Pyramids of Fortune?
January 28, 2013
by Aditi Jhaveri
Consumer Education Specialist, FTC
Thinking of joining a multilevel marketing program to make some extra money? Before diving in, make sure you're not dealing with a pyramid scheme. They're illegal, and for good reason.
Today, the FTC announced a complaint against Fortune Hi-Tech Marketing, Inc. (FHTM) for scamming consumers out of $169 million. The FTC alleged that the company operated an illegal pyramid scheme disguised as a multilevel marketing program, and claimed that anyone who joined could earn a substantial income. The FTC investigators found that more than 90% of all the members earned less than $15 in a year. Most folks actually paid more to join FHTM than they earned.
What about all the rags-to-riches stories the company promotes? This is only true for a few at the top tier. In fact, the FTC charged, the company structured its business in a way that guarantees most people who join would lose money. The compensation plan is confusing, and commissions on product sales are very small. There's no training on how to sell the products - things you might be familiar with and can buy elsewhere - like subscriptions to DISH Network, cell phone services, or dietary supplements. According to the FTC, the only way to make any money working for FHTM is to recruit other employees.
So what's the bottom line for you? If you're planning to buy into a multilevel marketing plan, get the details:
- If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is mainly based on the number of people you recruit and your sales to them, it's a pyramid scheme.
- Even if a company sells products or services you're familiar with - or boasts celebrity members - they may not be legitimate.
- Don't be fooled by rags-to-riches stories or portrayals of lavish lifestyles made possible by joining the program. These stories may not represent the experiences of most members.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.