The Competition Commission of Pakistan (CCP) has warned that some businesses and individuals are making false and misleading offers of easy money and earning quick returns in their advertisements about multi-level marketing (MLM)/ pyramid schemes with several levels of compensation.
CCP said that applicants are required to pay money upfront to enroll. Participants in the scheme may make money from enrolment fees paid by the new recruits enrolled by them and the sale of products. The commission is paid on the sale of the products as well as for sales by the recruits of a participant. Investors in a pyramid scheme, however, make money primarily from enrolment fees paid by the new recruits enrolled by them rather than by selling any product.
Participants who join these schemes at the initial stages may earn the promised benefits and receive the anticipated income for a limited period. However, the majority of them who join later on stand to lose their entire investment without realizing any returns. These schemes are structured in a way that requires new members to continuously enroll more recruits to generate profits for existing members.
Once the schemes reach a certain size leaving no room for significant new recruitment, which serves as the primary source of profits, the entire system collapses. Eventually, only a select few individuals positioned at the top of the pyramid seize financial gains and a huge majority of the participants bear the loss of all their investments. Such schemes are often advertised through print, electronic, and social media platforms.
CCP advised people to exercise extreme caution when confronted with advertisements or promotions for investment or employment opportunities that offer unrealistically high returns, particularly those requiring upfront payments. Howsoever attractive, these offers often prove false, as the schemes are designed to attract innocent investors and job seekers, collect heavy amounts from the unguarded general public, destroy their footprints, and vanish in thin air, it said.
CCP also emphasized the need for exercising due diligence before investing in any such scheme or joining similar employment promising unprecedented returns. Consumers should verify the legitimacy of the company, scrutinize the sustainability of their business model, conduct netsurfing to gather open-source intelligence, and seek advice from the market or financial experts if needed.
Consumers must be vigilant and cautious to protect themselves from falling victim to deceptive investment or employment schemes. CCP also urged the public to report any suspicious advertisements or promotions.
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