Top 9 Lies Used To Defend MLM Scams 8
8. My MLM can’t be a pyramid scheme because they have products.
Modern pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions. While the sale of goods and services nominally generates all commissions in a system primarily funded by such purchases, in fact, those commissions are funded by purchases made to obtain the right to participate in the scheme. Each individual who profits, therefore, does so primarily from the payments of others who are themselves making payments in order to obtain their own profit. – Source FTC Division of Marketing Practices James Kohm
Modern pyramid schemes use products to disguise the payments into the pyramid scheme. “One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public” – Source FTC http://business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans