Researcher and consumer advocate Dr. Jon Taylor has spent years evaluating hundreds of mutli-level marketing companies. Based on his research, he has developed the following definition of multi-level marketing:
Multi-level marketing (MLM) is a purported income opportunity, in which prospects are typically recruited with exaggerated product and income claims into a company-sponsored network of endless chains of participants, and incentivized to buy products in order to qualify for commissions and to advance upward in a pyramid of multiple levels of participants. Because MLM pay plans ignore the laws of supply and demand by assuming both infinite and virgin markets, and are heavily stacked in favor of founders and those at the highest levels In the pyramid, approximately 99% of participants spend more than they receive and eventually drop out, only to be replaced by a stream of similarly misled recruits. MLM programs, as product-based pyramid schemes, are the most harmful of pyramid schemes by any measure – loss rates, aggregate losses, and number of victims. And because of endless chains of recruitment and top-weighted pay plans, MLM may also be the most unfair and deceptive, and the most viral and predatory, of any class of income opportunities.
This definition is based on analysis of the compensation plans of 500 MLMs, on the average earnings data of the MLMs that release such data, and on 18 years of research and world-wide feedback.