SkyBiz 2000 – A Mathematical Trick
A mathematical trick	This page will show you that SkyBiz 2000 is after all only a mathematical trick and a highly immoral and unethical and fraudulent business venture. The figures used herein are the ones that were valid in December 2000.
SkyBiz.com.Inc.´s official income representation	You should find this article at any time on SkyNews pages e.g. http://www.skyboom.com/mail/daily5.html. (link expired, don´t open, danger of redirecting! This one has been copied on the 1st of October, 2000.) Personal Income Representations SkyBiz 2000 Associates are reminded that they are not to make any statements about how much income a potential Associate may make in the Home Based Business Program, with the limited exception that an Associate may say how much an Associate has made IF they have personal, verifiable knowledge of the income made, which usually means the income of the Associate making the income representation. However, ANY TIME that is done, the Associate MUST also say how much time, expense and effort went into making that much income AND disclose how much the typical Associate has earned. The typical Associate’s income is updated each six months and is set forth under the heading, "Income Disclosure" under the ’Business’ button on your Skynary website. Currently it states, "As of June 30, 2000, 2.53% of participants earned between US $1,000 and US $25,000 per week (11 earn $25,000 per week) but the average amount earned is $215 per week and the median amount earned (1/2 earn the same or more and 1/2 earn the same or less) is $70 per week. The great majority of participants earning those amounts have been in the program for a least six months. A participant is one who is actually conducting activities necessary to realize the benefits of the plan."
Do the reps obey this rule?	In reality it´s very customary that reps of SkyBiz breach this rule. The company does though not enforce the impositions of penalty set forth in the Terms and Conditions.
What´s a typical associate?	What does the company mean with a typical associate? Most people understand that this means the average member in the business program. But in fact this cannot mean anybody but only those reps who make their first pay-check or more. And they are at maximum 10 % of all the reps in number! And only less than 3,57 % out of all business centers are profitable as you will clearly see!
Who will collect commissions?	A Skynary Account is called a business center. One gets a business center by buying a web pak and participating the business program or by just becoming a rep and not buying the product. You´ll find information of the commission plan on every member´s Skynary page or on site http://skynary.com/source/skynary.asp. (link expired and abused, danger, don´t open) Click "overview" and "business". How does the business plan work? Who will be eligible to collect commissions? Only those who will sell two Web Paks – one in both legs – and after that they will have seven or more purchases in their downline and the balance between legs must be 1/3 or better. So there must be at least nine purchases in every dowline that pay out any commission to the upline´s business center in question. Only one out of ten business centers collect any commissions at all – and this is the best case!
Collecting commissions and still losing money!	By studying the commission plan you reckon that the first eighteen sales pay out less than the joining (administrative) and hosting fees for the first year have cost. The costs make 25 + 100 = 125 USD/ business center. Commissions make 70 + 35 = 105 USD. So the loss after eighteen sales or more are still 20 USD added with all the expenses due to marketing and promoting the business. Those business centers collecting commissions but still not profiting are less than 5,26 % of all in number. (1/19 up to 27)
The winners in SkyBiz are only less than 3,57 % of all the business centers	A business center will be profitable only if it will have 27 sales or more in its downline and the balance between legs is 1/3 or better. This means that only less than 3,57 % of all the business centers will profit anything. (1/28) In theory it is possible that a little more reps than this may be profitable. Let´s take an example. An associate owns one business center. He/she will collect commissions for 36 purchases, 18 in both legs. Let´s assume that all downline-reps own three business centers. That makes 12 reps. (3×12=36) The associate in question is 1 out of 13 reps, that is 7,69 %. The commissions make 70 + 35 + 35 + 70 = 210 $. The profits are 210 – 125 = 85 $ subtracted with expenses. Usually it´s not enough to cover them. And all the reps in downline will be loosers. So the associate needs to have more reps and business centers in his/her downline, otherwise the pyramid will collapse. And if there will be more reps, there will always be more loosers as in proportion too. So this is the best case when a rep can be profitable. And it is far less than 7,69 % in practice. This example is purely theoretical. The odds are close to zero for this case. Let´s take another example, more likely to take place. An associate has bought three business centers. He/she gets 52 purchases in the downline of the first businesss center, 26 in both legs. So there are 53 business centers alltogether, out of which 50 belong to others. Let´s suppose that 10 associates own 3 centers and 20 of them own only one. (30+20=50) The associate in question owns 3/53 of the network, that is 5,66 %.There are 31 reps so he/she is 1 out of 31, that is 3,23 %. Purchase of three Web Paks cost 375 USD. (3 x 125 $) Add all other costs and you get total expenses. The associate´s first business center collects commissions let´s say 350 $ for an Orbit – that is 50 sales. The other two centers have each 25 sales in the downline. They would earn 105 $ each. (both for eighteen sales, 70 for the first nine and 35 for the next nine sales) Total commissions make 350 + 210 = 560 $. The profits will be 560 – 375 = 185 $. This is usually not enough to cover all the expenses. And all the business centers in their downlines are loosers. So in this case less than 3,23 % of all the reps are profitable.
