A Pyramid By Any Other Name Will Still Come Tumbling DownBy: Elena Fawkner
OK people ... I know how tempting this looks but REALITY check time. This is but one example of a number of "wealth generation programs" currently being touted online. The idea is that you must find three people who want to join this program, you pay $20 to "benefactor" each of them into the program (for a total "investment" of $60) and you're set for life. Oh, and you have to do it in three days. Each of your three, if they are to remain in the game and thereby derive the same wondrous riches from the program as you, must also find three people, benefactor them into the program (again within three days) and their three must find their three in three days and so on.
And, because non-performers are booted from the program, so the theory goes, the only people getting paid are the ones actively benefactoring in their own recruits, each of whom down the line contributes their "investment" of $60.
The product each person gets for their $60 (because this is not, of course, a pyramid scheme - banish the thought!) is:
"Software entitled "Building an MLM Empire using the Internet", in which you Own Full Licensed Retail Rights to Market the software. Retail Value $29.95 All Sales Are Final-No Refunds!"OK, three points on the "product".
First, your investment is $60. The product is worth (let's give them the benefit of the doubt) $29.95. Hello!? But you get
resell rights!, I hear you protest. That makes it more valuable than just the purchase price of the product itself. Oh yeah? Well, you HAVE to be able to sell the product otherwise the whole scheme ... er ... program would be nothing more than a wealth distribution arrangement wouldn't it? And that's against the law, and we couldn't have that.
Second, this is not "software", it's an e-Book.
Third, the title of the e-Book deviously and insidiously implies a relationship between this "wealth creation program" and MLM (multi-level marketing). MLM is a different thing altogether. For a more detailed explanation of what MLM is and what it is not, read "Not MLM! ... Why ever not?" at www.ahbbo.com/notmlm.html.
'Wealth Creation' Programs
OK, so what about these "wealth creation programs" then? Sounds like a great idea, right? Everybody wins! Well, think about this ... if everyone goes out and gets three people who each have to throw $60 into the pot for their three, everybody up and down the line has effectively contributed $60 and that's all there is in the pot. How do you get more than your $60 back?
Ahah! you cleverly point out, those who don't recruit ... er ... "benefactor in" ... er ... sell (yeah, that's it, sell) the "product" to their three gets dropped, don't they, so now the $20 their benefactor contributed for them to join the program is still in the pot but they're not. They've forfeited their investment. That's how we make money.
OK! Very good. I can see you're paying attention. Just one, teensy little problem with this brilliant plan.
It's B.S.. It's a pyramid scheme and it's ILLEGAL.
Pyramid Schemes VS. Legitimate MLM
In her prepared statement to the International Monetary Fund's seminar on "Current Legal Issues Affecting Central Banks" in May 1998, Debra Valentine, General Counsel for the U.S. Federal Trade Commission, had this to say about pyramid schemes:
"What is striking about these schemes is that while they are very old forms of fraud, modern technology has vastly multiplied their potential for harming our citizens. The Internet in particular offers pyramid builders a multi-lane highway to world-wide recruits in virtually no time.Now consider how our "wealth distribution program" above works. Which is it, do you think? Pyramid scheme or MLM? Bzzzz ... time's up. All who think it's a classic pyramid go to the top of the class.
Federal Trade Commission Guidelines
Not surprisingly, the U.S. Federal Trade Commission ("FTC") pays close attention to so-called MLM's that are, in reality, nothing more than pyramid schemes. It regularly prosecutes the promoters of such schemes, obtaining injunctions and orders freezing the assets of the promoters to be applied in redress of victims. If you knowingly participate in a pyramid scheme, you too can be named as a defendant in such an action.
Bear in mind that as a distributor (whether you're participating in a legitimate MLM program or an illegal pyramid scheme), you're legally responsible for the claims you make about the company, its products and business opportunities. It is no defense that you're merely rehashing the same old representations made to you by the company. The FTC can require you to verify the research behind any claims you make. For more on the subject of representations and your obligation to be able to back them up, read "Not Just Six Lines ... 65 Characters" at www.ahbbo.com/adsftc.html.
In addition, if you solicit new distributors, heed the FTC's warning in its Consumer Alert, "The Bottom Line About Multilevel Marketing Plans": "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."
Finally, here's the FTC's tips for evaluating a multilevel marketing opportunity:
Hmm ... $1.1m in 39 days for an investment of $60 ... somehow, I JUST don't think so ...
© 2001 Elena Fawkner
The author assumes full responsibility for the contents of this article and retains all of its property rights. MarcommWise publishes it here with the permission of the author. MarcomWise assumes no responsibility for the article's contents.