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Pyramid Schemes Masquerade as Direct Sellers

Learn how to pick a Pyramid Scam or Ponzi Scheme from a real Direct Marketing or MLM business.

Source: Moneyweb

Source: GST

Consumer commission (South Africa) investigates nine suspected pyramid schemes.

CurrenciesThere is a thin line, nowadays, between network marketing companies, or multi-level marketing companies, and pyramid schemes. Particularly where the former has a business model that involves attracting sales agents by rewarding them for selling products to their network of friends and family, and setting up teams of other people – who also want to start their own business selling the product – and getting a percentage of their sales revenue.

People end up receiving solicitations from their friends or family to take advantage of a ‘unique opportunity’, with promises of financial independence and the allure of a lifestyle that comes with ‘being your own boss’.

“I really believe that, as an industry, it makes a difference in the lives of people that have few opportunities,” says Ernest du Toit, chairperson of the Direct Selling Association of South Africa (DSASA).

“For people who have no education and little capital to start a business of their own, it allows them to start earning a passive income, which can grow as they put more time and effort into it. [Compared to starting a business], it takes the risk out of the equation and they can work flexible hours.”

According to Section 43 (4) (a) of the Consumer Protection Act, a pyramid scheme is an arrangement, agreement, practice or scheme where, participants in the scheme receive compensation derived primarily from their respective recruitment of other persons as participants, rather than from the sale of any goods or services.

Read More: Moneyweb