Who´s really "a typical associate?"	Shouldn´t the company reckon the vast majority of the reps as typical associates instead of the vast minority? I reckon they are more than 96 % in number! But now we see that the company has a unique way of defining "a typical associate". They state: "A participant is one who is actually conducting activities necessary to realize the benefits of the plan." This must mean a person who really works for the goal and also succeeds in his/hers efforts. And by saying this they leave from 90 to more than 96 % of the reps out of the calculation. Is this not misleading? Could this be Christian? What about the high morals and ethics in business? Think!
Loosers relax: it´s not really your fault!	How does the company know which reps really "conduct activities necessary to realize the benefits of the plan?" (This is so unclearly stated that I wonder how many English speaking prospects understand it – and let´s not forget all those people who speak poor or no English at all!) Of course they know by the commissions payed out! But it surely does not mean that those reps who never ever got their first pay-check are worse or lazier than others! It´s the poor mathematical odds, disrepute of mlm-industry, almost worthless products, the missing contacts and abilities to work in home-based businesses and first of all – the honesty of most of the deceived associates involved in network marketing – that make them fail! They just simply cannot tell lies about the products and the poor business opportunity to their loved ones!
Genious pricing	How do the network marketing companies price their products? In a way that the money fleeced is not too much and not too little. The products cost in an average from 30 to 50 USD per month, (range from 15 to 80 USD) so it´s not enough for most people to complain about very much. But it´s enough for the perpetrators: they receive what they wanted in the first place – swindle a little from all which eventually makes a lot to a few and it´s often perfectly legal! But even if it were legal in some countries it´s highly immorral and unacceptable and everybody should fight back against it!
Want to be honest?	If you´re a SkyBizzer or any other MLM-rep, how do you market the products and promote your business now? By misleading advertising and telling lies about the odds in profiting from the business plan? Or are you really, really honest and tell all the essentials to your prospects that they need to know in order to make a secure and sound decision? Remember that some of them are your friends, relatives and family-members. They want to be that in the future too!
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	Sky Pyramids Files
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No summary is needed	I gave up the thought to write this summary. Why? Because there are many good articles about MLM in general in English already. My summary will not give enough new points of views and facts about the issue. So, it will be a waste of time to do it.
What then?	Read these following articles and you will have enough information about MLM in general: "What´s Wrong With Multi-Level Marketing?" by Dean VanDruff The Pyramid Scheme Alert site
A few things to say	MLM is deception from the very beginning. The companies that go networking know the real essence of MLM already when they are planning and developing their idea. They know what the real chances and odds are for a single rep to succeed in business: they´re miserable. Still they keep on marketing the business idea as great, excellent and super. This is misleading advertising and unfair trade parctice to my understanding. The products have no real demand. It is mainly because of the business opportunity that people sign in. And when they fail they usually stop buying the products as well, unless they buy it from a relative or a good friend and feel pity of him/ her. The companies and top leaders get more than 50 % of all the profits and they are very few in number. Each leg has to start from one business center. They are usually owned by a family member or a friend of the owner(s) of the company. Even if the company is on the stock market, there are only a few professional teams and retailers who own the highest level business centers. The idea is to deceive a little from many that eventually makes a lot to a few. The company is always the one who benefits the most. It could go bankruptcy without the deceptive idea of selling the business opportunity.
What´s your decision?	Do you want to help or prevent MLM companies from exploiting the unaware and defenceless? Knowledge is power. Tell the idea of this scam to two people: start from your family and your loved ones. Ask them to instruct two more who instruct two more… and soon the whole planet will be saved! Or does the chain break before the news reach each and everyone? If it does, don´t be surprised to notice that the same happens with all low-level legs and downlines in an MLM! And it usually happens very very soon after you´ve joined the scheme. Unless you are on a top level as you start with? Did you know that many MLMs go bankruptcy if they don´t get the system work in the beginning? Without the help of some professional recruiters and teams they would be out of business at once. "Getting in early" is the only way to do well in the business. Did you get in too late? And remember: you can never rely on any MLM for a life-time. Its more likely for an individual leg to collapse than to last for ever. No pyramid can stand when its foundation will collapse. It´s the same with your downline. It would be a miracle if it lasted for years and years, because ca. 90 % of the reps quit in a couple of years. With your team you have to recruit new retailers all the time in order to maintain in the business. So, where is your early retirement and secured days of oldhood? Where is your extra freetime, vacations, friends, hobbies, money…? Or did you lose the little you got to begin with?
	Petteri Haipola, updated in May 19 th, 2001	e-mail
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January 1st, 2004 Posted by Petteri Haipola

