What Are MLM Scams?


Quick Answer

Multilevel marketing scams are recruitment businesses that supposedly offer opportunities to make money through selling products but actually earn most of their profits from their employees. Often the products are odd or unmarketable, and the company focuses on urging its recruits to find more salespeople who in turn invest money in the company.

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Full Answer

Some MLM companies are successful legitimate businesses selling worthwhile products through networks of distributors, but many others fail or are outright scams. One warning sign is when job advertisements or descriptions promise inflated incomes to new employees with no job experience. Recruiters promoting MLM scams use high-pressure sales tactics on their recruits and often set a strict time limit on supposed business opportunities. Although participants in legitimate MLM businesses typically have to invest in product kits to start out, MLM scams pressure their potential employees to pay extra for management positions, additional training and special programs.

People who are considering investing in an MLM business should be wary of companies that do not want to give them time to consider the opportunity and discuss it with family members. A legitimate company has no qualms about answering questions on any aspect of its operations and organization. The product they are promoting should be salable and successful. When in doubt about an MLM company, people should check its rating with the Better Business Bureau.

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