Pyramid or Multi-level marketing (MLM) is a system in which people are recruited into joining a “profit sharing” program, usually through a recruiter. The people who are in the lowest level of the pyramid will receive the highest commissions. However, this type of lawsuit – called a “pyramid lawsuit” – is quite common. In the United States, there are currently approximately 80 such lawsuits pending.
The concept of a pyramid or multi-level marketing lawsuit is not new, but it is rather what is new in recent years.
Essentially, when more people join a MLM program, those at the top of the pyramid will receive larger commissions than those further down. Thus, while the company at the top of the pyramid will have less money and income than the lower tiers, it can still rake in more money because of the number of people in the higher tiers. In other words, pyramid lawsuits are not really new.
But why do these lawsuits occur?
Sometimes, the people who are recruited into an MLM program will try to pitch their product or service as much as possible to new members, convincing them that they need it and cannot live without it. Thus, someone new to the business will be persuaded to buy product A through B, C and D. By doing so, they might actually be getting worse products at a lower price. This is not illegal, per se. But some organizations are actually being accused of pyramid schemes, including My Universe, Tupperware, Avon and Amway.
The complaints regarding these lawsuits make it look as if the people being recruited into the pyramid are getting rich quickly with no real effort on their part. But pyramid schemes are not usually that easy to spot.
Most people who become involved in them are initially drawn by the prospect of making money fast. But after enough time passes by, most of them are disillusioned when they realize that there was no concrete monetary gain involved. The pyramid has no bottom line – only recruits can earn. Therefore, a legal pyramid set-up does not need an elaborate set-up to operate legally.
If you know or suspect that you are a victim of pyramid scams, then you should contact an experienced attorney.
The most important thing to remember in filing a pyramid lawsuit – especially if you are the target of a lawsuit – is to remain completely honest up until the time of your court case. It would be wise to gather all evidence you can and gather proof that the company is indeed structured. In addition, never sign any document, even a credit card application, unless you are absolutely positive that you understand the terms and conditions on such document. These types of legal disputes are very technical and it would be unwise to try to go it alone without proper legal representation.
Your best bet to avoid a pyramid set-up or any other pyramid scheme is to invest in a good litigation company that specializes in personal injury cases.
These companies have extensive experience in dealing with the Federal Trade Commission and other government regulators. They will protect your interests as you file your complaint and monitor the company from beginning to end. If you are a victim of a pyramid scam or an otherwise illegitimate business structure, you should seek legal counsel as soon as possible. You may save yourself from further financial losses.