Joe Mariano, president of the Direct Selling Association, said MLM companies typically use multilevel compensation as an alternative to traditional advertising. Companies use money they would otherwise spend on ads or shelf space to instead pay distributors.
"Pyramids are bad guys," Mariano said. "Their mere existence confuses the marketplace and makes it more difficult for legitimate direct-selling companies to do business and to be understood."
Key to the association's code of ethics, which members are expected to abide by, is a prohibition on deceptive sales practices, including promises of outsize earnings. Fortune Hi-Tech was not a member of the association, Mariano said.
Indeed, it's often true that the vast majority of distributors don't earn near enough to make MLM selling their primary job. The Direct Selling Association puts median earnings at $2,400 per year, although critics say the vast majority earn nothing.