Cagey Consumer

MLM by any other name

There are a number of terms used to describe business formats that are essentially equivalent to multi-level marketing. Here are a few of them:

multi-level marketing (mlm)
This term indicates that payouts occur at two or more levels. It is the most generally accepted of these terms and does not suggest anything illegal, thus it is not objected to by legitimate promoters.
network marketing
Commonly used by the industry, this term implies that success depends on building a distributor network. In some cases, this is also used to indicate that there is a network of product suppliers enabling distributors to offer a broader selection of products.

Promoters of mlm's frequently try to claim that what they have to offer is new or different from other programs that prospective distributors are familiar with.

consumer direct marketing
This term is used exclusively by promoters who are trying to differentiate themselves from multi-level marketing. Essentially, the distinction is that distributors are described as consumers. In the end, the result is likely to be the problematic situation in which people are buying something, not because they really want the product or service, but because of the business opportunity that goes along with it.
pyramid sales plan or pyramid scheme
This is the most common term found in state statutes regulating this business format, and is generally objected to by the industry, on the grounds that pyramid schemes are illegal. However, pyramid sales plans are ordinarily permissible providing that there is a bona fide product or service being sold and certain other conditions are met.
ponzi scheme
Often misused as a synonym for a pyramid scheme, the essential difference is that Ponzi scheme participants are not offered any direct financial incentive for bringing in other participants. However, they are likely to tell their friends about the investment opportunity. The fact that early participants in a Ponzi scheme are paid off from the monies collected by later participants is normally known only to the operator of the Ponzi scheme. The participants are instead offered a story to explain their high investment returns. Check Ponzi or Pyramid & What is a Ponzi for further information.
seller assisted marketing plans
This term is used under California law to describe a variety of business formats, which encompass multi-level marketing. California law applies this term only when a $500 minimum investment is involved. Click here for details.

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