Is MLM Legal? Is MLM Ethical? Is MLM just a Scam?

The definition of “legal” is “Authorized by or based on law.”

Yes, MLM is LEGAL! (and no MLM is not a scam)

Says who?

Says the U.S. Federal Government.

In 1975  the Federal Trade Commission accused and sued Amway Corporation for operating as an illegal pyramid. After four years of litigation the court ruled that Amway’s multi-level-marketing program was a legitimate business and not a pyramid scheme.

Is MLM a Scam?Perhaps there was a time prior to 1979 that someone could say, “MLM is a scam! It is an illegal pyramid scheme!” And they might have been correct because MLM hadn’t been tested and adjudicated in court. But since 1979, only the uneducated can claim that the MLM industry is illegal.

This does not mean that ALL companies that claim to be an “MLM company” are legal. But, the INDUSTRY OF MLM IS LEGAL.

Now that the “legal” issue is stated and known, there’s also a logical, ethical and professional issue that needs to be addressed.

What constitutes a “good” or “ethical” business?

To answer this, let me first answer the question, “What is business?” If you were to ask this question of an academic (a professor or teacher) he or she would probably answer that business comes down to “supply and demand.” But I personally disagree with this thinking. To me, business is “making someone’s life better.” My theory comes from the logic of why I personally reach into my wallet and pay for something. It’s not based on there being a supply of something (because there are a lot of things I don’t buy), but rather that I think  what I’m going to buy is going to make my life better in some way.

I don’t know what “guide” or “rule” policy makers and those who write laws follow when they rule in favor of or against a particular business. In other words, do judges and policy makers use some fundamental guiding principle such as “supply & demand” or “to make someone’s life better” to determine a legitimate or illegitimate business, or is it an arbitrary opinion? Is it based on how many lobbyists talk to Congressmen or Senators?

I bring this question to your attention so that you can think logically about any business or employment you seek. I don’t know what you personally use as a guide of what businesses are good, professional or ethical. Ask yourself what makes a good business? Have you decided that a “professional business” is one where the people wear nice suits and have a nice building? Is a “good” business only one that is legal? Is a good business only one that is profitable? No! That is not logical at all.

Only a business that does make people’s life better should be considered a “good, ethical, and/or professional” business. In comparison, a business that hurts people should be considered a “bad” and “unprofessional” business.

With that, I ask, “How can a business that manufactures a device designed to destroy thousands of people at once (such as a nuclear bomb) be an “ethical” business? How can selling a substance that kills 500,000 people EVERY year (such as tobacco) be a “good” business? How can we view a scientist who approves a drug to be sold, but is responsible for 150,000 to 200,000 deaths a “professional?” How can a “law” that strips an average of $359 dollars annually from every American family (such as state lotteries), disguised as a quick way to “make millions” but with the chances of winning at 0.0000002605, be “ethical?”

Feed Hungry ChildrenI was recently studying an MLM company whose “business plan” is to feed hungry children. At current date the MLM company and their 6600 distributors have donated 95,771,944 meals to hungry children. WOW! Only an insane person (or one with an axe to grind) would claim an entire mlm industry is a scam and unethical .

Now, don’t think this web site is only going to say good things about people in MLM, as if no one has ever done anything wrong in this industry – quite the contrary. The goal of this section is to set the guideline for how we might view an ethical business and the ethical activities of ANY business.

A good business makes people’s lives better; a bad business hurts people. That would be the two ends of the spectrum.

As an industry, MLM simply moves a product to a consumer.  But in choosing which MLM company you want to join (or company you want to be employed by), I hope you evaluate it based on whether it helps mankind or harms it.

Recommended next page: What is First-Class MLM?

Tim Sales

About the Author

Tim Sales

Tim’s experience in building his own downline of 56,000 network marketers helped him develop his signature training series. A public relations ambassador for the network marketing industry, Tim has also dedicated his time to debunking the false information spread about the network marketing industry.

