MULTI-LEVEL MARKETING OR NETWORK MARKETING

WHAT IS MULTI-LEVEL MARKETING?

Multi-level marketing (MLM) (also called network marketing or NM) is a business model that combines direct marketing with franchising. In a typical multi-level marketing system, individuals associate with a parent company as an independent contractor or franchisee and are compensated based on their sales of products or service, as well as the sales achieved by those they bring into the business. This is like many franchise companies where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager.
In a legitimate MLM company, commissions are earned only on sales of the company's products or services. No money may be earned from recruiting alone ("sign-up fees"). One must analyze the compensation plan to determine whether participants are paid from actual sales to customers and not from money received from new recruits. If participants are paid primarily from money received from new recruits, then the company is an illegal pyramid or Ponzi scheme.

WHERE IS MULTI-LEVEL MARKETING IN WORLD ECONOMY?
MULTI-LEVEL MARKETING is a vibrant industry offering employment to over 43 million people worldwide with a turnover exceeding $ 75 billion in worldwide sales of products and services as per the figures of the World Federation of Direct Sales Association (WFDSA) a body regulating the conduct of business on ethical lines and all members are bound by this code of conduct.

CONTROVERSIES SURROUNDING MLM
Multi-level marketing has a recognized image problem due to the fact that it is often difficult to distinguish legitimate MLMs from illegal scams such as pyramid or Ponzi schemes. MLM companies work legitimately in the United States in all 50 states and in more than 100 other countries, and new MLM companies may use terms like "affiliate marketing" or "home-based business franchising". However, many pyramid schemes try to present themselves as legitimate MLM businesses.

NEED OF REGULATORY AUTHORITY FOR MLM
In India, Insurance sector faced many problems in its early times but it is accepted and now it has become a part of life. Changes are not accepted easily. There are many MLM networking companies growing like mushrooms. Many companies have run away overnight having made handsome amount. The poor employed youth and folk are being cheated.
Like insurance regulatory development authority (IRDA) there should be a body that ensures the monitoring, regulating and controlling of MLM.