SEC explains difference between multi-level marketing, pyramiding

Posted at Aug 04 2015 10:50 PM | Updated as of Aug 05 2015 06:50 AM

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What is the difference between multi-level marketing and a pyramiding scheme?

In an interview on radio dzMM Tuesday, Atty. Lalaine Monserate, assistant director of the Securities and Exchange Commission (SEC) Enforcement and Investor Protection Department, said multi-level marketing (MLM) is a legitimate operation.

In MLM, also known as network marketing, a person earns income become he or she is selling a certain product, Monserate explained.

"Ang multi-level marketing, wala naman pong diperensiya po yan. In fact, legitimate po yan," she said.

In a pyramiding scheme, on the other hand, there is no product involved, she stressed. A person only earns based on his number of recruits.

"There is no product involved inside the pyramid," said Monserate. "Ang legitimate na multi-level marketing network, yung main consideration is you earn income because you are selling the product."

"[Sa pyramiding], pag pumasok ka dun, pwedeng kapalit daw po ay produkto, pero hindi mo naman kailangan yung produkto. Ang sabi nila 'for sale,' binibili mo yun, pero hindi mo kailangan, pwede mo nang ipamigay sa kung sinong kakilala mo," she added.

Radio dzMM, August 4, 2015