Pointers to avoid falling prey to MLM Scams and making the right choice
Multi-Level Marketing (MLM) is one of the fastest growing business models of our contemporary era which aims at reducing the gap between consumer prices and manufacturer prices, aided by the use of technology. Known by various labels such as pyramid selling, network marketing and referral marketing, many MLM companies offer a lucrative income source which promises high returns by creating an additional self-employment opportunity without putting in active labour. The salespeople at various levels earn not only from their own direct sales but also gain commission fromsales made by promoters recruited by them through word-of-mouth marketing of the company’s goods and services.
Despite the growing popularity of MLM companies in the market, there are reasons to be on one’s guard while choosing an MLM company to be associated with as many of these turn out to be predatory scams and malicious frauds masquerading as lawful businesses. Keeping these concerns in mind, certain guidelines have been laid out by financial watchdogs like Ministry of Corporate Affairs, FICCI(Federation of Indian Chambers of Commerce and Industry) and legal provisions such as The Prize Chits and Money Circulation Schemes [Banning Act] 1978, in order to help investors in making the right choice.
Investors should identify companies which comply with government guidelines for MLM companies in India. To ascertain whether the network marketing company in question is a legal one registered in India, one can visit Ministry of Corporate Affairs at http://www.mca.gov.in/mcafoportal/showCheckCompanyName.doand enter the company’s name to check its legal status. Browsing through the list of Associate Members on the FICCI website http://ficci.in/Associate-Members.asp can also help in judging the the credibility of the concerned company.
Appropriate investor education and financial awareness help choose legal MLM companies which are different from the fraudulent pyramid or Ponzi schemes. The 2013 FICCI Report on Direct Selling Industry in India distinguishes pyramid or Ponzi schemes (which involve promises of unusually high returns) from a DS(Direct Sales) model even if it is in the MLM model. It is important to know about the MLM Company’s products and marketing plan as well as get an insight into customer review about the products offered by the company.
The union territory of Chandigarh has witnessed vast infrastructural development, investorsand a proactive governmental framework conducive to the mushrooming of many MLM and digital marketing companies in this region.In order to choose the right MLM Company for investing one’s time and hard earned capital in, it is important to carefully examine the socio-legal particulars of the company in question. Comparing the choices in terms of their steadiness in the market(companies which have been in the market for more than 5 years), value offered by their proposed good/service, system of employee support and realistic compensation plan vis-à-vis the investment required, can help people explore the growing earning opportunities offered by this rapidly growing industry by choosing the right MLM company.