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Why does multilevel marketing have such a bad reputation?

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Quick Answer

Many multilevel marketing programs are pyramid schemes in disguise - financial cons where the originators of the con steal from those below them. Legitimate multilevel marketing benefits sellers based on sales, while pyramid schemes benefit sellers based on recruiting people and the sales to the recruits, notes the Federal Trade Commission (FTC). Multilevel marketing is also heavily associated with shoddy and unsafe products and business practices ranging from unethical to illegal.

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Full Answer

A participant in a multilevel marketing program profits from the efforts of those they recruit as well as from their own sales. These businesses have a very high rate of turnover due to buyer regret. Often fees are charged in order to release buyers from contracts. Some multilevel marketing programs make the largest part of their profits from exploiting buyers in this manner. Potential buyers and sellers should be highly critical of the business model and practices of any multilevel marketing setup in which they are considering participating.

Learning about a company before engaging in business with it is a good first step to help ward off unethical multilevel marketing campaigns, states the FTC. Often companies will generate bad press if they engage in unethical behaviors, and searching out consumer reports and other reliable resources can help people assess whether a given business is a scam or a legitimate enterprise.

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