Multilevel
A multilevel is a marketing company that sells products through a network of independent distributors. Multilevel marketing companies are not pyramid schemes, although they share some common features. Multilevel marketing companies typically pay commissions to distributors for sales of products and services to their customers. Some multilevel marketing companies also pay commissions on the sales of products and services to people recruited by their distributors.
Multilevel marketing companies have been around for many years. However, the industry has come under increased scrutiny in recent years. Some state and federal authorities have alleged that multilevel marketing companies are pyramid schemes. A pyramid scheme is a business model that typically pays commissions to participants for the recruitment of new participants, rather than for sales of products or services to the public.
The Federal Trade Commission (FTC) has taken action against a number of multilevel marketing companies for operating pyramid schemes. In 2004, the FTC issued a report that identified specific characteristics of pyramid schemes. The report stated that a pyramid scheme typically involves the payment of commissions for the recruitment of new participants, rather than for sales of products or services to the public. The report also stated that pyramid schemes are often characterized by,
1. Complex and misleading compensation schemes that make it difficult to determine how much money is being earned by participants;
2. A focus on recruiting new participants rather than on selling products or services to the public; and.
3. Promises of high income potential that are not achievable.
The FTC has also taken action against multilevel marketing companies for making false or unsubstantiated claims about the income potential of their businesses.
Despite the negative publicity, there are a number of legitimate multilevel marketing companies. These companies operate lawfully and provide a valuable service to their customers. Multilevel marketing companies can be a good opportunity for people who are interested in starting their own business. However, it is important to research any company before investing money in its products or services.
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