The most insidious of the MLM look-alike scams are pyramid
schemes. They mimic legitimate network operations in that they
compensate distributors on a multilevel structure, providing an
incentive to sell the business opportunity to prospects. The key
dis-tinction, however, is that pyramids focus primarily on
recruiting salespeople, not on selling products or services. In
fact, in many cases, there's no real product or service to
sell.
"In a pyramid scheme, the focus isn't on the movement
of a product or service to the general public," explains
Jeffrey Babener, a partner in the Portland, Oregon, law firm
Babener & Associates who represents many network marketing
com-panies in the United States and abroad. "It's a
'deal on wheels,' in which people are encouraged to spend a
lot of money and find other people to do the same, who are then
also encouraged to find others to do the same. The whole focus is
on the movement of money-people making money from headhunting
fees."
How can you pick out a scam? Do a background check on the
company you're considering. Contact your local Better Business
Bureau (or log on to the bureau's Web site at http://www.bbb.org) for a reliability
report on the company. You can also consult the Multilevel
Marketing Inter-national Association (MLMIA) at (949)854-0484 or
http://www.mlmia.com , or the
Direct Selling Association at (202)293-5760 or http://www.dsa.org , to see if the company
is a member in good standing. The Federal Trade Commission (FTC)
will have infor-mation on any complaints that have been lodged
about the company; contact the FTC at (202)326-2222 or http://www.ftc.gov
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