Multi-level Marketing Scheme

A multilevel marketing scheme is a type of pyramid scheme where participants are recruited into a "direct selling" program in which requires participants to purchase a fixed quantity of a product and sell it directly on a peer to peer basis to their friends and family. Participants are also typically disproportionately rewarded from recruiting other participants into the scheme who themselves must purchase products from the company, thus creating the requirement for an infinite chain of greater fools that must enter into the scheme in order for participants to recoup their loses.

Because of regulatory capture some MLM schemes are legal in the United States, although others have been shut down as illeal pyramid schemes. MLM schemes are largely perceived as being a form of predatory investing that preys on financially disadvantaged and marginalised groups who have been shut out of other opportunities.

See also Pyramid scheme, Ponzi scheme, and zero-sum game.


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