Use the questions below to evaluate a multi-level Marketing program that you are considering to see if it meets a government definition of a pyramid scheme.
Pyramid selling schemes often have start-up fees which are not for purchasing commercially viable goods or services since most earnings come from introducing others to the scheme.
Promoters who make unrealistic claims risk breaking the law.
If you answer yes to (1) and (2) then regardless of whether the scheme is pyramid selling or not, you should seek financial advice before entering.
Pyramid selling schemes are based on recruiting others into the scheme.
A legitimate scheme has as its main feature products which consumers want to buy.
Legitimate multi-level marketing depends on selling to customers and establishing an ongoing market.
Legitimate businesses require participants to buy or order only as much stock as they can realistically expect to sell.
Such statements need to be read carefully as they may make unrealistic promises which conceal the amount of hard work necessary to actually achieve such goals.
People giving testimonials may not want to be identified for reasons of privacy. This may raise suspicions about whether the testimonials are genuine. Even if they are, there is generally no way for consumers to check. References to testimonials should be read with this caution in mind.
Again, statements like this need to be read with care. You need to ask yourself why such a statement is necessary. They may disguise the fact that the scheme may be illegal, or contain illegal components.
Neither the Ministry or the Commerce Commission endorse or approve any schemes. If this statement is made, it is untrue.
Legitimate schemes are unlikely to do this.
Legitimate multi-level marketing businesses have a vested interest in ensuring that participants are well trained and supported.