The Facts About Pyramid Schemes

Even though the ordeal of the pyramid schemes are far behind us, at times, we as consumers do not learn from our mistakes and hence we tend to repeat the hardest lessons in history. In an effort to prevent   history from repeating itself, here are some things you might need to   know about pyramid schemes.

• Pyramid Schemes actually started out as legitimate Multilevel or "network" marketing plans- a legitimate way of selling goods or services through distributors. These plans typically promise that 
  if you sign up as a distributor, you'll receive commissions - both for your sales and those of the people you recruit to become distributors. When the plan operates in the exact opposite of the multilevel marketing plan, it ceases to operate legitimately and is referred to as a pyramid scheme.
  
• In pyramids, commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors - not to consumers in general. The underlying goods and services, which vary in items, serve only to make the schemes look legitimate. Joining a pyramid is risky because the vast majority of participants lose money to pay for the rewards 
  of a lucky few. Most people end up with nothing to show for 
  their money except the expensive products or marketing materials they're pressured to buy. In some instances, the contributor is not asked to make a purchase but instead, contribute specific amounts of cash that will generate interest through the recruitment of other contributors.

If you're thinking about joining what appears to be a legitimate multilevel marketing plan, take time to learn about the plan. What's the company's track record? What products does it sell? Does it sell products to the public-at-large? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the plan? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?
   
Be skeptical if a distributor tells you that for the price of a "start-up kit" of inventory and sales literature - and sometimes a commitment to sell a specific amount of the product or service each month - you'll be on the road to riches. Often, consumers spend a lot of money to "build their business" by participating in training programs, buying sales leads or purchasing the products themselves. Too often, these purchases are all they ever see for their investments.
  
Your Responsibilities
If you decide to become a distributor, you are legally responsible for the claims you make about the company, its product and the business opportunities it offers. That applies even if you're repeating claims you read in a company brochure or advertising flyer. The Consumer Affairs Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to a potential customer.
  
In addition, if you solicit new distributors, you are responsible for the claims you make about a distributor's earnings potential. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.
  
Evaluating a Plan
The CAC suggests that you use common sense when evaluating a multilevel marketing opportunity and consider these tips as you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids 
   in disguise.
3. Beware of plans that claim to sell miracle products or promise enormous earnings. Ask the promoter to substantiate claims. Remember, you may be liable.
4. Beware of "decoy" references paid by a plan's promoter to lie about their earnings through the plan.
5. Don't pay or sign any contracts in an "opportunity meeting" or 
   any other pressure-filled situation. Insist on taking your time to think over your decision. Talk it over with a family member, friend, accountant or lawyer.
6. Do your homework! ask around (far and wide) about the business and the promoter of such a business especially when the claims about the product or your potential earnings seem too good to be true.
     
   Remember this, money does not come freely. In order to get back money you might very well have to invest money or put some hard work into it. So before parting with your money, think carefully and make only wise and informed decisions.