Truth Behind a Pyramid Scheme
A successful pyramid combines a fake yet seemingly credible business with a simple-to-understand yet sophisticated-sounding money-making formula. The essential idea is that the mark, Mr. X, makes only one payment. To start earning, Mr. X has to recruit others like him who will also make one payment each. Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the "business" expands. In 2003, an internet-based "pyramid scam"[15] was uncovered by the United States Federal Trade Commission (FTC), where customers would pay a registration fee to join a program and purchase a package which included Internet mail and related goods and services. The FTC's complaint states that the company assured consumers who purchased the package that it would allow them to earn significant commissions for every website sold. The FTC alleged that the company deceptively represented that consumers who participated in their scheme would earn substantial income, when in fact most consumers lost money in the operation, and that the defendants provided deceptive marketing material to affiliates - providing them with the means to deceive others; and finally, the company failed to disclose that a substantial percentage of participants would lose money, and that the scheme was actually an illegal pyramid. Pyramids generally spread through emails, many of which may use confusing language, with the intent to make you think it is a multi-level marketing (MLM) business plan. MLM plans have their share of detractors, but they are legal because they have a product to sell. Examples of successful MLM plans are Amway, ACN, Mary Kay, Tupperware, and Avon Products. The difference between MLM plans and pyramid schemes is that pyramids do not offer a genuine product.
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