The Truth Behind Network Marketing.


The other day I was visited by an MLM guy. U know of them don’t u? They are the guys who promise u the Financial freedom, the proverbial pot of gold at the end of the rainbow, the best dog food available..etc. This guy was from a firm called RMP Infotec. No, no it’s not a spelling mistake, that’s just the way it’s spelled. Anyway he came armed with a laptop that had a god awful presentation and disapproved of everything under the sun that didn’t come under the technical brilliance of RMP. So he goes on to dazzle me with an amazing presentation that was loud obnoxious and pretentious.

He started by a tall claim that unlike other MLM companies, this company does not make seemingly tall unrealistic promises. To prove his point he promptly ran me through the presentation that had more tall and unrealistic claims that the number of potholes that are present in the Goregaon Malad link way. The presentation was so loud that Rakhi Sawant seemed to be meek and docile in comparison.

Off course I told a polite no thank u and asked him to never bring this topic up again when we next meet. But it astounded me that he had such firm conviction in the company’s products and schemes. And he’s not a sadak chaap either. He’s well educated and an MBA as well. Evidently he might have been born smart but education must have ruined him.

But as an article in CNN-IBN showed, there are scores of people who have been gullible enough to fall in this trap and in the process they ended up squandering their life savings and their losing izzaat in their circle of friends/relatives.

In case u missed out the article u can access it here, here and here. This was an investigative journalism done by them and they talk about MLM or network marketing companies like Amway, Quantum International Pvt Ltd among others.

One of the people they interviewed was a retired couple from AP.

Dr Umamaheshwar Rao, a retired scientist, and his wife were initially supportive of their children’s venture.

The expenditure was guaranteed but not the income. “The net result is a loss. The sales were less and the money spent in the game was more.” The family lost several lakh rupees even as their children drifted away.

“It ruined our inter-personal relationships. People were cult controlled in immeasurable ways,” says Rao, who has filed a public interest litigation (PIL) for action against Amway.

Even villagers who have extremely limited source and income are not spared from the claws of these companies like Pearls Agrotech Corporation.

People from Percherla have been duped into shelling out almost Rs 20 lakh for land that only exists on paper. In Ramadevi’s case after this dud investment, her husband just walked out on her.

Baali, a daily labourer earning Rs 50 a day, mortgaged her house hoping to become a successful Amway Business Owner. “When they met me, they said it’s a great opportunity to earn money. I didn’t have spare money then, so I raised it by mortgaging my house,” says Baali.

“First I paid Rs 5,000, then Rs 2000 and then Rs 2000 again. Like this I paid Rs 50,000 borrowing on interest,” says Baali.

A daily wage labourer !! This is astoundingly ridiculous. Can u believe the strata of society that Amway is targeting.

Most of the time it’s the promise of a Rosy Picture and the lure of money that drives people to invest in such insane schemes. But what they forget is that there are limited people with whom u can network with..and even they will tap the people in ur network only. Sample this..

Shivaiah says, “Aap kahreed lo, bas woh business ho jaata. Aap member bano baad me, aap paanch member ko, dus member ko, waisa mein mahina ka ek enroll kerte hue to, aapka net failta rehta hai, aapka income aate rehta hai, bolke bol diya.” (“Keep buying and keep making business. You become a member and then enroll five to ten more members a month. That way the net keeps spreading and your income keeps coming in. That’s what they told me.”)

Many memberships and seminars later, all Shivaiah managed was to lose Rs 3 lakh. Soon the people he enrolled were competing with him.

He says, “Mera downline poora ismein ghus gaya. Mujhko maloom nahin. Koi khareed rahe hain, koi join, enroll nahin ker rahe hain. Kya bole. Mujhe to baad me mujhko samajh mein aaya.” (“My entire downline jumped into this. I realised this far too late.”)

If you thought the companies may be only guilty of roping in clients with guile but at least their products are good think again. Many Amway distributors recommend a brand of supplements which is supposed to work wonders with energy levels of the body. Here’s something that will open ur eyes.

A lab analysis of some Amway products has thrown up damning results. A report from the Andhra State Food Laboratory shows that these dietary supplements do not contain all that they promise.

Calling them dietary supplements saves the company from tough regulation laws.

“When a product is labeled as a dietary supplement then it neither comes under the category of food nor under the category of drugs and that is how they are evading the regulatory mechanism.”

I can hear some of u saying “well if it’s as bad as u claim it to be how come the companies are still thriving..how come government’s not taken any action against them?” Very valid point. And guess what – the activities that these companies are conducting have been banned in India.

