Falling For MLM Imposters

Sean M. Lyden:

The most insidious of the MLM look-alike scams are pyramid schemes. They mimic legitimate network operations in that they compensate distributors on a multilevel structure, providing an incentive to sell the business opportunity to prospects. The key dis-tinction, however, is that pyramids focus primarily on recruiting salespeople, not on selling products or services. In fact, in many cases, there’s no real product or service to sell.

“In a pyramid scheme, the focus isn’t on the movement of a product or service to the general public,” explains Jeffrey Babener, a partner in the Portland, Oregon, law firm Babener & Associates who represents many network marketing com-panies in the United States and abroad. “It’s a ‘deal on wheels,’ in which people are encouraged to spend a lot of money and find other people to do the same, who are then also encouraged to find others to do the same. The whole focus is on the movement of money—people making money from headhunting fees.”