What Is The Difference Between MLM And Pyramid Scheme – Review

Are you on the brink of getting ready to join a Multilevel Marketing opportunity? If so, it might be wise to read this before making that final decision. Why? Not all M.L.M. schemes are legitimate many are very closely related to a pyramid scheme; And, They Are Illegal.

I will look at the differences between the two, giving you are far greater insight about what separates the two.

M.L.M. And How It Works

Dependent upon what scheme you are looking at will determine your starting status. Predominately, there are THREE types, Consultants – Contractors or Distributors. But, your starting title doesn’t make any difference, the bottom line, you’re there to make money.

The M.L.M. masterplan is recruiting the most significant amount of distributors to maximise sales growth. You’ll earn a commission for each sale you make. Also, you receive a compensation payment from the sales of others who you have recruited into the scheme.

They use a tiered, (multilevel) compensation plan where consultants get paid at multiple levels for sales and volume of sales generated; And, it filters down to the grassroots distributer.

 Pyramid Schemes And How They Work

The basic principle with the pyramid scheme, it operates a fully charged enrolling other people type system; And, with an upfront payment charge. They also sell a very cheap product that has little to no real value. The product is a front to hide up the actual operation in an attempt to convince people that it’s not a pyramid scheme.

As the name suggests, (Pyramid) those at the top are the big money earners. They scoop the cream while those at the bottom part with their money with little to no prospect of earning a commission.

And, when the recruiting tries up the scheme fall over, you lose everything while the promoters walk away with their pockets stuffed with your money.

Why Are Pyramid Schemes Different?

Pyramid schemes are different from M.L.M. in the way they generate income. Recruitment is the focal point, whereas M.L.M. primarily uses real products to generate revenue.

Those at the top of the pyramid use you to encourage others into the scheme knowing that you’ll make next to nothing for your effort, while they sit back and do almost nothing and skim the cream off the top.

Like I said before, M.L.M.s have physical products to sell and use that revenue to pay the various levels of members, while at the same time build their network of distributors. Fundamentally, they are product-driven, not recruitment driven. And, that’s the difference between the two.


Over the many years of existence, M.L.M.s, have been tarnished as being a pyramid system.

While in a lot of instances that is true will some, but not all.

Despite the fact of its stigma, Multilevel Marketing Companies, to gain back its credibility, need to take constructive action to cease industry misinterpretation; And there are two areas where they need to focus.

  • Misleading income performance

Misleading income performance, irrespective whether they are direct and straightforward, or suggesting the truth of their existence is of great importance to the consumer when making a potential investment decision.

More often than not, earning potential is the pivotal point when deciding a vital investment decision. It comes as no surprise why the F.T.C. view earnings fabrication extremely serious.

False claims and unsubstantiated earnings are deceptive and unlawful under Section 5 of the F.T.C. Act.

Unfortunately, law enforcement experience identifies that many M.L.M.s continue to misrepresent the earnings potential; participants are likely to earn.

  • Business Structure 

  • An area deemed as being unfair or deceptive, purely because the focus isn’t on real sales or real customers.

The Federal Trade Commission (F.T.C.) views legitimate M.L.M. businesses structures, are those who accurately represent genuine business opportunities.

Earnings irrespective whether they are direct and straightforward, or suggesting the truth of their existence is of great importance to the consumer when making a potential investment decision.

More often than not, earning potential is the crucial point when making important investment decisions. It comes as no surprise why the F.T.C. view earnings fabrication extremely serious.

All statements must be truthful, non-misleading, and substantiated. False earnings the F.T.C. consider defamatory will be investigated.

A legitimate multilevel marketing company must accurately represent its business opportunity and what members can expect to make.

Genuine Multilevel Marketing Businesses

  1. Actual M.L.M. companies reward their members based on product sales.
  2. They have a legitimate marketable product to sell.
  3. Products within the marketplace considered authentic.
  4. Start-up costs are medium to low.

Pyramid Schemes

  • Focus entirely on recruitment, with the majority of income finding its way to the top.
  • Recruitment drives based around selling the sausage and not the sizzle.
  • Unsuspecting people get drawn in by the hype, unaware they more likely will be subject to loading up with lots of inventory that is of poor quality with an inflated price attached.
  • And, others offer a product of shallow quality, mainly to pass the pub test of legitimacy.
  • Start-up costs are in the high range bracket.

Why Do Pyramid Schemes Fall Over?

The simple reason why they become unsustainable, there isn’t enough people worldwide to fulfil its required numbers to satisfy its existence.

Apart from that, pyramid selling is illegal almost worldwide, and given time, they are found out and closed down by law enforcement agencies.

There is an endless line of complaints about pyramid systems having duped people and lost lots of money in the process.

Are M.L.M. Companies Legit?

Some are, while others are not. Because they are legitimate M.L.M. companies, doesn’t mean that they are all clean skins, as they also have their share of concerns.

I mentioned earlier how they by and large sell legal products as their primary source of income. While that is true, they also rely heavily on recruitment, with some of their recruiting tactics borderline.

Another point they conveniently don’t tell you is how complicated your chances are of being successful not only that; they will never mention how most distributors never see a commission cheque.

