multilevel Marketing (MLM) is a business strategy that involves companies encouraging their representatives to recruit new salespeople by incentivizing them along will selling their products or services. The biggest advantages of the MLM business model – both to businesses and individuals lies in its low risk, low operating costs, portability, and high-income potential. MLM business models implemented by companies are usually genuine. Still, some companies appear suddenly out of nowhere, hoping to cash on the MLM boon and disappear suddenly, duping innocents. So, always do proper groundwork when choosing your Network Marketing company. In the section ahead, we will see what Ponzi and Pyramid schemes are and how you should avoid companies implementing such illegal schemes.

What are Ponzi and Pyramid Schemes?

Ponzi and Pyramid are illegal and unstable business models that promise high returns for enrolling people into the network. Under MLMs, members pay a joining fee which is passed on to those above them. Unlike a simple MLM scheme, in a Pyramid scheme, joining members need to pay a joining fee passed on to their topline. On the other hand, Ponzi schemes use funds derived from new investors. Here, the existing investors pay interest to their downline from these funds and keep recruiting members. Some examples of Ponzi schemes include Personal Saving Scheme, Investment Programs, etc. Ponzi and Pyramid schemes are barred in India.

Beware of Ponzi and Pyramid Schemes

There have been several instances when many companies started their operations in the guise of MLM companies but incorporated the Pyramid schemes. Such schemes that do not involve any products or services are illegal, and often common people are trapped by such companies that vanish in no time after duping innocent investors. To prevent such happenings in the future and safeguard investors’ interests, the Government has recently drafted regulations that make it mandatory for companies to register and have a permanent office address in India and debarring the implementation of the Pyramid schemes. On your part, it is important for you to always make an informed decision before collaborating with a Direct Selling company – beware of Ponzi and Pyramid schemes.

Conclusion: Make an informed decision when choosing your Network Marketing company

The Government has boosted the Direct Selling Industry. The Government has taken steps to safeguard those wanting to join the Direct Selling Industry. Yet, it is your responsibility to ensure and protect your interests before partnering with any company. You should verify the background, check its credentials, know about its compensation plan, and get acquainted with its products or services before collaborating with a Direct Selling company. Stay safe. Stay happy. All the best.