This is a kind of an answer, which I might send to anyone trying to sell me anything or just disagreeing with my articles about MLM in general or trying to convince me about some special MLM company or its products, that they are so good, so good… I don´t wanna even hear about it! I do not want to get any replies, because most of them are SPAM and hardly ever anything new will come up. I am very well informed by MLMers of all kind of their points of view and am now sick of hearing from them any more. I do know my business and have studied very carefully most of the facts involved. I have been on the national Television pointing out the anti-MLM view and have contacted the Finnish Congress Reps in order to make better laws that would protect consumers against the MLM fraud. There is no way you can make me change my mind about MLM. I know that not all MLMs are as evil by nature as the most vicious pyramids like the SkyBiz was. Anyway, I am not interested in looking into stuff of any MLM. My articles tell my personal experience and have some over all look at the MLM business in general. There is a lot of information about MLM on the web, which you may read. Start for example here, some articles released through the Federal Trade Commission in the USA.

http://www.ftc.gov/bcp/conline/features/mlm.htm
”Getting to the Bottom of Pyramid Schemes” by James Kohm, Federal Trade Commission.
http://www.ftc.gov/bcp/conline/pubs/invest/mlm.htm
”Multilevel marketing plans”.

If you still want to send some mail to me, please do so, if only you manage to find my e-mail address. I don´t want to give it to the public since the overwhelming SPAM. If you manage to get through my SPAM watch, I still warn you that I am not going to read any critics or responses, which say that MLM is honourable business. I know it is not and that´s it! It´s your own shame, if you do not believe those who have seen behind the lies in MLM and know what they are talking about, without having any biases towards the MLM industry. There are lots of those experts too. Not all the critics are written by losers who have burnt their wings and lost some money. There are still some good people in the world who really care for others and want to warn them not getting involved in deceptive schemes where they will lose money, friends, family and even health. So, if you want to write to me, do it knowing that your response will be most likely sent to trash, unless you want to thank me for my efforts and telling the truth about MLM. Thanks for your kind response in an advance!

You cannot convert me to be an MLMer, ever! Don´t even try: you´ll just waste your time! I have studied the critics against MLM in general and learned to know its nature: I don´t  want to be any part of any MLM ever. If you really tried to see what´s wrong with MLM, you could understand it too.

Yes, I´m trying to convert you to the anti-MLM front, but only this once. It´s your life, time and decision, not mine. If you want to ruin your life and relationships by MLM, that´s your problem and shame. I don´t want to bother you any more than this once.