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Doug Lee

Another good article. I agree, the most ethical business is one that can make someone’s life better.
-Doug Lee

Bruce Ballinger

Great article.Right on the mark to explain industry.
-Bruce Ballinger

Miriam

I think this is a very informative and fair website. What a brilliant idea! It’s a place where people can go to form an intelligent opinion of MLM and how they can make it work. I will place the link on my website and recommend it to all my fellow MLMers!

Thank you!

Jacob Camacho

Thank you for a precise and short answer: MLM is indeed legal. Forever in debt to Amway for taking the lead.

Patti Roney

I love the article because most of us want to begin at the ethical, legal, integral points in choosing a new business strategy. These questions are critical and you’ve done a wonderful job, Tim!

rajeev sreenivasan

VERY VERY INFORMATIVE ARTICLE, I AGREED AN ETHICAL BUSINESS MEANS THE BUSINESS ONE THAT MAKES PEOPLE’S LIFE BETTER NOT HURT THEM.
THANKS FOR YOU VERY VALUABLE INFO.
RAJEEV

Randy

First class explanation. MLM is a Win-Win situation for everyone.

Kim Bolte

Tim, Your goal to aggressively alter the perception of the M.L.M industry on the Internet in 2008 is doable with factual and thought provoking articles like this.
Thanks,
Kim

Susan Joseph

Seems like it will be very helpful for prospects to see.

Tambria Alexander

I agree. I believe the determining factor in choosing a company to do business with as an associate and/or consumer is dependent upon the company’s level of integrity.

Steve Stearns

Very simple: Legal – Yes, Good – Does it help people, bad – does it hurt people. Anything else is unnecessary baggage.

Terri Hamel

I appreciated the factual information.

Sheila Schiffman

I have been in MLM form more years than I wish to count. I was in Amway and the training was awesome, products also great. Thank you Amway for going to court for all of us. MLM is the greatest opportunity on earth where an average person can reach heights they never dreamed possible. Where else can this happen. Be PROUD you are in MLM..it has created more millionaires than any other industry on the planet. Is that so bad? I feel it is based on the integrity of the person/CEO running the company, his eithics, and responsibility to the people who join the enterprise. One who is honest and keeps everything above board, not hide or hiype the truth. Due your due diligence and find the company you feel is BEST for you. The ones who knock MLM are the ones jealous of the ones like us who make it work and work well. It is the BEST enterprise to be involved in and don’t let ANYONE put it down..if they do they just don’t understand the industry. Amen

Sheila Schiffman

P. S. People helping people, what a world if everyone helped each other to financial freedom and time freedom to be able to spend more time with friends and family. MLM is nothing more than the sales manager earning a commission on the sales representatives. He trained them why shouldn’t he receive a commission for that training? Thanks Tim for bringing this out in the front for everyone on the outside looking in to take a look at anD realize what an outstanding opportunity where everyone benefits. Wouldn’t you rather have 1 % of one hundred people than 100% of yourself. When your ability to perform for one reason or another stops, you still receive your residual income THAT YOU EARNED AND EARNED WITH HONESTY AND INTEGRITY.

Patty Jones, KY

Applause, I agree.

Joe Kresser

Wow! You have given me so much to work with when I am trying to recruit for my business. Good stuff!! Joe K

Albert Watkins

Greatly stated.

Sandy Martin

Tim, I appreciate your emphasis on ethical behavior – something that is often overlooked in other businesses.

Carol Smith

To see a legal MLM company, always look for a publically traded MLM company. They are transparent, they have investors, and lots of public oversight!

Lisa Schuyler

Tim, this is great. I’ve seen a lot of traditional businesses that couldn’t care less about making someone’s life better. And yet I know this to be a high priority in my network marketing business. Thanks for the great explanation.

Sue AB

Although the MLM structure is legal, I do recommend that you check with the government and be sure the business you are considering is fully legal in your country – you wouldn’t want to build something and have it end because of lack of due diligence.

Donnie D.

I could not agree more! Thanks Tim

Retha from South Africa

Excellent! Thanks Tim

Rosemary Leach

Thanks Tim, what a great explanation. I know that the network marketing I am with have a high priority in improving peoples lives in all areas. They give back to the community as well.

