What is the difference between an MLM and a pyramid scheme?
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A pyramid scheme has no actual product sold. The only income is from new recruits paying existing recruits.
MLM actually sells products. Income comes from products that are sold to clients and some of that profit goes up the chain. Specifically recruiters can only be paid primarily based on actual sales (their own and that of people they’ve recruited), not for just bringing people in.
Since there is a source of revenue MLM is not illegal as long as recruiters aren’t actually breaching contracts. The recruiters can often be -highly- misleading though when getting new people to join in. Usually about how much effort it takes to get sales and expected profits.
And people who get recruited often find themselves fronting money for a product that takes them far longer to sell than expected.
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