Multi-Level Marketing has been around for decades.
It's also commonly known as Network Marketing, where you become a distributor and sell products to your family and friends and other people in your network of acquaintances.
The concept itself is legal. But the Federal Trade Commission said some companies are crossing the line with false claims during the global pandemic
The FTC is going after multi-level marketers that use the coronavirus pandemic in their pitches to sell products or recruit new people.
"Two concerns that you have to be aware of when you're a MLM participant," said FTC Regional Director Chuck Harwood. First, you want to make sure that you're passing on reliable information."
Recent warning letters to 10 MLM companies point to unsubstantiated health claims related to COVID, that have no scientific verification and violate the FTC Act, which prohibits misleading and deceptive practices.
"There's simply no substantiation that the kinds of products that are being marketed and sold through these MLM schemes will prevent someone from contracting COVID-19 or help you recover from COVID-19 any faster than you would otherwise," Harwood said
Another big problem is inflated claims about the money you can make with a network marketing business.
"You have to be very careful if you're investing in one, be sure that the promises of how much money you're going to make, are actually truthful. a lot of times they're inflated," Harwood said. "A lot of times, what we find is that people who get into these kind of schemes- whether it's related to COVID-19 or anything else- find that they lose far more money than they ever make."
The FTC website dedicates an entire section to multi-level marketing businesses and pyramid schemes and how to tell the difference. You can also learn what to look for and how to research a company before you get involved.
And if you participate in a network marketing or MLM business, company, Harwood said be sure to investigate all claims before you share them.
"Often times law enforcement will look to the original creator of the (false) claim," Harwood said. "But be aware, that doesn't excuse you from potential liability for making those claims, even if you say you relied on someone else."
Again- in most cases, Multi-Level or Network Marketing businesses are legal. It's the claims that are getting some of them in hot water. So before you get involved- do an independent investigation, away from the hype.
Pay close attention to unproven health claims. Fact check health and beauty claims through the FDA and other independent sources. And be especially cautious about claims that you will make large sums of money.
Find out what you must do to make that money, then do the math so you'll have a realistic expectation of the money you can make compared to the time and money you must invest.