Valencia Burton

This really does define the ethics regarding MLMs. Thank you Tim!

Gavin Chapman

“Making someone’s life better.” Great line! For any business wanting to be truly great, enduring and prosperous. And this line must be at the very heart of professional MLM. So if we are a stick of candy ‘rock’ we could be cut and those words would run right through us.

marilyn holm

Your definition of good business, making someone’s life better, is perfect. It’s exactly that ideal that has become my polestar. Thank you again, for articulating the concept so simply and brilliantly.

Teresa Parker

It is very exciting to see our industry presented in such a professional way. This website will provide so much valuable information for professional people to see the light! Kudos!!!

Issah Sharaihu

Tim,
This is a master website where peoples minds can be disabuse. I will tell anyone who wants to know more about M L M, to visit. Thank you Tim.

Suzy Hayden

Many mlm companies have a great “fake front”. In evaluating which company you want to align with besure sure you step somewhat out of the picture of “I can make alot of money with this so it is good for me.. and will be good for others”. Think about the other person you will be talking to, is it good for them? Will the product benefit them even if the business does not. And also, does the company have the materials etc needed for this person I am talking to to do what I am doing. This is a something I have learned from listening to the material from this trainer, Tim Sales.

J. Ayre

Clear and useful, thanks

Rolf Hefti

Tim’s view on how to evaluate ANY business is truly humane, compassionate, and ethical. Bravo!

JIMMY PHILIPPINES

IF THERE IS OSCARS AWARD FOR MLM GURU/TEACHER I WILL NOMINATE YOU WITH TWO THUMBS UP I AM VERY GREATFUL FOR EVERYTHING YOU HAVE CONTRIBUTED TO OUR INDUSTRY.

June

Well said!!! This is a great article.

Dennis B

A simple, easy to understand explanation.

Don Hor

You should be our MLM laywer!! Yes!

Jo Petrovic

I’m three months into a brand-new Aussie MLM and loving it! I have dear family members however who seem to think I’m compromising my integrity by networking. I just don’t mention it anymore to them; but am sad as they could be getting the benefits health-wise. I wish I had the magic word that would make people see it my way! Cheers, Jo

FAZON

Fantastic! Good info. and straight to the point. Thanks

sheila

Dear Folks,
The only way to really succeed and to have more time with friends and family is through direct selling/ MLM/referral markeing/network marketing and word of mouth advertising. The movie at the box offic when it first comes out depends on word of mouth advertising but did the movie theater send you a check for your advertising.. Of course not. In network marketing we get paid and cut out the need for very expensive advertising so you make the money. People helping people what could be better instead of the dog eat dog in Corporate America. Jo Petrovic,those that don’t see it your way deserve to stay broke and work 40 hours 40 years and if they can afford to retire at 65 only 3 are financially independent the rest are either dead, broke and dependant on socila services. NEXT move on to someone else.

Tara Fogarty - MI

People should read this article whether they get involved with an MLM company or not. Fantastic.

SAWAN KHANNA

welldone! a very good article people should read this atleast, it will make someone to reconsider about this industry, also this is the only industry where you can get positivity, praise from ur colleagues, you can make your dreams come true in ashort span of time.

Jana Cotton

Great job once again Tim!

Dave Thompson, Nashville, TN

Another great explanation! Thanks again Tim!

Ron Deering

Tim your information is great and I got your brilliant compensation cd and it works great thanks for all your work.

stuffing envelopes

I’ve really enjoyed reading your articles. You obviously know what you are talking about! Your site is so easy to navigate too, I’ve bookmarked it in my favourites.

Brenton Scarpitto

Thanks for the good weblog. It was quite valuable for me. Keep sharing such concepts in the future as well. This was in fact what I was searching for, and I am glad to came here! Thanks for sharing the this kind of information with us

Uday k Maiti

Learnt a lot about the system.Wish updated facts,credentials,revisions&relevant others to put it up as a prestigious profession.

Jan David

Great article. Awesome to learn that MLM is legal in the U.S. Does anyone know if it is legal in Norway, Europe?

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