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Spotting the MLM Scam

Jun 19, 2008
Multi-level marketing was once a legitimate business. In the quieter days of our nation's history when many people lived in small towns away from cities and shopping, companies utilizing an MLM format made products available to people who otherwise would have had to travel hours to get them, or go without. In today's world of internet shopping, products are widely available to everyone and MLM in not necessary. Therefore, any company using an MLM format is suspect of being an MLM scam in disguise.

There are some MLM companies that are legal. In 1979 the Federal Trade Commission (FTC) decided that multi-level marketing was not illegal per se. However, Amway, one of the oldest and best known MLM companies, was found guilty of price fixing (by requiring "independent" distributors to sell at the low price) and making exaggerated income claims. So even legal companies may be using some shady practices.

There are some specific things to look for when trying to differentiate a legitimate MLM company from an MLM scam. The first is claims of huge income, fast. You see the ads all the time: "Make millions now, no manager" or "Work from home, start $12,000 per week." Maybe you saw the ad in the paper, maybe a flier was placed under your windshield wiper in the supermarket parking lot, or maybe you received it by e-mail. Promises of getting rich quick with little or no effort are red flag number one of an MLM scam.

Another warning signal of a potential MLM scam has to do with how the promised money is generated. In today's competitive economy chances are you can't make $12,000 per week independently selling any legal product, so the money has to be coming from some other avenue, which is likely to be membership buy-in fees. MLM scams exist only by defrauding people into buying memberships in anticipation of being able to make a profit defrauding other people into the program. Legal MLM companies will always focus more on selling the product rather than recruiting new members, and won't charge huge buy_in fees.

A common characteristic of MLM scams is requiring members to purchase their own advertising materials. Think about it: a company wants you to sell their product but they want you to pay for the advertising materials? Especially with the huge profit margins that the Top Guy makes with these programs, they should at least pay for your brochures and tapes. If a company requires you to pay for advertising or marketing materials, it is a sure sign that it is an MLM scam.

Many of the most sophisticated MLM scams offer training seminars (sometimes training seminars are even required) by the MLM programs. These training seminars offer little practical training, but are mostly rah-rah seminars to boost enthusiasm for finding new recruits by sharing emotion filled success stories. These training seminars can cost members thousands of dollars although the company ought to be paying you to attend and learn how to sell its product. No company which requires you to pay for your own training seminar is a legitimate program.

MLM scams have defrauded thousands of people out of billions of dollars over the years and are still prevalent. When anyone approaches you with a get rich quick plan, regardless of if you know and trust the individual or not, take the time to research the company and look for these warning signs. You may save yourself from losing all your honestly made money, and a lot of heartache. When it comes to MLM scams, just say no.
About the Author
The MLM scam (http://believethemovie.com/) is one of the most common frauds prevalent today. The author Art Gib is a freelance writer.
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