Watch Out for the Multi Level Marketing Scam

The multi level marketing scam has been around for a long time and in various different disguises so it is not always as easy to spot as it has been. There are also great companies that have been built based on the MLM format so it is only fair to say that not all multi level marketing companies can be considered a multi level marketing scam. Take Amway or Avon for instance. They are legitimate companies that offer good products and rely on sales people to actually get the products into homes and businesses in order to succeed. But success on the sales level is only a small fraction of the business that drives a multi level marketing company such as HerbaLife or Amway. The vast majority of their business relies on their sales associates bringing in other associates, and those in turn bringing in more, etc., etc.

The multi level marketing scam began back in the 1930s. They were usually some form of pyramid scheme most often involving the use of a chain letter. In this most basic and most illegal of schemes, a person would mail out a letter to, for example, one hundred people. The letter would state that the receiver was to send him back one dollar, then they were instructed to mail that same letter to a hundred other friends of theirs, who would in turn send that person one dollar, and the original person another dollar. If the second person, the one who originally received the first letter, did as instructed, the original person who began the scheme would receive one hundred bucks from the one hundred persons on their original list, plus another hundred from each of the one hundred persons on their list, etc.

For the originator, this type of penny ante scheme would be very lucrative since these letters sometimes went on for years and became long lists with hundreds of levels of contributors around the country and around the world. Suffice to say that this quickly caught the attention of the FBI and other law enforcement officials. In a pyramid scheme of this sort, eventually the last levels of people who bought in would lose their money and only the originators would gain.

A multi level marketing scam works much the same way, with associates being brought on as arms or legs of the original creator of the scam. Only instead of one dollar, they would charge hundreds of dollars to join the organization, with no clear benefits or even a product to sell. Without a service or product to sell, the entire upside down pyramid would eventually collapse on itself and leave the people at the top with no return for their investment. Many originators of these schemes would just create a new one after the first collapsed and continue to reap the windfall of being number one on the chart.

There are definitely some legal MLM programs out there and I dont mean to disparage them all. Obviously, some people work very hard at them and make lots of money without ripping off people. I am just very leery of any multi level marketing scam and suggest that people do their homework carefully before investing even one penny of their hard earned money.