It's A Pyramid Scheme Or Is It?

I know the preconceived notions about direct sales, network marketing, MLMs if you will, I mean how could I not! I have never really been one to turn my nose up at the business model.

I was that girl who spent all her cleaning money on Avon (those magazines were it), have one of those Scentsy burners in every room of my apartment, and jump all over the Younique Mascara.

To be honest...I'm not really sure how I become such a supporter of small businesses, and I'm just not the hate on things kind of person. I mean your either for something or against it. And there are plenty of things I am against, but I still show grace and respect. I have had a few negative experiences, but that was one situation and unique to me. I moved on!

HOWEVER—Can we go to the dark side and play devil's advocate for a quick minute.

Bad Experiences.

Bad Reviews.

A friend told you it was a no bueno!

Your husband said to get a real job.

The FTC says you can't make money.

I mean we have heard all the things, am I right? And the haters. WHOA! EVERYWHERE. Every corner, every nook, and cranny!

So with people looking for a way to make some extra money during this time, let me shed some impartial insight into the things you may have heard about direct sales, network marketing, or MLMs. My mission is to not turn a hater into a believer. My mission is to share some factual information because I believe knowledge is power. You ready, sister?


Let's start by saying, it's never one size fits all. Yes, there have been some Direct Sales companies that have been fined by the FTC for having "pyramid scheme" practices. Let's look into this a little further. PYR·A·MID Scheme- NOUN: PYRAMID SCHEME; PLURAL NOUN: PYRAMID SCHEMES A form of investment(illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.

Direct sales companies are regulated by the FTC, so I got my information from the FTC's website: How does the FTC distinguish between MLMs with lawful and unlawful compensation structures? At the most basic level, the law requires that an MLM pay compensation that is based on actual sales to real customers, rather than based on mere wholesale purchases or other payments by its participants. In evaluating MLM practices, the FTC, in accord with established case law, focuses on how the structure as a whole operates in practice and considers factors including marketing presentations, participant experiences, the compensation plan, and the incentives that that compensation structure creates. The assessment of am MLM's compensation structure is a fact-specific determination that the FTC makes after careful investigation.

Wikipedia defines pyramid schemes as "a Business model that recruits members via a promise of payments or services for enrolling others into a scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal. Pyramid schemes have existed for at least a century in different guises. Some Multi-Level Marketing plans have been classified as pyramid schemes. [1]

A direct sales company is direct to consumer business model that offers a product to a customer base.

Traditionally, illegal pyramid schemes are a promise to wealth based on nothing other than recruiting people to invest with NO Promise Of Investment Or Product. This is where a Pyramid Scheme becomes illegal. This is where the difference comes in an illegal pyramid scheme and a legal direct sales company-the product and the customer base.

When the focus becomes more about recruiting other distributors and the promise of income and less about providing a product or service to a customer, this is where scheme comes in. The FTC steps in and investigates. They are basically saying.. "You can't recruit people with the promise of success and wealth because you can't predict how much money they'll make or how successful they'll be. It's dishonest and unethical."

I agree. Empty promises of wealth is just a plain "no Bueno"! If the FTC decided that a direct sales company is fitting in that realm, that's when they get involved and investigate. Fine. And potentially shut the company down. etc.

I love people. seriously! So the fact that the company I partner with customer-centric focused. It makes me love it even more.

The focus is always on providing quality products to the customer at a reasonable price. Not the recruitment of distributors or partners with a promise of wealth( ie." Sign up with me, and you'll make a million dollars a year.) It's just plain dishonest and unethical, and this is why the FTC is put in place. The FTC also has regulations on those who do partner with direct sales company can't share their paychecks or promises of vacations, perks, cars or paychecks.

If your thinking of becoming a customer, buying a product or partnering with a direct sales company, ask yourself a few questions first.

  1. Are they customer-centric? (THE ANSWER SHOULD BE “YES”)

  2. Do they provide the actual products to purchase? (THE ANSWER SHOULD BE “YES”)

  3. Can I purchase as solely a customer? (THE ANSWER SHOULD BE “YES”)

  4. Do I have to be a distributor to purchase products? (THE ANSWER SHOULD ABSOLUTELY BE “NO”).

Not all business (direct sales or others) are created equally. The key is to be sure and ask the right questions before getting on that soapbox, "all MLMs are pyramid schemes!" Honestly, this is so far from the truth!

Myth Busted? Yes and No.

Let me say this all opinions in this blog are my own and from research and are in no way representative of Monat Global. Deal pickle?

Stay Fabulous,