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Although each MLM company dictates company business plan own specific financial compensation plan for the payout of any earnings to their respective participants, the common feature that is found across all MLMs is that the compensation plans theoretically pay out to participants only from two potential revenue streams.
MLM salespeople are, therefore, expected to sell products directly to company business plan-user retail consumers by means of relationship referrals and word of mouth marketing, but most importantly they are incentivized to recruit others to join the company’s distribution chain as fellow salespeople so that these can become down line distributors. MLM pyramid can derive their significant earnings. Many MLM companies do generate billions of dollars in annual revenue and hundreds of millions of dollars in annual profit. Only some of said profit is then significantly shared with individual participants at the top of the MLM distributorship pyramid. The main sales pitch of MLM companies to their participants and prospective participants is not the MLM company’s products or services.
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Rather, the true sales pitch and emphasis is on a confidence given to participants of potential financial independence through participation in the MLM, luring with phrases like «the lifestyle you deserve» or «independent distributor. MLMs have been made illegal in some jurisdictions as a mere variation of the traditional pyramid scheme, including in China. MLM companies already constitute illegal pyramid schemes even by the narrower existing legislation, exploiting members of the organization. The legal distinction between MLMs and traditional pyramid schemes has been characterized by many authorities as a legal fiction.
This section does not cite any sources. MLM salespeople are not employees of the MLM company. MLM company for their invested labor and expenses in their MLM «independent business». As non-employees, participants are not protected by legal rights of employment law provisions.
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