Q. A recent employment opportunity led me to think that it may be a Ponzi scheme. Does BBB have information on this type scheme?
A. Multilevel or network marketing businesses can be legitimate or illegal, depending on their focus. Those focusing on making money through sales to the public are legitimate. Those making money primarily by recruiting salespeople, affiliates or distributors are illegal and referred to as pyramid schemes.
The Better Business Bureau warns to watch for the following signs that a multilevel marketing opportunity is really a pyramid scheme:
* You are asked to recruit new salespeople as the primary way to make money. Carefully consider the training materials. Do they focus on selling to the public or recruiting?
* You are asked to buy regularly in order to get special discounts or privileges.
* You are promised a luxurious and rewarding lifestyle for very little work. If it seems too good to be true, then it is and you should walk away.
If you are uncertain about a multilevel marketing opportunity, BBB offers the following advice to evaluate before you sign a contract and hand over your money:
* Take time to think and research before you sign a contract and invest money. This means do not sign at the "opportunity meeting."
* Evaluate how and when you will be paid and what your expenses will be to determine if it is a profitable opportunity. Do not just accept the claims of how much you can make.
* Get everything in writing.
* If part of the opportunity is to recruit new distributors, make sure that the reward or incentive is not greater than for selling to the public. Also, be realistic and honest in your pitch when you are recruiting others, or you could be held liable for false or inflated claims.
* Get contact information for someone within the company who can answer your questions and then contact them and ask questions.
* Ask the person recruiting you many questions about their own success. How much do they sell each year? How much is to distributors versus the public? How much were their expenses? How long have they been doing this? How many people have they recruited? Proceed as if no question is off limits when your own investment and future is on the line.
If you have encountered a pyramid scheme, you can report it to the FTC at www.ftccomplaintassistant.gov, to the Attorney General in Tennessee at www.AttorneyGeneral.TN.gov and Georgia at www.law.GA.gov.
Jim Winsett is president of the Better Business Bureau of Chattanooga.