For instance, I have written a post about Nu Skin and research identified that more than 90% of distributors don’t earn a commission; And, if you sign up to their fast start program, then you’ll be out of pocket $100 every month no matter whether you sell the product or not.

What I’m highlighting, even though they are legitimate companies, not always is it easy to earn commissions.

So if you are considering joining a multilevel business, then for your peace of mind ask many questions, have them show you real proof that it works, and make sure that the evidence is not something from their recruitment folio.

Go online research the company, check their standing.

Then compare what they’ve told you against what others are saying.

That way, you will be in a stable position in making a sound decision.

Be Wary Of the Lifestyle – Holidays And New Cars Syndrome

How many times have you read about the types of lifestyle you will enjoy just by joining up to our system.

Don’t be tricked; claims of this nature are misleading and utterly flawed.

You probably know what I’m talking about, things like, “Set For Life – Make More Money Than You Ever Thought Possible. Then the expensive homes all decked out with modern furniture luxury cars, exotic holidays and the list goes on.

Then some use the subtle approach, join today and quit your job tomorrow or quit your job and tell the boss you can earn more working from home than he can afford to pay you, and much more.

If you stumble across these types of lifestyle claims, be wary, they are deceptive.

Such claims put out into the online world are hell-bent on getting hold of your money, because your chances of achieving them are remote to impossible.

The Federal Trade Commission has laid a footprint that will help consumers detect legitimate plans from illegal ones.

The guideline indicates what to look for when sorting legit M.L.M. from a pyramid scheme.

  • Actual product sales or service to consumers, M.L.M. offers products
  • Whereas Pyramid schemes do not
  • Commissions are paid on the sale of products and not on enrolments; M.L.M. has an organised commission set up on the sales of products.
  • Pyramid schemes are based solely on new registrations.
  • The company buys back inventory from participants at the time of termination.
  • Pyramid schemes do not have any stock.

The F.T.C. has also indicated that over the coming month’s additional steps will be put in place, with the sole purpose of creating greater transparency.

My Final Say

Scammers demand your attention as they are in every online business opportunity; But, for some unknown reason, a majority appear to gravitate toward the M.L.M. industry. Data identifies that M.L.M. direct selling highly preferred throughout the U.S.A. Even with a poor track record, it doesn’t seem to phase consumers. However, the U.S. isn’t alone as scammers operate in every corner of the universe.

The industry creates lots of negativity as I have mentioned in my thread. So, it places a shroud of uncertainty over the industry.

Change is needed and by the report from the F.T.C. streamlining is inevitable. The laws governing the M.L.M. industry is now in the process of being overhauled with a greater emphasis placed on transparency, that can only protect and benefit the consumer.

However, more likely, it will only weed out those who are blatantly flaunting the M.L.M. guidelines. But, we need just to wait and see if it does have a profound impact on the industry.

Pyramid schemes have a profound impact throughout the world. It is the centre of family break ups, putting everyday people into unwanted debt and driving other genuine people away from online companies who operate a very legitimate business.

Indications reveal that pyramid selling has a magnet type of attraction toward low-income earners who are struggling week to week looking to supplement their income. Unfortunately, it has the opposite effect and only drives them further into debt.

Scammers are very cunning in the way they approach their business model as they disguise the underlying aspects of the business and mask it with all the convincing glossary that unsuspecting people get all fuzzy inside and then fall into their trap.

How Risky Are Pyramid Schemes

Pyramid schemes are illegal; therefore, must be dismissed as a business opportunity. They’ll rob you of your money, and in some instances push you slowly into unwanted debt. STEER CLEAR AT ALL COST.

M.L.M Business Opportunity

There are a few companies that operate within the guidelines of being a legitimate opportunity. None-the-less, go through a full due diligence process before arriving at a final decision.

Do I Recommend M.L.M?s

I’ll leave the decision for you to make. It may suit your ideals, or it may not. My advice, do all the checking you deem as necessary in satisfying your concerns, and if everything stacks up then maybe M.L.M will suit you.

However, always keep tucked away in the back of your mind; most M.L.M.s operate on a pyramid style system. So, tend to work very close to the pyramid scheme.

Carrying out extensive research may successfully link you with a multilevel platform that is profitable; But, it also could be devastating. There are many pretend M.L.M.s. That is nothing more than cons, modelled to drain your wallet and evaporate your dream of running your own online business.  TREAD WARILY.

Are You Looking To Start Your

Own Online Business?

If you are genuinely interested in making money with a timeframe to suit you; My #1 recommendation gives you the freedom to choose your marketing framework without having others pulling all the strings and telling you what to do.

  1. You select what you want
  2. You choose what you want to promote
  3. No deadline to meet
  4. Work at a leisurely pace that suits you
  5. You are the boss, not someone else

What is The Difference Between MLM And Pyramid Scheme - Review






Quality Overall



  • MLM Genuine Consumer Products
  • MLM Sales To End Consumers
  • MLM Follow A Compensation Plan


  • Pyramid Scheme High Risk
  • Pyramid Scheme Lose Your Money
  • Pyramid Scheme Constantly Under FTC Focus

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