Editing Pyramid scheme (section)

== Connection to multi-level marketing ==
Some [[multi-level marketing]] (MLM) companies operate as pyramid schemes and consumers often confuse legitimate multi-level marketing with pyramid schemes.<ref name="Smith1984">{{cite book|last1=Smith|first1=Rodney K.|title=Multilevel Marketing|date=1984|publisher=Baker Publishing Group|isbn=0-8010-8243-9|page=45}}</ref><ref name="Keep2014">{{cite journal|last1=Keep|first1=William W|last2=Vander Nat|first2=Peter J.|title=Multilevel marketing and pyramid schemes in the United States: An historical analysis|journal=Journal of Historical Research in Marketing|date=2014|volume=6|issue=2|pages=188–210|doi=10.1108/JHRM-01-2014-0002|access-date=2016-03-26|url=http://business.pages.tcnj.edu/files/2014/02/Keep-and-Vander-Nat_MLM-and-Pyramid-Schemes_Final.pdf|archive-url=https://web.archive.org/web/20160412102646/http://business.pages.tcnj.edu/files/2014/02/Keep-and-Vander-Nat_MLM-and-Pyramid-Schemes_Final.pdf|archive-date=2016-04-12}}</ref><ref name="Valentine Speech">{{cite web|last1=Valentine|first1=Debra|title=Pyramid Schemes|date=May 13, 1998|url=https://www.ftc.gov/public-statements/1998/05/pyramid-schemes|publisher=Federal Trade Commission|access-date=2016-03-25|archive-url=https://web.archive.org/web/20220526165547/http://www.ftc.gov/news-events/news/speeches/pyramid-schemes|archive-date=2022-05-26}}</ref><ref>{{Cite book| last = Edwards | first = Paul | title = Franchising & licensing: two powerful ways to grow your business in any economy | publisher = Tarcher | year = 1997 | page = 356 | isbn = 0-87477-898-0}}</ref>

According to the U.S. [[Federal Trade Commission]] (FTC) legitimate MLM businesses are distinguished from pyramid schemes by participants making money primarily from product sales, rather than recruitment:<ref name="PS_USA_1998">{{cite web|url=https://www.ftc.gov/public-statements/1998/05/pyramid-schemes|title=Pyramid Schemes|date=18 July 2013}}</ref>

<blockquote>Not all multi-level marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it's probably not. It could be a pyramid scheme.<ref name="MLM_USA">{{cite web|url=https://www.ftc.gov/tips-advice/business-center/guidance/multilevel-marketing|title=Multilevel Marketing|date=14 July 2016}}</ref></blockquote>

In contrast, pyramid schemes "may purport to sell a product", but often "simply use the product to hide their pyramid structure".<ref name="Valentine Speech"/> While some people call MLMs in general "pyramid selling",<ref>{{Cite book |last=Clegg |first=Brian |title=The invisible customer: strategies for successive customer service down the wire |publisher=Kogan Page |year=2000  |page=112 |isbn=0-7494-3144-X}}</ref><ref>{{Cite book |last1=Higgs |first1=Philip |last2=Smith |first2=Jane |title=Rethinking Our World |publisher=Juta Academic |year=2007 |page=30 |isbn=978-0-7021-7255-7}}</ref><ref>{{Cite book |last=Kitching |first=Trevor |title=Purchasing scams and how to avoid them |publisher=Gower Publishing Company |year=2001 |page=4 |isbn=0-566-08281-0}}</ref><ref>{{Cite book |last=Mendelsohn |first=Martin |title=The guide to franchising |publisher=Cengage Learning Business Press |year=2004 |page=36 |isbn=1-84480-162-4}}</ref> others use the term to denote an illegal pyramid scheme masquerading as a MLM.<ref>{{Cite book |last=Blythe  |first=Jim |title=Sales & Key Account Management |publisher=Cengage Learning Business Press |year=2004 |page=278 |isbn=1-84480-023-7}}</ref>

The U.S. Federal Trade Commission warns against becoming involved "in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products."<ref name="ftc.gov">{{cite web |url=http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv08.shtm |title=Multilevel Marketing |date=4 January 2018 |publisher=Federal Trade Commission |access-date=2018-06-20 |quote=There are multi-level marketing plans – and then there are pyramid schemes. Before signing on the dotted line, study the company's track record, ask lots of questions, and seek out independent opinions about the business.}}</ref>

Some commentators contend that MLMs in general are nothing more than legalized pyramid schemes.<ref name="Carroll 2003 235">{{cite book |last=Carroll |first=Robert Todd |title=The Skeptic's Dictionary: A Collection of Strange Beliefs, Amusing Deceptions, and Dangerous Delusions |publisher=Wiley |year=2003 |page=[https://archive.org/details/skepticsdictiona00carr_024/page/n241 235] |url=https://archive.org/details/skepticsdictiona00carr_024 |url-access=limited |isbn=0-471-27242-6}}</ref><ref name="Coenen 2009 168">{{cite book |last=Coenen |first=Tracy |title=Expert Fraud Investigation: A Step-by-Step Guide |publisher=Wiley |year=2009 |page=[https://archive.org/details/expertfraudinves00coen_262/page/n172 168] |url=https://archive.org/details/expertfraudinves00coen_262 |url-access=limited |isbn=978-0-470-38796-2}}</ref><ref name="Salinger Editor 2005 880">{{Cite book |editor-last=Salinger |editor-first=Lawrence M. |title=Encyclopedia of White-Collar & Corporate Crime |publisher=Sage Publishing |year=2005 |volume=2 |page=880 |isbn=0-7619-3004-3}}</ref> There are different laws in every state, and they take different actions toward pyramid schemes, but multi-level-marketing is legal.<ref>{{Cite web|url=https://criminal.findlaw.com/criminal-charges/pyramid-schemes.html|title=Pyramid Schemes|website=Findlaw|language=en-US|access-date=2019-03-29}}</ref> Multi-level marketing lobbying groups have pressured US government regulators to maintain the legal status of such schemes.<ref>{{Cite web|url=https://www.theverge.com/2014/4/8/5590550/alleged-pyramid-schemes-lobbying-ftc|title=How lobbying dollars prop up pyramid schemes|website=TheVerge|date=8 April 2014|language=en-US|access-date=2019-08-20}}</ref>