View Full Version : Pyramid scheme under the guise of franchising? - Illegal?

Church Key Kid
05-22-2002, 03:01 PM
I know that pyramid schemes are illegal. I do not plan on investing in the business below or any other business. I just want to know if it is illegal and if this scheme is actually a pyramid scheme.

Person A recruits person B & C. For each $2000 they sell, person A gets $500. Person B recruits B1 & B2. Person C recruits C1 & C2. For each $2000 that B1-C2 sell, their recruiter gets $500. However, person A does not get any kickbacks based on either what persons B1-C2 sell, or what persons B & C get as kickbacks.

Since the plan stops at every level, does this qualify as a pyramid scheme? And, is this illegal?

I apologize if the description is confusing :)

Gary T
05-22-2002, 03:26 PM
Depends on what they're selling. If it's membership in this plan, it's a pyramid scheme (Ponzi plan) and illegal. If it's a product or service, it's network marketing (multilevel marketing) and legal.

There are some network marketing companies and plans that are shady and/or illegal, but network marketing is not the same as a pyramid scheme. The term "pyramid scheme" has a specific definition, and does not properly refer to all business plans that appear "pyramidal" on paper.

Send questions for Cecil Adams to: cecil@straightdope.com

Send comments about this website to: webmaster@straightdope.com

Terms of Use / Privacy Policy

Advertise on the Straight Dope!
(Your direct line to thousands of the smartest, hippest people on the planet, plus a few total dipsticks.)

Copyright 2018 STM Reader, LLC.