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Is Multi-Level Marketing(MLM) Legal?
No, multi-level marketing (MLM) is not legal. It is governed by the Multi-level Marketing and Pyramid Selling(Prohibition) Act. But there are exceptions to the rule, embodied in the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order.
Insurance companies are exempt from the Act, thus insurance companies can keep their network of insurance agents. Master franchises are also exempt. For example, if you own the Delifrance brand, you can recruit those who want to set up a Delifrance store. They can pay you to use the brand and it would not be illegal.
Direct selling is in a more delicate area. The legality of the operation would probably lie in how it is structured. It is not exactly improper to have to pay for the right to market a brand of product. It is also common to have incentives for bringing in new salespeople. But the key question is, do the participants profit from the sales of the people they recruit, or do they profit from the recruitment of the people?
The aim of the Act is to prevent unsustainable pyramid-selling. If the business derives profits mostly from the recruitment of new members, it is probably unsustainable and illegal. When a long-lost ‘friend’ contacts you to join his marketing team, keep this in mind. Contact the Commercial Affairs Department (CAD) at 6325 0000 if you suspect a business scheme of being an illegal MLM scheme.
The Ministry of Trade and Industry administers the Act. More information can be found on its website.
No, multi-level marketing (MLM) is not legal. It is governed by the Multi-level Marketing and Pyramid Selling(Prohibition) Act. But there are exceptions to the rule, embodied in the Multi-Level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order.
Insurance companies are exempt from the Act, thus insurance companies can keep their network of insurance agents. Master franchises are also exempt. For example, if you own the Delifrance brand, you can recruit those who want to set up a Delifrance store. They can pay you to use the brand and it would not be illegal.
Direct selling is in a more delicate area. The legality of the operation would probably lie in how it is structured. It is not exactly improper to have to pay for the right to market a brand of product. It is also common to have incentives for bringing in new salespeople. But the key question is, do the participants profit from the sales of the people they recruit, or do they profit from the recruitment of the people?
The aim of the Act is to prevent unsustainable pyramid-selling. If the business derives profits mostly from the recruitment of new members, it is probably unsustainable and illegal. When a long-lost ‘friend’ contacts you to join his marketing team, keep this in mind. Contact the Commercial Affairs Department (CAD) at 6325 0000 if you suspect a business scheme of being an illegal MLM scheme.
The Ministry of Trade and Industry administers the Act. More information can be found on its website.
