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Multilevel marketing companies employ a network of independent vendors who sell products directly to people in their community. These sellers earn income based on their personal sales, as well as sales of people they recruit to work for the company.

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Multi-level marketing is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying to existing distributors a percentage of the sales of their recruits; The recruits are known as the "downline" of a distributor.

Some sources say that all MLMs are basically pyramid schemes, even if they are legal. The US Federal Trade Commission (FTC) states: "Avoid multilevel marketing plans that pay commissions for new distributors. These are in fact illegal pyramid schemes.

In the usual cases, you will need between 3 and 5 years of company work before you really can live

A pyramid schema is a business model that recruits members through a promise of payments or other people's registration services into the plan, rather than providing investment or selling products or services. ... Some multilevel marketing plans have been classified as pyramid schemes.

Multilevel marketing (MLM) companies use a network of independent distributors to sell products directly to people in the community. Examples that most people think of when they hear about MLM companies include Avon and Mary K Cosmetics. If you become a distributor for one of these companies, you will make some money from selling the product. But the real way to make money is by recruiting a network of distributors who also sell the product, called your downline. You earn commissions on sales made by distributors in your downline. To make money in MLM, you have to know not only how to sell your product, but also how to build your downline.

The multi-level marketing or, that employs, relationship marketing , multi level marketing , network sale by co-option , network sale coopted (HRV), network marketing , etc. in English multi level marketing or MLM, is a structure of the sales network in which resellers (or distributors) can sponsor new sellers, and then be partly compensated by a commission assessed as a percentage on sales of recruits. The multi-level sale eliminates the costs of recruitment and training, but also spends advertising by replacing it with word-of-mouth.

The multilevel sale itself was invented in the United States in 1940 and popularized in the 1950s by Tupperware . It is present in almost all countries

Network marketing revenue 

In the various network marketing companies, there are usually two types of income.

  • commissions: the independent representative has a margin;
  • Residual Income: Residual income (or annuity, or passive income, recurring income or non-active income) is income that is paid on a recurring basis. It is calculated according to the personal turnover of the representative and that of his organization, according to the remuneration plan of the MLM company with which the representative works.

The Independent Representative may also benefit, under certain conditions, from bonuses (to be encouraged).

Convictions, Warnings and Criticism

The company Herbalife (who presented his activity as the multi-level marketing) has been convicted repeatedly for pyramid 3 , 4 .

In 2007, the report to the Prime Minister of Miviludes warned against "the risks inherent in multi-level sales networks" and a potential "sectarian drift" of the practices of these networks 5 , and lists "the steps that the facilitator , both recruiter and local or regional network delegate will be led to develop in front of its future distributors' consumers 5 in companies with risky practices.

In 2012, Miviludes set up a guide to give "both healthcare professionals and individuals" 6 the procedures to be followed in case of suspicion of "sectarian aberrations" when "the sale proposal is made within the framework of a multi-level sales network " 7 .

Walter J. Carl stated in an article in the Western Journal of Communication in 2004 that "the MLM sale has been described by some as a sect (Butterfield, 1985), of the pyramid sale (Fitzpatrick & Reynolds, 1997), 8 or (Carter, 1999), such as the use of religious discourse to promote the enterprise (Höpfl & Maddrell, 1996), and the exploitation of the network friends for profit (Fitzpatrick & Reynolds, 1997) 9 . "in China, volunteers who worked to rescue people enrolled in MLM networks were physically assaulted 10 .

MLMs have also been criticized for their inability to fulfill their promises. For a majority of participants, the MLM sale would not work due to conflicts with Western cultural norms 11 . There are even studies that suggest much lower break-even success rates than other types of firms 12 , 13  :"The vast majority of MLM recruits MLM, in which participants must aggressively recruit in order to earn money. According to the information available given by the companies themselves, the rate of loss for MLM recruitment is about 99.9%; that is to say, 99.9% of participants lose money when you subtract all the expenses they have made to work, including regarding purchases from the company 12  " . This is partly because in encouraging recruits to "recruit people who will eventually compete with [them] 14  " producing a "market saturation 15  " .

Due to encouraging recruits to recruit more competitors, the academic Robert Todd Carroll went so far as to say that at best modern MLM are only legalized pyramid systems 14 .

In October 2010 it was reported that investigations were opened by US attorneys regarding MLM companies due to the fact that sellers were mainly paid to recruit and that the latest recruits could do nothing gain compared recruits oldest 16 .

The industrial critic Robert L. FitzPatrick  (in) spoke in 2013 of the multilevel marketing as "the bubble Main Street" (as opposed to Wall Street) that will eventually burst.