How to Identify a Pyramiding, Direct Selling Company That is Considered Illegitimate and a Scam?

A Pyramiding, Direct Selling Company

DSAP (Direct Selling Association of the Philippines) has published in its website (www.dsap.ph) an "8-point Test" that identifies a company to be illegitimate and pyramiding. It is indeed an interesting guide in order to caution direct sellers to stay away from what is a pyramiding scam.

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1. Is there a product?
2. Are commissions paid on sale of products and not on registration/entry fees?
3. Is the intent to sell a product not a position?
4. Is there no direct correlation between the number of recruits and compensation?
5. If recruitment were to be stopped today, will the participants still make money?
6. Is there a reasonable product return policy?
7. Do products have fair market value?
8. Is there a compelling reason to buy?
If the answer to all the questions is YES, then the company being evaluated is a legitimate company. But if the answer is NO, then there is a high probability that it is a pyramid scam.

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The Points Common to Pyramiding Companies

Most binary-pyramiding and illegitimate companies have products to show off. So, most of them passed test-point #1. But from test-point #2 through #8, they are, shall we say, certified scams. Their commissions are registration-based (point #2); they sell the "position," which they usually call as "headers" (3 or 4 headers, etc!) (point #3); there is correlation between recruits and compensation, which in "binary language" is called "pairing" (point #4); no more money if recruitment stops (the pairing scheme will be ended) (point #5); no reasonable or black and white return policy of products (point #6); products are overvalued to cope with their bloated compensation plan (point #7); purchase of products is quota- or product-maintenance-motivated (point #8).

On The Ponzi Scheme in Today's Binary-pyramiding Companies in the Philippines

One element of the Ponzi Scheme that forms part of the binary-pyramiding scheme is the requirement of this scam to recruit for more investors. Charles Ponzi was a schemer who amassed billions of dollars by encouraging quick-money investment and then disappear or terminate the business. Hundreds of investors have been victimized already in the Philippines by these fly-by-night companies that were employing the Ponzi or binary/pyramid scam.

The Hype

Have you noticed the hype that is accompanying with a new binary-pyramiding company in town? It is orchestrated by the paid rah-rah boys of the company, the so-called top-earner networkers. Business meetings at Jollibee or McDonalds seem unending, and the product testimonies of new recruits roar like powerful waves of motivation and encouragement to the newbies. Then in less than six months, after having boarded already blind investors into their scheme, the company will disappear.

That's how pyramiding works. That's why establishing a pyramiding business in the Philippines is against the law. But why is the pyramiding scheme continues to ruin the name of the direct selling industry in our country? Well, it is because of the thousands of so-called networkers who are religiously supporting the scam for the sake of easy money.

What do you think? We have a box below ready to record your comments, if you have some.