By the way the persentage of failures at SkyBiz is actually more than 96. That´s a mathematical fact. It doesn´t matter how good and skilled people are at work: evidently more than 98 % are doomed to fail as they join. My math examples tell only the best case in theory. In practice the chances are much worse. /skybizmaths.htm

The main thing in MLM is that you´re getting the money from failures. Actually you´re not really recruiting winners (only a very few reps win) but losers. You cannot hide from this reality behind anything. It´s a fact. Without losers there will be no winners!

If you´re interested in critics against MLM in general, please read the following articles through, which I recommend after a short while. Actually you should do it: it´s your life-style, business and making a living that they say is a fraud from the very beginning. You may though not be the crook, but are being taken advantage of without noticing it. Even if you´re making a buck, you´re just a victim in a deceptive scheme or then you are the crook. The most retailers have been been doomed to fail at the very moment they signed in and payd for their lisence. And what have you been doing? You have been telling these honest people, who are often in a desperate situation financially as they join in and going through some sort of crisis, dramatic time in their lives – otherwise they would not have been interested at all – ”This is a GREAT life-time opportunity for you! You can start a new life as an independant entrepreneur. No risks involved! You´ll get more freetime, hobbies, friends, money, vacations – MLM will help your dreams come true!”

Most retailers will not earn their investments and expenses back, so it will be a lie to assure the prospects that you cannot lose anything. Still they keep on advertising the idea by using false and inaccurate statements. Professional recruiters constantly break the laws of misleading advertising and unfair trade practices. And what do the MLM companies do? Punish them? No. They just collect the money and smile! After all, they´re not responsible of anything the independant sales representatives do: so why bother? Do you want to be part of this fraudulent scheme and even promote it? It is your choice! And your choices tell other people what kind of a man you really are.

http://www.vandruff.com/mlm.html A sound article by Dean VanDruff. ”This article will analyze four problem areas with MLM. Specifically, it will focus on problems of I) Market Saturation, II) Pyramid Structure, III) Morality and Ethics, and IV) Relationship Issues associated with MLMs.” See the links at the bottom and the FAQ -site too.

http://www.pyramidschemealert.org/ ”Pyramid Scheme Alert is the first consumer organization to confront the abuses and trickery of pyramid scheme perpetrators.” You´d better read these sites.

http://www.sehlat.com/aux/nomlm.html Since Christianity and ”Christian ethics” have been used in promoting SkyBiz, (and other MLMs too) click here to see that Jesus Christ was not the first MLMer and it is immoral to promote MLM businesses by using Christian faith as a means of marketing.

http://www.apollowebworks.com/amway/argument/ FAQs about critics against the world´s largest MLM, Amway. Answers can be applied to any MLM in general.

http://www.mlmsurvivor.com A site by Ruth Carter, an anti-MLM writer and an ex-Amway distributor.

I believe you also know what ”front-loading” (US) and ”referral selling” (Australia) mean? Why are governments in all over the world so worried about MLMs and their practices? (FTC in the USA, Consumers Offices in the Western Democracies) Why are the underdeveloped countries afraid of MLM? Remember Albany and Romania? What´s next: India, Malaysia, Thailand, the RSA, Swaziland, Sierra Leone,…?

I believe you also tell your prospects the real odds to succeed in MLM? What are the real risks involved: costs, efforts, time spent in motivation seminars and working, spoiled human relations, etc.

Anyone can do it? Really? What does the pure mathematics say about it? Honestly? How many per cent of the retailers are doomed to fail as they sign in? (99,9 % ) If each and every distributor was a master in promoting his/ her business, would the percentage still be the same? Yes! Success in MLM is not based as much on your skills and motivation as it is based on propability, maths and the pyramid stucture on an MLM pay out system. Do you tell this figure to your prospects? Why should you? Not everyone can be a winner, or can they? Are there more people on the top levels than on the lower levels? Aren´t there always more on the lower levels? Do the suckers on the lower levels earn a dime? They´re the vast majority! Why should anyone believe that s/he is better than most people and can become a top level distributor and stay there for ever? Remember that ca 90 – 98% of the retailers quit in a couple of years, so you have to find new people in your downline all the time. And most quitters stop buying the products as well: so you cannot support yourself by selling the products but mainly by recruiting new people to the scheme! What makes you say to each and everyone: ”not everyone can do it, but when I look at you I know that you can!”

