Pyramid schemes

The pitch is that you will make money by paying to participate in the program and recruiting others to join. But if it's really a pyramid, you and your friends will lose money, not make it.

Stay safe. Be Informed.
  • Plans that promise profits mainly for recruiting new members are illegal pyramid schemes. In legitimate multilevel marketing plans, profits come primarily from selling goods and services to consumers.

  • Be aware that some pyramids are disguised as “gifting clubs.” New recruits give money to current members with the promise that they will receive money from future recruits.

  • Know that all pyramids are doomed to collapse. That’s because it’s impossible to keep on getting fresh recruits who will pay to participate.

  • Legitimate multilevel marketing plans only succeed if they offer products or services that customers want. All successful businesses depend on repeat sales. If there isn’t constant demand for the products or services, the business will fail.

  • Sales to other distributors don’t count. Legitimate multilevel marketing plans aren’t based on sales to distributors. Profits should come from sales that you and any distributors under you make to the end-users.

  • Be wary of big earnings claims. No one can guarantee how much you’ll make. That depends on how hard you work and whether consumers like your products or services. Many people who work in multilevel marketing do it part-time to supplement their other income.

  • Check it out before you commit. Get all details in writing, and contact your state or local consumer protection agency for advice. In some states, multilevel marketing companies must register with the government and comply with other requirements.

  • Don’t buy more supplies than you need. Some fraudulent companies try to force distributors to pay for more products than they can reasonably sell.