We've heard it so often, we're compelled to set the record straight. No, network marketing is not a pyramid scheme!
But since there are no mistakes, only lessons and learning, here's our lesson for the day.
We'll explain what MLM really is and how it works. So, are you ready for a refresher course?
What is network marketing?
MLM (Multi Level Marketing), or network marketing, is a business model based on selling products or services through a network of independent distributors.
This is a modern, innovative sales approach that has been around for many years. The principle is simple: market products or services directly to consumers, bypassing traditional distribution channels.
A regulated, ethical approach
This business model is based on a legitimate and ethical systemoffering a business opportunity to those who wish to become entrepreneurs while remaining independent.
In an MLM network, distributors sell the company's products or services and also recruit other distributors to join their team. Each distributor earns commissions on sales made by themselves and their team. The key idea is to create synergy and collective collective growth by building a solid network.
Each distributor is independent but shares a strong brand and a common ambition.
Famous brands that use this business model include iad, Herbalife, Tupperware and VorWerk, the brand behind the famous Thermomix.
MLM VS Pyramid scheme
No to pyramid schemes!
It's crucial to distinguish MLM from a pyramid scheme, which is illegal. While the two models may seem similar at first glance, they have fundamental differences.
In a pyramid scheme, the main objective is the massive recruitment of new participants, with no real offer of products or services. Participants are induced to pay a sum of money to join the system, and are remunerated mainly on the registration fees of new members. This model is not sustainable and can lead to financial losses for the majority of participants.
Yes to MLM!
MLM, on the other hand, is based on the sale of real, high-quality products or services, and on a high level of ethics and compliance with applicable regulations. Distributors are remunerated according to their sales performance, as well as the sales achieved by their team. The success of this system is based on building a loyal customer base and developing sales and leadership skills.
This is all the more obvious because, as chartered accountants, a regulated and supervised profession, we can't defend just anything. MLM is a legal and innovative business strategy.
Network marketing legislation in France
In France, MLM is regulated by law. Legislation aims to protect consumers and ensure that business practices are ethical and fair.
As chartered accountants, we are bound by a code of ethics and deontology. If this wasn't a secure system, we wouldn't be here to talk about it.
MLM companies must comply with certain obligations, such as providing clear information on products or services, not requiring the purchase of large inventories, allowing the return of unsold products, and being transparent about potential earnings.
The laws governing network marketing
As you can imagine, we accountants love rules. So to share a little of our devouring passion with you, here are some of the legislative sources governing network marketing in France (and this is just a small part to save you the headaches):
- Law no. 2014-344 of March 17, 2014 on consumer affairs (known as the "Hamon Law") - This law contains specific provisions concerning the commercial practices of MLM companies, particularly with regard to consumer information and the regulation of distribution contracts.
- Consumer Code - Articles L122-6 to L122-9 of the Consumer Code contain provisions concerning the obligations of MLM companies towards consumers, particularly with regard to pre-contractual information, conditions of sale and unfair commercial practices.
- Code général des impôts - Income generated by MLM activities is subject to tax regulations, particularly with regard to declaring income and paying taxes.
- Labor Code - MLM companies must also comply with the provisions of the Labor Code regarding employment contracts, employee compensation and working conditions.
Viseeon, MLM in DNA
At Viseeon, network marketing is more than an organization or a business strategy, it's a state of mind.
MLM stands for sharing, cohesion, skills development and a sense of service.
It's our way of putting people back at the heart of accountancy!
So you see, it's not bad at all!
