Pyramid Schemes: Impact on Direct Selling Industry and Society

The direct selling industry is vibrant as a parent industry for many marketing models. Multilevel marketing, party plan, and affiliate marketing are the offsprings of the direct selling industry. When these impart a positive outlook towards the industry pyramid schemes and Ponzi schemes creates a shady impact damaging the image of the industry in the global market. Direct selling is a well-established industry since the 1800s. When the industry boomed fraudsters molded it as a platform to unleash their treachery and tap the society emotionally and drain out the economy.

Ponzi schemes were the first identified scam using the direct selling industry and then the pyramid schemes followed. Pyramid schemes reiterate in the industry casting a grey shade and this has been happening over the decades. The disturbing factor to these trickeries is that it all uses the MLM model of direct selling to trap people. Result? MLM industry has been stamped as flawed by the industry critics and the general public. How can this be eliminated?

Authorities like FTC, DSA and SEC have run numerous training programs, seminars both online and offline and other initiatives to educate those in the industry and the general public on ways and means to identify pyramid schemes. FTC has run a series of operations together with other state regulatory bodies and SEC to protect its consumers from falling prey. Fair enough. What effect did it have on them? Did the pyramid schemes stop?

No. Right? Why does this recur? Who is responsible for these repeating incidents? Scammers are intelligent manipulators and they mold the minds of consumers and utilize their greed and ignorance to their advantage. Frauds come in various forms, sizes, and shapes. They approach you with false claims of high returns on investments. They also try to lure you with a luxurious lifestyle and entrepreneurial opportunities. Natural calamities are their favorite time. When individuals are vulnerable they play with the fear and feelings to their financial advantage. Pyramid schemes are mostly investment scams, travel programs or gift programs that involves only money not products.

The only way out of this is to wipe out the ignorance is to launch more and more programs to educate the masses and clearing the general negative outlook. Consumers need to be vigilant of approaching false promises and fake claims. Direct selling organizations together with the regulatory bodies should consider this as a social responsibility and implement measures to curb these social evils.