Oh that is a pyramid scheme.. no thanks

How many of us have heard that phrase? I would venture to guess all of us at one time or another. 

Most of us would have been taught to say in rebuttal something like Pyramid schemes are illegal. We are not a pyramid scheme. But is this rebuttal enough? My answer no. 

Multi-level marketing businesses are legal enterprises and are often classed or lumped together as pyramid schemes by prospects. Do not get frustrated. Understand their hesitation and their concern. After all, there are many scams out there. They are just being cautious and trying to protect themselves. Remember the old saying we have heard,  if it is too good to be true, it probably is?

It does help though to understand the difference between illegal business opportunities and legitimate ones so that the next time someone says it is a pyramid, you can say more than just they are illegal. Everyone knows they are illegal but how do you detect them? How do defend your business opportunity as being legitimate when this accusation is brought forward? Do not get defensive. 

In Canada, the industry is regulated by the Competition Act and the Act is enforced by the Competition Bureau. Section 55 of the act identifies four key points that define when an opportunity is a pyramid scheme. They are as follows:

1. It requires payment of money for the right to receive compensation for recruiting others. In other words, there is no product or service being offered, you get paid simply for recruiting others into the opportunity. Then they, in turn, make their money by recruiting others.

2.Requires purchases in order to participate. If a kit is being sold it must be sold at the seller's cost and for the purpose of making sales to customers. 

3. Requires inventory loading. This is where the participant must continue purchasing a product and they are often left with mass amounts of product in their homes that they have not been able to sell but they had to continue to make those purchases to remain a representative. The product being purchased are not for real consumers or customers. 

4. It lacks a buyback guarantee. or the guarantee is not disclosed to the participant. Can you return the product if you are not happy with it? Was a buyback option ever disclosed to you?

Hope this helps.