An Explanation of Pyramid Selling

By Trevor Blake

There is always a question mark hanging over alternative ‘work from home’
businesses and it needs to be firmly put to bed once and for all. Here are
the FACTS about Pyramid Selling.

The first widely reported pyramid scheme on record was one created

in the USA by Charles Ponzi. He stated that he was able to offer high
returns to investors, supposedly from buying and selling international
postal reply coupons at differing rates, due to the effects that the
First World War was having on the economy.

Ponzi sold promissory notes quoting a 50% return within 90 days.

However, he never bought any coupons with the money. He merely
used the money from later entrants to the scheme to pay off the
earlier ones! The scheme ran for 9 months, before he was arrested
for fraud and jailed.

In those nine months (bearing in mind this was back in 1920) he
received more than 9 million dollars although he probably owed ten
times that much to later investors in the scheme.
Fifty years on the success of Multi Level Marketing Companies
did not go unnoticed by unscrupulous people. They realised that
the MLM concept could be manipulated. Money could be made
from people without bothering too much about the sale of quality
products to a satisfied clientele.

Thus, pyramid selling was born.

All of these pyramid selling schemes were based on one or more
 of these ingredients:

*Large entry fees (we re talking thousands of pounds here)
extracted from people on the understanding that they would profit
 by receiving similar payments from new entrants that they
introduced;

*Encouragement to purchase as large an inventory of products
 as possible at the highest discounts available, before obtaining
orders from customers or other distributors, and with no
refund policy;

*No written contract or agreement between the company and the

distributor;

*No training in, or any real concern about, selling products to the public.

Now that is about as far removed from companies like Wikaniko
 as you can get, isn’t it?

That's why pyramid schemes became attached to MLM. It is
just like the cowboys who move into the property and building
industries and give them bad names. Every industry has this type
 of people, but thankfully, due to the laws now governing
MLM, they are usually winkled out and prosecuted.

Fortunately, as more time passes, this silly pyramid label is
beginning to disappear from our

CHARLES PONZI

industry. However, there have been at least half a dozen pyramid
 schemes started in the last fewmonths, that I can recall, and I
would guess that there are quite a few more bubbling under the
surface.

One of these sprang up on the Isle of Wight, and another one
did the rounds that involved lots of females parting with lots of
money, called Women Empowering Women. As if they don’t
find enough to spend their money on already!

This is not withstanding the fact that the MLM companies
 in Britain are governed by Acts such as The Pyramid Selling
 Schemes Regs 1971, The Trading Schemes Act 1996, Trading
Schemes Regulations 1997 and in general terms, the Fair Trading
 Act 1973. The latest Act to protect consumers is the Consumer
Protection From Unfair Trading Regulations 2008.

Conclusion

Now that you understand all about Pyramid selling, hopefully you
 will understand that when this question is posed, not only does
 it undermine the person who is trying to build an ethical, long
term future by providing good services for the benefit of others,
and it undermines a hard working, ethical company too.

Thank you

Trevor Blake

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