There are a number of very real danger zones in network marketing that should ring alarm bells loud and clear whenever you come into contact with them. Learn to recognise them and give them a very wide berth whenever they appear.

Danger Zone 1: The FiveFatal FAILURE Factors in Network Marketing

Avoid these five fatal failure factors like the plague. You cannot succeed with people who use these appeals. The fact that they'll even try this marks them indelibly as either ignoramuses who don't know what they're doing, or deceptive abusers who know exactly what they're doing. You can't afford to do business with either!

• Ignorance

If anyone appeals only to your emotions without giving you objective, reliable, factual information on which to make a rational, informed business decision, pull back and get the facts you need.

• Fear of Loss

If they try to instill fear of loss to get you to act hastily – either fear of losing what you already have, or fear of missing out on something you don't have – run a mile!

• Greed

Appeals to your personal greed are a sure sign that the person pitching that appeal is out to take advantage of you, one way or another. Logic should tell you that if YOU can make such a killing (always at someone else's expense!), they're expecting to make a killing at your expense.

• Laziness

No time, no effort and no self-discipline? Easy! Spillover will make you rich from the matrix system, your sponsor will build your business for you, etc etc etc.... yeah, right! Get the FACTS here!

• Gullibility/Stupidity*

If you believe what they tell you without checking the facts, you're gullible. (*If you get all the facts and still believe any deceptive, irrational nonsense, there's no getting away from it: you're just plain stupid!)

Danger Zone 2: Signs of Illegal Pyramid Selling

There are some classic signs of illegal pyramid selling which often appear in "network marketing" deals from time to time. If it's promoted by the company, it's absolutely NOT a genuine MLM opportunity. If it's promoted by the distributor organisation only, don't get involved.

• Payments for recruiting (head hunting fees)

These are invariably called by other names to distract you from the illegal reality. They may be called "coding bonuses", "training bonuses" or any other name designed to cover up the fact that you're being paid only for the act of recruiting someone. This is ILLEGAL everywhere.

Any payment not based on sales of PRODUCT, either by wholesale or retail, is illegal and crosses the line into illegal pyramid selling territory.

• Front-end Loading

Signing up with a large inventory purchase in order to qualify for a higher discount or bonuses level may sound attractive, but in REAL network marketing you're rewarded for your ability to SELL, not your ability to BUY. No matter how cheaply you buy something, until you actually sell it, you don't have a profit. All you have is more product or service than you need and less money than you had before buying it!

Inducing others to buy more product than they can realistically and reasonably sell within one or two months is usually illegal under anti-pyramid selling laws everywhere.

WARNING – many MLM companies risk crossing the line with "Fast Start" product packs and bonuses that encourage distributors to pressure recruits into purchasing them so the sponsors can benefit at the expense of their new recruits.

• Rewards contingent on personal purchases

If you have to place a personal order (not for resale) in order to qualify for commissions or bonuses, the compensation plan is in breach of most "referral selling" laws.

FACT: many online affiliate programs require you to make a personal purchase for your own use before you can earn commissions on referred sales. This is illegal in many countries, including Australia, the USA and the United Kingdom.

Here are just two examples of referral selling laws

Here's what Australia's Trade Practices Act (1974) has to say...

TRADE PRACTICES ACT 1974 — SECTION 57
Referral selling
A corporation shall not, in trade or commerce, induce a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for giving the corporation the names of prospective customers or otherwise assisting the corporation to supply goods or services to other consumers, if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made.

The Texas Trade Practices Act (1973) says...

BUSINESS & COMMERCE CODE
CHAPTER 17. DECEPTIVE TRADE PRACTICES
SUBCHAPTER A. GENERAL PROVISIONS
§ 17.46. DECEPTIVE TRADE PRACTICES UNLAWFUL.

(19) using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods;

There are other common identifying characteristics of illegal pyramid selling schemes, but these are the most common, and the ones that most often occur in so-called MLM programs that are really pyramid schemes.

 
Protect yourself!