The Eyeopener, one of Ryerson University's student newspapers has published an article on an alleged "Multi-Level Marketing (MLM)" scheme that is being presented to students.
The newspaper approached the ACFE-GTA Chapter for clarification on MLM schemes and Pyramid schemes, and the Chapter was able to provide some information on what anyone should do when they are approached to invest money or participate in such schemes.
It is important for anyone being approached to invest money in or participate in any program or scheme – the students at local universities in this case - to do their research before
signing up for any such MLM schemes.
It is important to learn more about the company, their track record, and the products they are selling. One tool is to do an internet search with the name of individual who is approaching you, and another search on the company itself, and include words like “review,” “scam,” or “complaint.” Also, look through several pages of the search results – don’t just look at the first page. It is also helpful to look for articles about the company in newspapers or magazines that report on or are supported by the specific market segment. Things to learn include:
- How long the company has been in business
- Whether the company has a positive reputation for customer satisfaction
- What the buzz is about the company and its products on blogs or websites
- Whether the company has been sued for deceptive business practices
- Whether the respective provincial ministry has any complaints about the company; however, a lack of complaints does NOT guarantee that a company is legitimate.
NEVER sign a contract and NEVER pay any money during their first or second meeting with these people. AND…NEVER rush into making a decision, no matter how lucrative or time-limiting the offer may be. Remember…if it sounds too good to be true, it will NOT end well for you!
- Obtain a copy of any agreement or contract in writing, and up-front.
- Understand what you are being asked to join…get the compensation structure, what your costs are going to be, reliable support for the marketing claims about how much money you can make; how to get out of the contract or obligations and what it will cost to leave.
- Avoid anything where the commission or reward for recruiting new “distributors” is more than the price of the products you are going to sell. This is a sure sign of a pyramid scheme!
- And finally… and get some legal advice BEFORE signing or agreeing to anything.
In the case of the local university students, perhaps a Business Law professor or Marketing professor would share their thoughts over a cup of coffee.
Also, it is important to remember that you will most probably end up targeting your family and friends with these products or schemes.
And, with all the levels of promoters up-the-chain, the cost to the end-user could be significantly higher than if they purchased a similar product in a retail store or online, say at Amazon…Don’t alienate your family or friends…These things also tend not to end well.