Is network marketing legal?

Published on 20.September 2021

Many people dream of starting their small business without risk and without a lot of money and growing it into a profitable company. This is actually possible with network marketing or MLM - if it is serious.

Multi-level marketing, also known as MLM or network marketing, is a sales and recommendation system in which independent sellers sell consumer goods. These goods are produced and supplied by a company. Unlike salaried salespeople, network marketing affiliates make money when they sell successfully and receive commissions for doing so. In many MLM sales organizations, partners are also motivated to set up their own sales team. If these affiliates are also successful, the "Team Boss" will also receive an additional percentage of these sales. His job (in addition to his own sales) is therefore to build up a team and to regularly train and motivate it.

Done right, network marketing is perfectly legal.

Unfortunately, it is not always easy to distinguish legal network marketing from an illegal pyramid scheme, since both have a similar sales structure. Even in large companies, it is common for salespeople to receive commissions and sales managers/sales directors and top managers to receive special arrangements or bonuses on top of that

The main key difference between MLM and a traditional pyramid scheme is that there is an actual product for sale. So when actually selling products to actual customers, network marketing is mostly legal, even when trying to recruit additional sellers. In contrast, Ponzi schemes sell the right to solicit others, whereby participants recoup their investment in products by in turn soliciting potential leads, rather than selling a product or service.

Furthermore, network marketing systems can be dubious and illegal if high income is promised with little time or effort or if interested parties are to invest high fees for starter packages and/or training.

What is the biggest problem with network marketing?

The real problem with network marketing isn't network marketing itself, but rather the "wrong people" it attracts. Network marketing is a proven sales model, and it's akin to "micro-franchising." The advantage of legal network marketing is that on the one hand only very low entry costs are necessary and on the other hand there is great potential for extraordinary income.

However, these opportunities that make network marketing attractive also attract many people who are either not qualified or ready to become entrepreneurs. Thus, many fail who:

• have not been successful professionally so far,
• could save little money to invest in building the business,
• have no experience in leading and motivating
• have no previous experience in customer acquisition/sales,
• have little experience in building business relationships and
• above all, have unrealistic expectations in terms of workload and possible income.

As a result, many people fail in network marketing and blame the system for their failure.

The solution

Legal Network Marketing is a great opportunity for people who want to start their own business risk-free. But always remember: It's a business and you are the business owner. If you've never owned a business before, if you've never sold and built anything, you need to learn how to do it at the beginning.

Network marketers who are serious about building a business should familiarize themselves with business basics, the latest sales and marketing techniques, networking and business development strategies, etc. and engage in regular exchanges. You can learn anything if you are motivated and have realistic goals, especially at the beginning.

If you are interested in starting in legal network marketing, we look forward to getting to know you.
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