It can be really hard to admit that you have been fooled. But by admitting it and humbling yourself is the only way out to reach freedom. And if you´re one of the top level perpetrators or innovators (founder/ owner) in an MLM company, it may still not be too late to repent and start all over again in an upright way. Give up frauds and start a legitimate honorable business! Repent, since the Judge and the Redeemer Jesus Christ is knocking at the door!

Sincerely,

Petteri Haipola
October 19th, 2005

Not all MLMs are evil by nature?

This is what many distributors have been trying to tell me and convince me about. Especially MLMers who sell nutritions claim to really help people to be healed from various sicknesses. They say that ”a product oriented” MLM is not a pyramid fraud. What´s the truth? If you seek vary carefully and without biases you´ll see the real truth about each and every MLM.

If the MLM products are so wonderful and miracle, why then do they not sell them the traditional way? Now there´s a great danger that many in need do not get the products, because they are not available by MLM! If the products really were as good as they have been ”testified” to be, then they would be ”a real hit” if only they were sold ”the traditional way”, by chemistries, drug stores, shopping malls etc.! Or what do you think about Viagra, e.g.? And do not forget Aspirin, vaccines, penicillin and a multitude of other life supporting drugs that really are a necessity to human kind. Compare MLM products to vitamins and nutritions, which you can buy from almost anywhere. If the MLM companies really want to help sick people and prevent people from getting ill, they would sell their products in multitudes by using other marketing and distribution methods than MLM. If the MLM products really had ”a demand”, then the drug stores, pharmacies, nutrition boutiques, shopping malls, department stores and all possible sales people would be fighting over the products in order to sell them and they would really be a great success for all parties involved! And everyone would benefit the maximum: also the end-buyer. So, why do they not sell the traditional way?

What if they brought the MLM products to the open market? Would there be a legion of imitations there? Imitations of secundary value, effect and quality? Worthless imitations? Would this prevent the original ”good” products from a break through and everlasting success? Is this why MLMs don´t sell the traditional way?

I still don´t get it. Why don´t they sell the traditional way? It´s quite obvious to me that if they have products that any professional sales person was able to sell anywhere (you don´t need a doctor´s prescription for them) it would be a success to all parties involved. Just think how good it would be for the manufacturing company to have some ”real professionals” to do the sales work! (and not unskilled amateurs like it is the status quo in MLMs at the present time)

They make worthless imitations out of everything – sports equipment, music, arts, food, etc. – but only ”the originals” have got the status and real value, ”the wow!” in them! When I buy running shoes I don´t buy any imitations any more: I simply cannot afford to it! No, I go to the most expensive sports shop instead and use the help of an expert in order to carefully make the right choice! If I bought a lousy pair of shoes it could mean the end of my hobby/ies due to frustration and anger to myself and my stupidity. Aching feet and blisters do not motivate in sports. Worthless copies are useless: it will be more difficult for them to persevere on the free market economy than for the originals. Excellent products sold at the right prices will always have their demand and share of the market! So, why do they not sell the traditional way?

Besides, what prevents other companies from making imitations of MLM products right now, at this present time? The products are there and it´s very easy to get them for scientific research and analysis in order to make imitations of them. So, are the cheap and low-standard imitations the real reason why the MLMs don´t come to the open market? Of course not! There must be another reason and you know it! Or do you?

If the MLM products had a superior effect on people, it would be most definately the best idea to sell them the traditional way. MLM is actually a bit inefficient, as you will see! Due to malicious and ill fame of a cult it is very difficult to sell anything via MLM, even if the products were good. Me among with the vast majority of people prefer and will always prefer goods and services sold the traditional way. That´s another fact. People have an evil image of MLM. A company that really wishes to expand its share of the market would go selling the traditional way. That´s how I see it. At least I would do so, if I had a ”must have” product to sell.

