How to Recognize and Avoid Network Marketing Scams

Network marketing scams have been around for as long as network marketing existed. For many people, it is almost impossible to distinguish between a legitimate network marketing business opportunity from a scam.

Avoiding these scams can be a challenging and daunting task at times, especially if you are new to network marketing.

These scams thrive on one of man’s greatest desires, namely, the desire to improve one’s current financial condition in the quickest way possible.

Many people work very hard on their day jobs, spending their time and energy on the pressing tasks of the day. And yet they often find that even after all their hard work, they still are not where they want to be financially.

Because of this desire to improve one's financial condition, rationality is often lost for most people when it comes to evaluating a network marketing opportunity.

Con-artists know this, and they package their offers in such a way that you would think it is a legitimate network marketing business.

So, how will you know that the opportunity you intend to join is not another network marketing scam?

Your starting point would be to know what network marketing really is. Without this knowledge, how do you expect to separate a scam from a genuine opportunity?

Read this page before you proceed if you are not sure what network marketing really is and come back once you understand the nature of network marketing.

Read it?


Welcome back.

You now understand that the selling of a product or service forms the basis of any form of marketing, including network marketing. This applies whether the marketing is carried on online or offline.

Understanding the Nature of Network Marketing Scams

Look up the word 'scam' in your dictionary. You will find words like con, rip-off, cheat, swindle, trick, listed as meaning scam.

So a network marketing scam would be any business whose intention is to trick you out of your money without giving you anything of value in return.

It may come in various ways. Typical examples include:

  • The opportunity requires a large amount of start up capital.
  • Your commission is dependent on new people coming in.
  • You are not required to sell anything -- just bring in people.
  • You move upwards every time you sign up someone.

he problem is...

As soon as you run out of new recruits, payments stop. The person who comes in last has no way of recovering any money from the scam.

Network marketing is, by its nature, very susceptible to manipulation by unscrupulous individuals and organizations. After all, the majority of people who join MLM companies are generally inexperienced and know little about the nature of the network marketing.

Unfortunately, many network marketing scams present themselves as being simple and easy. And this is why they survive.

This appears to be a major selling point for most scams. They promise that you will make tons of money by doing very minimal work. With limited time and energy already being expended on your day job, they want you to believe that what they offer is a better way to make money.

It is a fact of life that when it comes to money – especially the prospect of making loads of it - most people lose much of their natural cautiousness.

The designers of network marketing scams know this. And they package their offers in a way that looks simple and easy to make money compared to your day job.

Always be alert.

If it appears to you that the opportunity you are being offered sounds too good to be true, play safe. Avoid it.

How to Avoid Network Marketing Scams

Avoiding network marketing scams requires a lot of vigilance on your part.  To help you avoid network marketing scams, here are some of the questions you may seek answers to when evaluating a company.

1. The integrity of the company

Does the company have a physical address - a customer service line where you can contact them at any time to have your concerns addressed?

When looking for a legitimate network marketing company, make sure that the company has a physical address and a customer service line, preferably a toll-free hotline which you can reach anytime.

2. For how long has the company been around?

Network marketing scams don’t last for too long. They hardly make it to their third birthday. It may be worthwhile to give a company some more time to operate if you are in any doubt, or look for another company if you are not prepared to wait.

Note that a shorter period does not necessarily mean the company is a scam.

3. Is the company a member of a reputable marketing or selling association such as the Direct Selling Association (DSA)?

Network marketing involves direct selling. So, if the company is a member of the DSA, then it is highly probable that it is not a scam.

4. The compensation plan

Will you make money by merely recruiting other people into the network?

Some network marketing scams are noticeable by the way they structure their compensation plans. Individuals are paid from the registration fees of those they have recruited.

5. Are you required to pay some form of monthly subscription just to maintain your position on the network?

If that is the case, the business plan is likely to be a pyramid scheme – which is another type of a scam.

6. The nature of the products or service

Would you or anyone else buy their products or services if it was not for the opportunity to make money network marketing?

This, by far, overrides everything else regarding the legitimacy of any network marketing company.

Network marketing is a business. Like any business, network marketing companies make their money from the sale of some kind of product or service. They differ with conventional business in one major respect…

…the way they move their product or service from the manufacturer to the end user.

Network marketing companies use consumer networks to do this. For a detailed discussion on this see the discussion on what network marketing really is.

Recognizing and avoiding MLM marketing scams can be challenging at times. There are some companies that may appear to be legitimate at first but in the end, fold up and cost their distributors large sums of money.

If you ever encounter such a problem, never give up. Just because a particular networking marketing company turned out to be a scam, does not mean that all network marketing companies out there are scams. 

Network marketing scams are here to stay. The important thing to remember is to always be cautious. Be vigilant. Ask your potential sponsor as many questions as you can, including the questions suggested here. If you do that, you have a greater chance of joining a company that is not one of the network marketing scams.