Network Marketers - MLM - Multi Level Marketing facts

In a legitimate MLM company, commissions are only earned on the sale of products or services to the end consumer who, in many cases, is also a distributor. No money may be earned on a "sign up fee" or for recruiting alone. Critics contend that some companies produce revenue primarily by attracting new participants, as opposed to selling products.

Many Multi Level Marketing recruits are attracted to the possibilities of a PASSIVE INCOME. Most new MLM recruits find it very difficult to find MLM leads beyond their immediate circle of friends and family.

MLM leads can come from attending meetings, joining associations and community organizations.

Analysis of the compensation plan is often required to determine whether participants are paid based on actual sales of products to customers versus new recruit bonuses and sales of business support materials.

Distributors of Amway in particular often receive criticism for generating considerable revenue from selling instructional and motivational materials to its participants. The FTC filed suit against Amway in 1976 (FTC v. Amway) but lost the case, paving the way for many companies to adopt a multi-level distribution system.

A major shift in MLM occurred during the 1980s when companies began allowing their members to focus solely on marketing rather than handling the tasks of stocking/distributing products as well as taking care of commission payments to their sales organizations. Today, most MLM companies act as fulfillment companies by taking orders, shipping products, calculating and paying commissions, etc.

Often, victims of fraudulent or illegal MLM schemes are required to purchase expensive inventories of products. These schemes are often quick to collapse, when the merchandise cannot be resold, leaving all but those at the top of the pyramid with sometimes staggering financial losses.