Do you still claim that some MLMs are good by nature? We have a huge disagreement here. I believe that all MLMs are evil by nature: they are planned to be that way! The pyramid structure is designed to produce more losers than winners and saturate the market, not only by demand of products, but also by demand of retailers. In order to succeed every retailer needs to recruit more retailers in their downline, which of coure is not possible. There are not enough people in the world to make everyone happy in the MLM. There are customers and new recruits to some of the distributors, but not for everyone as there should be if all distributors want to gain profit. I do not know any distributors who do not want to profit, so most of the losers have been decepted by false promises and income representations. If more than 99 % of distributors will eventually lose money, there must be something fundamentally wrong in the business. The foundation of the pyramid structure is wrotten and corrupt. When the foundation of a building will fall down, then the whole building will collapse. How do big MLMs then continue in business for decades? Why do they not vanish? Because, once an MLM has spread widely enough, there will be enough people to support the company, but only a few will make a living as a retailer. The MLM network spreads ahead in cycles. There are times of high seasons, when there may be hundreds of thousands of distributors in one company in one country. After the saturation point has been passed, the number of those people joining in will be much less than those departing the scheme. The pyramid will collapse, but not entirely. The range between low season and high season may be millions of distributors worldwide. There is always a limit, which one company cannot pass. After the limit has been reached, the number of retailers will go down dramatically, but after a few years of low season, it will come up again. This is what I mean by `cycles´ and that´s how the MLM train keeps on going, unless anyone stops it by law enforcement.

To me it doesn´t matter at all if the MLM is ”product-oriented on paper” and not based on recruitment. In practice all MLM is based on recruiting recruiters who recruit recruiters etc. The nature of MLM is fundamentally flawed. MLMs are merely nothing but recruitment schemes based on false income promises. (expectations, false hope) The mathematics of such a plan ensure that only a few will ever earn anything at all, but each and everyone will be represented by great hope of easy success with no special skills involved. You ought to remember and keep it clearly in your head all times that there is no such thing like easy money. Someone´s got to pay the price and in MLM it is the sales people who do it.

I know that there are some people who are involved with MLMs because they have received some help to their physical condition via the good products – or at least they believe so. But for me MLM will be the last place where to look for help if I got some problems in my health. It´s the same with most people due to lack of confidence on MLM in general. If there will be a time when I need to buy health products from an MLM I would most likely not try to sell them any further and become a distributor. I could say – as one Christian distributor says – that ”the product has worked on me, but I cannot guarantee if it will work for you”. Even if I could benefit for a good MLM product by selling it and it worked for me, I still don´t think that I would be willing to build my own business selling the product and promote MLM that way. So, frankly speaking, I am very very rigid on MLM. Still I don´t blame such Christians who really believe they are doing a favour by selling products that work on them (or anyone without doubt), if they do it honestly. (This includes honest income representations and telling the real odds in order to become a winner or even earn back the money invested in the scheme) Yet I don´t believe that cure from sickness is result of the products only rather than all things together starting from faith, exercise (hiking e.g.) and diet.

A simple example

Let´s imagine there´s a MLM that sells nutritions which REALLY cure people. The products can be bought only via this MLM company from distributors. There´s a patient in Finland who suffers from multiple diseases and symptoms that products of this MLM company only could heal. But the network has not expanded to Finland yet. (maybe it ever will be) So, what to do next? The doctors in his home town don´t know how to cure this man. They don´t know anything about this MLM nor its products. How on earth could this man get help from the MLM? (There´s no answer!)

So, if they sold these miraculous products the traditional way, the doctors would have been aware of them. They just simply could have told the poor man to go to the nearest shopping mall and buy the products from there. Very simple and effective – isn´t it?!

So, why don´t they sell the traditional way?

Petteri Haipola, the 4th of January 2004, last modified October 19th, 2005.

• My Unlived Life With SkyBiz 2000, a Short Story by the Author
• A Summary of the Sky Pyramids Files in English
• SkyBiz news in English | SkyBiz uutiset suomeksi
• SkyBiz 2000 – A Mathematical Trick
• A Petition For An International Pyramid Selling Law April 29, 2007
• Dont´t write to me before you read this
• Market share and competition in Multi-Level Marketing

April 11th, 2007 Posted by Petteri Haipola

Table of Contents

• Preface
• Definitions
  • Pyramid Schemes
• Foreign sites
• Income representation
• One should be rewarded only for profitable distributors in one’s downline

Preface

This report is a petition to all people, countries and governments in the world in order to prevent harmful and deceptive marketing methods such as Multi-level marketing from operating in all over the world and exploiting the poorest nations and people in society. Please, read this report with full consideration of what we call is ’upright’ or ’righteous’. Everybody should be treated in a way what he or she deserves and this paper will make it clear, how we can guarantee reasonable commissions and bonuses for all those who work full-time or part-time in the field of direct marketing industry.

