Business in Bangladesh: Illegal Aspects of Multi-Level Marketing

Topics: Multi-level marketing, Pyramid scheme, Business models Pages: 28 (10396 words) Published: October 30, 2011
Illegal Aspects of MLM (Multi-Level Marketing)
Business in Bangladesh


Some of the top experts on MLM’s and pyramid schemes have been consulted in the preparation of this paper.

Table of Contains

Name of the TopicsPage no.

01.| Report Abstract| 03|
02.| Introductory Discussion of Relevant Terms| 05|
03.| Types of MLM compensation plans| 09|
04.| A simple analysis of a pyramid scheme based binary compensation plan| 10| 05.| Difference between Legitimate Multi-Level Marketing Plan and Pyramid Scheme| 12| 06.| How to identify product-based illegal pyramid schemes (illegal MLM)| 14| 07.| Critical Hypothetical Analysis of Multi-Level Marketing Binary Compensation Plan – An Ultimate Pyramid Scheme| 16| 08.| Why Pyramid Schemes are Popular?| 31|

09.| Disadvantages of illegal MLM as A Business Model| 32| 10.| Destructive Effects on the Lives of MLM Participants| 34| 11.| A Brief Case study on Destiny-2000 Ltd.| 36|
12.| Government Regulation and Recommendations| 39|
13.| Conclusion| 41|
14.| Reference| 42|

Report Abstract
One of the most problematical of business models is multi-level or network marketing (MLM). Many MLM programs show all the effects and characteristics of a pyramid scheme, but the MLM industry has nonetheless been allowed to continue and flourish in Bangladesh. The MLM participants are considerably suffered by the tricky and corrupting influence of the MLM companies, and the financial and social harms. Unfortunately, victims of these programs seldom complain, blaming themselves for their failures. This problem is compounded by limited resources available to the enforcement agencies in Bangladesh, faced with MLM companies which are operating using both Naked Pyramid Schemes (NPS, where no products are offered actually) and Product-based Pyramid Schemes (PPS, where products are offered but using illegal pyramid scheme). Due to inadequate definitions of what constitute a pyramid scheme, insufficient resources, corruption and lack of prosecutorial wills in enforcement of existing laws, enforcement agencies often fail to catching the fraud MLM companies, but letting them go free. The consequences are enormous—millions of consumers are being cheated out of billions of money each year. A pyramid scheme, as currently defined as are plans which (1) “concentrate on the commissions you could earn just for recruiting new distributors” and which (2) “generally ignore the marketing and selling of products and services.” The above two criteria have proven to be inadequate for determining whether any given MLM program is a pyramid scheme or not. Legislators, courts, and consumer protection agencies would serve consumers better if they improved their methods of determining whether an MLM business fits the definition of a pyramid scheme or not. At least, it is needed to point out that an MLM program is not a pyramid scheme, when in fact it is more likely a Product-based Pyramid Schemes that has managed to escape corrective action. However, in Bangladesh some 62 registered Multilevel Marketing (MLMs) companies are now operating in the country and most of them are following Product-based Pyramid Schemes (PPS). In this report it has been tried to discuss on the illegal aspects of MLM business, and how to determine a MLM business as illegal Pyramid Scheme along with discussing the disadvantages of illegal MLM business. A brief study on the largest MLM Company in Bangladesh, Destiny-2000 Ltd., has been done here from the legal perspective. This report has recommended for banning of illegal MLM business in Bangladesh.

Introductory Discussion of Relevant Terms
As a long-time critic of MLM programs, I was curious to know why so many otherwise intelligent and capable persons were involved. The growth of MLM amazed me; since it seemed obvious it was just a disguised pyramid...
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