M-L-M…?!?

I wonder would there be a living person who have never heard of MLM in his lifetime...! At least in a civilized society, I mean...! There are no. of fullforms for MLM, the funniest and popular being -

Making Life Miserable...

Murga Lao Murga and Multi-Legged Madness...

Today let's see how a multi-level marketing (MLM) company operates. An MLM, or pyramid selling scheme, typically requires you to pay upfront charges for either joining the scheme or buying a product or service (like collector's items or software, training programs, e-zine etc). As more and more people join the MLM scheme, a member hopes to recover the upfront charges and then earn sizable profit through binary income. However, history tells us that all such MLM companies have failed miserably and vanished with investors' money after running out of new recruits or investors (a new 'bakra'?). Most of the time, the person who recruited many others himself becomes a victim of the scheme.

First, the agents, distributors, panellist and customers of the MLM companies try to convince the new recruit with bogus claims about earning huge money. If the recruit does not seem interested, they introduce terms like lifetime income and royalty payment through binary activity. All MLM agents pretend to help you earn big money. Unfortunately, it is he who ends up with the money, leaving more than a few penniless. When the binary income plan fails, recruits have had to go into hiding from the newer entrants.

This has happened so many times before, that MLM operators have found it necessary to advertise in order to allay the fears of new recruits, often engaging sellable brand ambassadors in the popular media. This is the "Fake it, till you make it" system, that's common among MLM operators.

Another important aspect is that once someone gets involved with an MLM company, he begins to strongly advocate it, irrespective of whether he likes it or not, and even if his inner self says it is wrong. The reason is he doesn't want to come out as being fooled by someone, and will pretend to have made a 'smart' choice by buying into the MLM scheme. So most agents will tell you that they are always right and they know everything and all others (who are not joining his MLM) are morons.

In addition, MLM systems are a massive net loss for a country, as they distract people from doing real productive work. All products or services sold through an MLM network are either worthless, or not beneficial to common people. The products offered under the pretext of herbal medicine, cure from diseases, medicine or collector's items such as gold coins, are often useless. In fact, the medicines sold under the garb of herbal products may even harm you and endanger your life. It is the same with other products as well. Â large number of companies, with varying degrees of legitimacy, many of them with a global footprint, are raising money or selling obscenely expensive products, by creating a high-reward matrix that is built on luring new distributors/depositors/buyers into the scheme. More importantly, each of them grows by roping in people who enjoy high public trust, such as doctors, bankers, reputed sportspersons, government officers, senior corporate executives, or their spouses, and sometimes even god-men.

Remember the Gold Quest scam? It was a chain-marketing scheme that used to sell limited edition gold coins, figurines or watches for Rs30,000 to Rs35,000. According to news reports, in May 2008, after receiving 8,277 complaints of cheating from many people, especially from South India, the Chennai police arrested Gold Quest's managing director and six other employees. The company ceased to exist, leaving 2.66 lakh of its independent representatives without any commission. Finally, last year the Supreme Court appointed Justice KP Sivasubramanian as settlement commissioner of a one-man commission, for the Gold Quest case.

Unfortunately, there is no legal provision in India to curb MLM schemes. However, Singapore, the headquarters of Speak Asia Online Pte Ltd, which hit the headlines recently, does have strict laws on MLMs. Under the Singapore Multi-level Marketing and Pyramid Selling (Prohibition) Act, all persons who participate in multi-level marketing or pyramid selling are treated as offenders who had committed an offence. This is because the participants would have played an active but destructive role to attract others into the scheme. The Act believes that this is the best way to deter potential promoters of such schemes.

According to the Ministry of Trade and Industry, Singapore, a conviction under the Act will result in a fine of up to $200,000 or imprisonment for a term not exceeding 5 years, or both. The fines are for:

1. Promoting or participating in a multi-level marketing, or pyramid selling, scheme or any such arrangement.

2. Registering a business which is designed to promote multi-level marketing, or pyramid selling scheme or any such arrangement.

3. Registering a company which proposes to promote multi-level marketing, or pyramid selling, scheme or any such arrangement.

4. In addition, the Singapore Act empowers a Court that convicts a promoter or participant of a multi-level marketing or pyramid selling scheme an additional penalty of an amount not exceeding the amount or value of any benefit which the promoter or participant has received. This additional penalty ensures that the Act serves as an effective deterrent to potential offenders.

However, since the Indian government has not taken any stand on the legitimacy of such network marketing or MLM companies, such schemes get replaced with other schemes and the entire cycle is repeated because the allure of instant riches through such phony schemes is everlasting.

So far we have seen the spuriousness and risks involved in the Get Rich Quick or MLM schemes. Tomorrow we will see some aspects of a magic thing called Credit Card…!

Stay tuned and Aware…!