What separates an MLM from a pyramid scheme?
Sophia Koch
Updated on January 11, 2026
Definition of MLM and Pyramid schemes The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme, and commissions are based only on the number of new individuals one introduces into the scheme.
Why Multi-Level Marketing is illegal?
In India, network marketing as well as multi-level marketing schemes are legal however, there are certain exceptions to it which categorises certain businesses as illegal multi-level marketing since they maliciously aim at trapping innocent customers who are keen to invest in MLM schemes while in reality there is no …
Why is MLM not banned?
Simply, MLM is not completely banned because many companies exist that provide good products or services that others are willing to purchase. Ignore the fact that often comparable versions of those types of products/services may be found elsewhere for lower prices.
What is the number one MLM company?
Top 100 MLM Companies Ranked By Revenue (2021)
| Rank | Company | Founded |
|---|---|---|
| 1 | Amway (Review) | 1959 |
| 2 | Herbalife (Review) | 1983 |
| 3 | Avon Products, Inc. (Review) | 1986 |
| 4 | Vorwerk | 1883 |
In which country MLM is banned?
government of India
Due to this, the government of India has identified a few types of network marketing fraud strategies as illegal in India in order to protect consumers. These network marketing schemes are not legal in India under the Direct Selling Guidelines 2016 and Prize Chits & Money Circulation Schemes (Banning) Act 1978 (pdf).
What makes a multi-level marketing business illegal?
Businesses that involve selling products to family and friends and recruiting other people to do the same are called multi-level marketing (MLM), network marketing, or direct marketing businesses. Some MLMs are illegal pyramid schemes. Before joining an MLM program, here are some things to know.
How is a pyramid scheme similar to multilevel marketing?
A pyramid scheme looks very similar to multilevel marketing. It also expands the business by recruiting several layers of members, which form a pyramid system. However, pyramid schemes are illegal scams, while multilevel marketing is legitimate.
Can a pyramid scheme be a legitimate business?
Unfortunately, not every multilevel marketing opportunity is a legitimate business opportunity. Many pyramid schemes, frauds designed to part the unwary from their money, are disguised. Like multilevel marketing, pyramid schemes depend on recruiting people to become distributors of a product or service.
What do you call a multi-level marketing scheme ( MLM )?
People within MLMs may call it direct selling or network marketing. Typically an MLM will be a large organisation made up of hundreds of individuals selling merchandise and services such as beauty products, candles, cleaning products and books from home. An MLM can easily be identified by three things:
