Nicole McNeil Donecker of Marcum. Multilevel Marketing Companies and Pyramid Schemes
MLMs are similar in structure to pyramid schemes, but with the essential difference that an MLM is considered a legitimate business enterprise and a pyramid is a scheme to defraud. Understanding this difference is paramount for investors.
February 25, 2022 at 11:31 AM
8 minute read
Litigation
I am sure you have heard of Avon and Tupperware, and you may even have their products in your home. Both of these companies are referred to as multilevel marketing companies, or MLMs. Multilevel marketing is a strategy used by some direct sales companies encouraging existing participants to promote and sell their products and services to other individuals and bring new recruits into the business. MLMs are similar in structure to pyramid schemes, but with the essential difference that an MLM is considered a legitimate business enterprise and a pyramid is a scheme to defraud. Understanding this difference is paramount for investors.
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