I would like to thank Dr. Jon Taylor from the Consumer Awareness Institute for his help in interpreting this petition into English language and for his expert analysis and advice.

April 11´th, 2007

Petteri Haipola

Consumer awareness and protection advocate in Finland

The original petition in full length and in Finnish language is posted on my web site at

http://www.kolumbus.fi/petteri.haipola/verkostomarkkinointi/lait/anti-pyramid.htm

Definitions

Pyramid Schemes

An MLM may be considered a pyramid scheme if sales persons are more concerned with recruiting a downline than direct selling. Such schemes are called ”Product-based Pyramid Schemes”, or ”Recruiting MLM’s” by Dr. Jon M. Taylor from Consumer Awareness Institute. Dr. Taylor has developed a method of ”Five Causal and Defining Characteristics for Identifying Exploitive Product-based Pyramid Schemes, or Recruiting MLM’s”. A Summary of his report is on page http://www.mlm-thetruth.com/5RedFlags-summary.htm.

This petition is my suggestion in order to put an end to deceiptive MLM marketing schemes or make it more difficult for such schemes to operate. Something ought to be done and if not this, then something else like applying the Five Red Flags by Dr. Taylor in law enforcment.

Abstract

Illegal pyramid scheme is NOT a marketing program of products and services by which distributors are rewarded in a way that at least half of their income comes from selling products and services to end users and customers. (See income representations at the end of this document) Such schemes, by which distributors are rewarded in a way, that half or more of their income comes from downline payments in the form of commissions or bonuses from sales to downline participants should be regarded as illegal pyramids.

In MLM programs the person actually selling the products should be rewarded at least as much in commissions and bonuses by the company as will be paid to the total of all upline participants for the same sales. This will also encourage distributors to sell products to customers (end users) and thereby not reward primarily the recruitment of new recruits in an endless chain, since the incomes of distributors are primarily based on their own retail activity and not on sales to large number of participants in their downline.

If regulators required that MLM companies were structured this way, selling an unrealistic dream of easy riches from MLM recruitment will be discouraged, because in order to make millions one should retail worth millions. In practice the income level of a distributor would be at maximum the earnings of a good distributor in any legitimate sales business. Becoming rich (enjoying ”financial freedom,” etc.) by deceiving and exploiting other people would be discouraged.

With the help of this definition, it will be possible to get rid of all of the illegal pyramid schemes in our country and even world-wide. Thus, we do not need to try to solve the problems of limitless recruiting, or how big a portion of purchases have been made by distributors for themselves and their household and how much do they actually sell to customers beyond the network of distributors. Furthermore, it will not be necessary to study pay plans in detail. It will be enough for law enforcement agencies and officials to check where the incomes of distributors come from: from direct selling or downline payments such as commissions and overrides and bonuses. In addition to this, the law enforcement officials need to keep watch over the marketing methods, so that there will not be anything illegal there.

For the law enforcement officials it will be the easiest way to define the distinction between illegal pyramid schemes and legitimate marketing programs as described above. By doing so, we manage to escape complex explanations and expensive investigations. The division to legal and illegal marketing program comes distinguishable. Besides this distributors will be encouraged and empowered and incentivized to sell products, rather than to recruit new recruits in an endless chain of recruiters, which otherwise would not be restricted in any way by the MLM-company.

