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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
- 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
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.
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.
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