Network Marketing (MLM): Beware of Promises of Easy Enrichment!

MLM Network Distributor activity requires no specific professional qualification or infrastructure, and little or no prior administrative procedures. In general, it is sufficient to be sponsored by a member of the network to be incorporated.

However, we must distinguish:

  • Multilevel selling is a legal direct selling model in France. Salespeople/distributors/representatives are paid on their personal sales and they also get commission on those made by directly hired salespeople. Their rewards come from selling the products or services of the brand they belong to.
  • Pyramid schemes, pyramid schemes, or Ponzi schemes, in which the remuneration of recruiters results primarily from belonging to a network of new members, rather than from the sale of products or services. Business practices carried out by this type of network are prohibited in France.

How to detect a fraudulent MLM scheme?

In these prohibited sales regulations, members of the network have a primary activity of recruiting new members, in their immediate entourage, or subscribers to social networks. Membership includes payment of an entry fee and/or a periodic subscription.

Recruitment of new associates generates the main financial gain for the member, but also for his sponsors and all members who are placed above the recruiter in the network’s lineage. Earnings from selling products or services to affiliates are less and are only used as a “legal showcase”.

Thus, the main concern of distributors is not the sale of services, but the possibility of significant financial gain resulting only from the increase in the number of affiliates.

These networks are based primarily on prohibited business practices (Article L. 121-15 of the Consumer Code), which may also constitute fraud.

Many operators, whose parent companies are often located abroad (especially the USA), carry out activity in France that lies on the borderline between legal multi-level sales and illegal sales networks.

In these sales systems, recruits are enticed to join by promise:

  • Exceptional offers (promotional rates) on travel, beauty products, nutritional supplements, etc.
  • Services that allow gains or returns well above market rates on financial products and investments (training on online trading, stocks, cryptocurrencies, shares in a financial company, in an investment fund, etc.).
  • Big rewards depending on the level reached in the hierarchy (hours, luxury cars, flights, gems, etc.). Recruitment is carried out according to the following mechanisms:
  • a form of indoctrination and a certain psychological pressure (regular reminders from the “godfather” to encourage his godmothers to enlist in turn);
  • The use of catchy formulas such as: “getting rich by working from home”, “financial opportunity”, “investment for earning”, “financial independence”, associated with the discourse of belonging to a closed circle of insiders. ..
  • use of dedicated channels or videos of presentations on the Internet, with access often restricted via a code provided by the Sponsor;
  • meetings by invitation, often paid, in which the prospect of easy enrichment is raised;
  • “Status” and bonus levels with such prestigious names as “Commander”, “Golden”, “Platinum”, “Legend”;
  • Highlight on social networks the lifestyle of the better members of the hierarchy.

These networks with a hierarchical structure are doomed to collapse when there are not enough members to distribute the gains from recruitment in favor of former members. Oftentimes, the only winners end up, leaving the network and creating a new one to “reset” the system.

I am a victim… What should I do?

Gather as much information as possible about the practice and how it works (screenshots from the site, audio/video recording of sessions, exchange of emails, phone numbers, beneficiary of the bank account of funds, etc.).

File a complaint, once the facts have been established, with the police or gendarmerie service, by mail with the public prosecutor or calling the DGCCRF (/dgccrf/contact-dgccrf)

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