MLM

MLM, or multi-level marketing, is a business model in which a company sells products through a network of distributors who earn income from their own sales and from the sales of people they recruit into the network. Distributors are typically considered independent contractors and may purchase inventory, market products, and recruit new distributors. Compensation plans commonly combine retail profit, recruitment bonuses, and downline commissions, sometimes including leadership pools or performance bonuses. Earnings depend on both direct sales and the sales of one's downline, creating multiple levels of earnings.

Proponents say MLMs provide entrepreneurial opportunities and low upfront costs. Critics note that many participants earn little or lose money, with income often concentrated among a small minority at the top of the network. Common concerns include inventory loading, pressure to purchase products, and the emphasis on recruitment over product sales. The model can resemble a pyramid scheme if compensation relies mainly on recruitment rather than actual product sales.

Legally, MLMs operate in many jurisdictions, but are regulated to prevent fraud and deceptive earnings claims. In the United States, the Federal Trade Commission scrutinizes MLMs for misleading income representations and anti-pyramid aspects. Other countries have varying rules on disclosure, contract terms, and sales practices. When evaluating an MLM, potential participants are advised to examine the product demand, the company's earnings disclosures, and the sustainability of compensation based on real sales rather than recruitment alone.