Multi-Level Marketing was banned in 1978. The Prize Chits and Money Circulation Schemes (Banning) Act bans “money circulation schemes” in all forms – Multi Level Marketing, Network Marketing and Direct Marketing

A recent Andhra Pradesh High Court judgment in a case involving Amway has held that its business is illegal, calling it a Prize Chits and Money Circulation Scheme that have been banned since 1978

“Even in Supreme Court, an SLP has been dismissed of Amway company where it was clearly held that Amway is nothing but money circulation scheme, falling into the mischief of this act.”

In 2003 and 2004, the Madras High Court also declared such networking schemes illegal.

About 5 years back even my dad had put about 20k in Amway and never got the funds back. After that all our family members have taken a Bhishma Pratigya of never putting money in any MLM scheme ever in our lives. But every year I get calls from at least 4 of my friends who urge me to listen to a presentation by their “mentors”. And countless invitation to their “Seminars” which will open my eyes to the potential of the getting Financial Freedom (!! Methinks this term is patented by them!). As always I attempt to dissuade them only to be rebuffed at that moment. After sometime they invariably come back to me with their tail between their legs. As the article summarizes wonderfully:

Mathematics and common sense will tell you that losing money in network marketing is not because you failed.

Chain recruitment tends to favor those at the top of the heap. But most – and that could include you – do end up at the bottom.

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26 Comments

  1. Hi there! I am thoroughly impressed with your knowledge of Network Marketing. Your insights into this article about Network Marketing was well worth the the time to read it. I thank you for posting such awsome information. Signed Amanda Kelly on this Day Saturday.

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  4. Well, all I have got to say is that if you are such a coward that you don’t have the guts to face the chanllenges in life and want to limit your dreams to your income.. let me tell you.. you will never ever be able to rise in your life!

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  6. Hi there , I like a lot your blog post expecially the article for dog food samples and your post regarding The Truth Behind Network Marketing. , it looks very interesting. I found you on yahoo while searching for dog food samples . I just Stumble it on Tuesday !

  7. First things first… excellent work done by Sudhir. Your knowledge is quite extensive and the fact that you have taken time to write about it with this detail is quite commendable. As far as the comments of Srikant goes… Get a spell check dude and what was expressed was ones personal opinion. Don’t take it to heart. The concept of MLM is easy money. Do the initial hardwork and let your joinees or tree or whatever that is earn you easy money. I for one believe firmly in ‘No Pain No Gain’ if you want to earn more you want to make more money it’s a good thing but not ‘easy money’. MLM is easy money so as far as i am concerned. I don’t want easy money they go as easy as they come. So Srikant make money and strive to make more money but not easy money.

  8. Well, the point is that most people think that the MLM products are over valued in a ratio of say 1:3 or more…then please explain why a pepsi or mineral water is overvalued at 1:10 or more.

  9. pearls company over cross 4100cr company is it confirm & 70 lacks agents worked in the concern

  10. Hi,Superb. your thought is perfectly right. recently one of my friend took me to RMP Infotec function. There i realize the stupidness of RMP. This is a fraud business to cheat the middle class and low class peoples. the people who attended the meeting is 99% from middle class. If you become an agent for RMP they will give suiting for free of cost, you know why? if you attend a RMP meeting, all the RMP members wearing suits. one who attend the meeting, definately he will impressed by looking at them. The thing is, lot of the peoples wearing suit with stitched shoes. Just think about it. BIG one of the group of RMP, arranged a big fest, but they didnt invited any guests.!!! why????!!!! they themself distrubuted the prizes.!!!..

    The very interesting part is, finaly one RMP guy asked me, how is our team, setup, and all. I said ok. he asked, “when u will join?. i said, i dont have iterest. he was forcing me to join. and he is not able to answer my questions itself.

    and he is telling all the peoples as, ” you just quit the job, you can achieve anything with us.” this is very very bad.

    Thanks buddy, for providing such a good article. thanks a lot.

    If anybody have doubt on my reply, mail me to prashaachar@gmail.com

  11. In RMP, if you want to get your money back,(i.e. you invested 7000, you will get a bull shit product worth 2.5k or 3k, whatever, if you introduce 2 guys, you will get 1000, then if that 2 guys introduced 2 guys each, then you will get 1000, finaly after 14 active members that too in orderly, you will get 8000.) the funda is 14*7000=98000 + your amount(7000)=105000/-. for this the product value might be for total 14+1(you) is appx 45000. the net value remained for the company is 60000. in that they will provide. 8000 rupees to you. then the profit for the company is 52000. and under your chain almost 8000 rupees will spen for your clinets from the company because of chain. so, 44000/-.

