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In conclusion, the attribute needs to be placed on infinite chain sales schemes that are inherently deceptive procedures, which improve a few in the very top at the expense of a multitude of downline participants, that find yourself being victimized by this strategy. The ideal thing regulators can do will be to limit harm by emphasizing MLM compensation plans. It is expected they'll utilize the theories in this paper to reach more affordable enforcement of existing laws for protecting consumers in a more proactive manner -- and also wait around for complaints to come trickling in. At the very least, they could warn consumers against these types of programs -- rather against ALL MLM's, as the user can't be expected to recognize the exceptionally rare program that might be legitimate.

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Conclusions In case an MLM application is found to own all five (or even four) of those above mentioned faculties, it's just a recruiting MLM, or even product-based pyramid scheme in theory, structure, and effects -- no matter of caliber of services and products offered, type of compensation plan (binary, breakaway, matrix, unilevel, etc.), company policies regarding recruitment, establishment of "rules," or other efforts from company officials to make its application appear to be legitimate. The primary emphasis will probably be to deriving income from recruitment, because the bonus to retail services and products will likely be relatively slight.

The leverage within a MLM compensation plan, resulting from the foregoing elements, is a two-edged 28 29 sword. As a rule of thumb, the better it's to your very best "providers," the worse it is for those under them. That is very true when the payment program is focused not on sale to non-participating customers, but instead primarily on recruiting participants who buy large amounts of products to "do the business" -- that may be true with the majority of the MLM compensation plans I have studied. Each of their posturing about being direct selling programs is belied with their own benefit system.

While not one of the five traits by itself constitutes a pyramid scheme, a combination of those five together suggests a detrimental (and probably illegal) pyramid scheme, if properly understood. Conversely, in case a company displayed only three of these faculties, it's probably benign. Four is questionable.

The effects of highly leveraged compensation plans could be quantified by requiring MLM organizations to produce data on company payout to most participants (not simply "busy" ones) by percentiles after subtracting average purchases for revenues. Where MLM organizations utilizing such reimbursement plans have released honest statistics on income distribution, the results have been shocking. Afterall statistical manipulations of data that was published have been removed (that must be accomplished by qualified and impartial analysts because MLM accounts are typically full of deceptions), the results have shown that pay-out by the firm has surfaced inordinately to top "providers" Obviously, there are philosophical exceptions -- which are organized as examples for prospective recruits.

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Losing rate for recruitment MLM's (roughly 99.9 percent) far exceeds that for no-product pyramid schemes (87.5-93.3 percent). By contrast, recruiting MLM's create no-product pyramid approaches appear extremely profitable.8 Hence the assumption that MLM's are not as awful as vintage no-product pyramid schemes is completely false -- the inverse is correct.