The Bottom Line About Multilevel Marketing Plans and Pyramid Schemes

Multilevel or “network” marketing plans are ways to sell goods or services through distributors. Typically, these plans promise that if you sign up as a distributor, you’ll get commissions not only from the sales you make, but also from the sales of the people you recruit to become distributors. These recruits sometimes are called your “downline.”

Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It’s best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.

Joining a pyramid is risky because the vast majority of participants lose money to pay for the rewards of a few people at the top.

How can you tell the difference between a bona fide multilevel marketing plan and a pyramid scheme? According to the Federal Trade Commission, the nation’s consumer protection agency, it takes research, some business sense and a healthy share of skepticism.