Companies selling through true MLM (Multi-Level Marketing) are legal. However some companies that claim to be MLM have questionable practices that may at least border on Pyramid Schemes. Pyramid schemes are illegal.
My hypothetical example below, based on the Unicity MLM structure, shows that over 85% of the retail price of an MLM product may be used to pay for commissions and bonuses etc.
As a result of the profit margins/commissions/bonuses/rebates paid out, customers may pay several times the actual true price of a product (price including reasonable profit margin if it was not MLM) when buying an MLM product. MLM products are definitely not cheap and do not represent value for money.
MLM products are very expensive. How much do you think has to be added to the actual cost of the product (including reasonable profit margin if it was not MLM) to pay for the ‘income streams’ in the example below? What percentage of the retail price (price you would pay as a customer) do you think would be the reasonable price of the product (including a reasonable profit margin) before the MLM costs are factored in?
In addition, the MLM tree structure is very similar to a pyramid structure. Eventually there will not be enough people on Earth for ‘Franchisees’ (or whatever other name is used) at the lower levels to recoup (get back) their ‘investment’. In fact many people do not earn much who entered MLM some time ago.
If someone is selling a product, ask if it is MLM.
Many sales people may avoid answering the question. If they avoid answering by saying it is Direct Selling or Direct Sales, ask again ‘Is it MLM, yes or no?’.
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