Q.What is network marketing? How is a genuine network-marketing business different from an illegal pyramid scheme?

Network marketing is a legitimate distribution method, but it sits close to an illegal structure that must be distinguished carefully.

Network marketing (multi-level marketing, MLM) is a method of distribution in which independent distributors sell a company's products directly to consumers, and also earn commission on the sales made by further distributors they recruit into the network beneath them, with commission flowing upward through the resulting structure.

Difference from a pyramid scheme: a legitimate network-marketing business earns its revenue, and pays its distributors, primarily from genuine sales of products/services to real end consumers — recruitment is a secondary, supporting activity. An illegal pyramid scheme, by contrast, pays participants mainly or entirely for recruiting new members (through joining fees or by requiring new recruits to buy unsellable stock), with little or no real product moving to genuine outside consumers. Because a pyramid scheme's income depends on an ever-expanding chain of new recruits, it mathematically collapses once recruitment s …

Assuming all multi-level/network-marketing businesses are automatically illegal pyramid schemes — the legal distinction turns specifically on whether genuine …