If interpretation of the law and legislation will be done like the way described here, then it will be difficult for the MLM’s to promote products and services and above all the business opportunity in a way, which enables the ongoing and continuous wrong-doing and exploitation. Almost each and every one of the network marketing organizations would be more likely to operate as close to the model of fair direct selling and leave behind all the suggestions of ’unlimited opportunity’ of making huge income. Selling the ’dream’ or ’opportunity’ would be difficult. Recruiting real distributors in the network of real distributors would be the primary emphasis as well as selling products to end users: the dream-sellers would almost disappear. There would not be too many distributors in the market area of a company as whole or locally. Supply and demand would meet. It would be possible for each and every distributor to make a living or earn little extra by retailing products and services to customers (end users). Recruiters recruiting unlimited amount of other recruiters in an endless chain would decrease in number and the number of real distributors selling legitimate products and services to customers would increase. The primary ’product’ would not be ’the business opportunity’ and ’the dream’ any longer as it is now in most MLM’s or in almost every MLM (The ’real product’ that is being sold to victims of deceptive MLM’s is the idea of becoming rich or enjoying financial freedom by recruiting a huge number of participants in the downline of a pyramid scheme or MLM network).

By combination of reselling products and generating commissions from downline purchases, so long as direct selling to non-participants constitutes at least half of the income and commissions, no retailer in his or her right mind would expect to gain ”financial freedom” – the income of a millionaire, etc. It is more equitable to reward those people who do the actual selling and not those who do not do it, but only promote their recruiting scheme and motivate others to recruit new participants into the program, where the primary emphasis is on recruiting new distributors in an endless chain.

Problems caused by illegal pyramid schemes can be prevented as recruiting does not pay off any more and retailing products does. If laws will be applied and even regulated this way, then the distributors in a network will also cooperate and avoid illegal entrepreneurs and companies, which saturate the market and defame the whole industry of direct selling.

Key and methods for removing illegal pyramid schemes from the market has now been found. All we need is good will and cooperation of citizens, and acts by the governmental officials and legislators in order to apply the existing laws this way and make new laws in harmony with the idea presented here, first in our own country and then also in the European Union and finally in all over the world.

Yours sincerely

Petteri Haipola, Jyväskylä, Finland, European Union 11.04.2007 (April 11th, 2007)

Foreign sites

See also

• http://www.mlm-thetruth.com/5RedFlags-summary.htm
  
  Dr. Jon M. Taylor, President, Consumer Awareness Institute, The 5 RED FLAGS for Identifying Exploitive
  Product-based Pyramid Schemes, or Recruiting MLM’s
• http://www.mlmwatch.org/01General/10lies.html
  
  Robert L. Fitzpatrick, Ten Big Lies of Multilevel Marketing.

and other related sites. For a list of recommended sites go to http://www.mlm-thetruth.com/links.htm or this page on my site.

Income representation

These income representations show, how the 50-% Rule would put an end to pyramid selling or make it more difficult for recruiting MLM’s to operate, because compensation plans would reward more direct selling than recruiting. It would be easy for law enforcement agencies to investigate MLM’s in order to see whether they are illegal pyramid schemes or honest retail-MLM’s.

Example 1:

• A distributor buys or sells nothing, but has a downline of a million participants:
  • He will not be rewarded at all.

Example 2:

• A distributor buys or sells worth 100 USD a month and has a downline of a million participants:
  • He will be rewarded e.g. 20 % commission for his sales, that makes 20 USD, and he will receive commissions and bonuses 19,99 USD from his downline. Total pay check will be $39,99 a Month, more than 50% of which from his own direct selling.

Example 3:

• A distributor buys or sells worth 10,000 USD a month and has a downline of a million participants:
  • He will be rewarded e.g. 20 % commission for his sales, that makes 2,000 USD, and he will receive commissions and bonuses 1,999.99 USD from his downline. Total pay check will be $3,999.99 a Month, more than 50% of which from his own direct selling.

One should be rewarded only for profitable distributors in one’s downline

Product-based Pyramid Schemes, or Recruiting MLM’s are inherently fraudulent and deceptive. Companies reward top distributors, in whose downline almost every one loses money. They should reward only those leaders, in whose downline most people make real money. (net profit or weight income) Now the companies reward king pin distributors by the losses of a huge dowline. This is unfair and dishonest and should be stopped.

Last modified April 29, 2007.

Sites in English about pyramid schemes and recruiting MLM’s