Forbidden and dubious MLM variants

Within the sales structure below the multi-level marketing, there are also offers that are frivolous or even prohibited. These are systems of pyramid schemes, chain letters or gambling. These systems violate the law such as the U.S. Postal Lottery Statute (18 USC § 1302) or the German § 6 c UWG. The World Federation of Direct Selling Associations a pyramid scheme is defined as a system in which a recruited or an entrance fee is paid for the opportunity to continue to achieve benefits including money or privileges, which is primarily from the introduction of other participants in the system by the dependent recruits, and less from selling products to consumers.


Dubious as MLM and illegal variants are the systems where no product or service is offered. The main source of income to the recruitment of new members and their entry fee is based. The system has to burst because at some point, no new members can be found and the last shall then bitten by dogs. If you recruit 8 new members and re-advertise these eight members and each pays $ 1,500, as entry fee. This is then used by one member and will then get out and become really rich.

This was the explanation for an airplane game which was raised as a pyramid scheme. If you look at this from the mathematical side, the number grew with each payment cycle by a factor of 8, such as 8, 64, 512; 4096, 32 768, 262 144; 2,097,152; 16,777,216 and so on down to numbers that the population of the United States and soon exceeded the entire humanity. There is no product or service that is offered and the product is sold out with a far greater value than you would pay for a comparable product on the market.


The multi-level marketing principle

The potential width of a structure, for example how many people in his first level recommend to bring MLM business sponsor can be vary from vendor to vendor likewise, the depth or the number of layers in the depth of an MLM system. The person, who is another person, the “sponsor” is named. In some cases, this width is unlimited and each may thus recruit many new partners, leading directly into the first level, as he wants. Others MLM systems rely on a limitation of the feature size usually 20-10 First Liner.

If the feature size is limited, then recruited new partners in the first level cannot be classified or forced to incorporate more deeply into its own structure. Here is an example of a matrix, the two members (First liner) is allowed per level. In this example, the dark blue Sponsor (Member of A on the plane 13) members of the light blue (B, C, E, J, O, P, Q and T) may be recruited. The red member (H), the bright blue member (J) is appended.