    The bottom line is clear, as per their promise, they wont give you the money form the advetisement or the middle man. the money is from your clients only. if you want to get atleat your money means, you should tropuble or almost 14 peoples has to loose their money.

    think about that 14 members and think about thier clients.

    obviously, 1 or another day there will be stop for this.

    this is the funda.

    if you have any queries, ping me to prashaachar@gmail.com

  12. @Prashanth,

    Yeah dude the so called path to riches seem to be nothing more than path to frustration. Now a few of my friends are after my life to join Quest which is about gold coins which are over-prized because they are said to be ‘special’. Special my ass is what I told my friends and ran for my life !!

  13. Prasanth, you are loser. Can you tell me what have you achieved in your life. And the RMP plan that you have presented is wrong, When 14 guys join, its not only one person get paid, atleast 10 gets paid, so the cost to company is much more than what you have said, and it does not need to be in orderly fashion. Dont mislead public by saying things that you do not know clearly. The truth is that, it is very hard to achieve success in any marketing field because only the real go getters win there. The biggest advantage and the biggest minus point of any MLM is that the very low investment required out of a person to start the business, which makes ppl who has the quality and who does not have the quality to start a business, and those who fail, critize the business and leave, while the winner dont quite and earn in lakhs. And the real truth why most ppl dont approve of MLM is because of the human nature of the hesitation to move away from the common crowd thinking of getting teased. What is your achievement in life Prasanth? I`m 24 years old, and IT professional, works part time in RMP, gets paid atleast 15,000 a month extra., when I work only 3-4 hours a day after my work. I`m quitting my job next month and my income is gonna go upto around 70000 a month in 3 months. What is ur plan of life? How old are you? Please do not talk about things which you dont know cleary and mislead the public. Its easy to be a criticiser than to be the one who carries out things. Anyone can blog, sitting at home, but it takes will power and determination to face the world and to realise ones dreams.

  14. For Seeraj…

    As your RMP guys said, you cant achieve anything with your job… this is bullshit.

    you knw onw thing?… I am very much satisfied with my salary. and no need to beg like u guys to join the chain.

    if i worked for extra hours, i will be paid Rs. 150 per hour.

    The funniest part is, one of your RMP team guy said, “I purchased new p-l-er bike within 7 months, Look at us. how we are”.

    I asked him, “whether with full cash or what?”

    He said “no 10k down payment. and —-.”
    no need to explain more i guess.

    Please answer my quetion,
    1.why RMP guys wont invite any deligates? they are thinking themself as deligates (they dont knw how to behave in the stage also).

    2. why RMP products are very cheap quality ( solar lamp, vaccum cleaner, HCL laptops etc)
    3. Think RMP as a circle and if everyone joined RMP, how you will pay for all or last joined persons?

    4. RMP celbrates the achive fest, why not the traning for loosers??
    5. Why they are providing suit for all???!!!

    Now tell me about u…

    1. If you are a IT person, (official means u will be having an official mail ID) give me ur official mail id.
    2. a small hardware engg is also called as IT person ( dont misguide all tht u r in a high level position, and u also joined RMP)
    3. do u know? how many loosers in RMP?
    4. Do you know how and why AMWAY lot of MLM companies are done the fraud things?
    5. Did u analysed that why only middle and low class people attracted by this?

    About me;

    My salary was 1700 in dec 2004. Now I am the IT Administrator in a reputed company. Drawing 3.8L and extra hours as mentioned, and taking care of whole department and setup with my team.

    if you need i will provide my official mail ID.

    The bottom line is clear tht, I too dont want to tell anything more. You guys should not misguide the other as “quit your job and join us”.

    RMP may close (may not be, cant say) in the very next month, but he can achive in his job. No one has become rich or got popularity because of RMP.

    But anyone can live happily with his job. Respect your JOB.

  15. One Guy said in mouthshut…
    Hi..there I recently came acrooss this business model though one of my friend. The rationale of this business is nothing but create more

    members whose membership money is distributed to those who have already become the members (fools). The company is giving the products stating these matches the membership fees which is not the case. I have also come across few complaints about the products being distributed.

    The take home point is you will earn commission as long as you make other fools & share there membership fees as commission. End of the day the promotors of the company making money by selling products at a higher level. The members who are in the early chain are the gainers & you nenver know when this chain stops & you become the last BAKARA !!!

    People start becoming members thinking they will earn lot of commission which is true as long as you create members. Once this is stoped no one will get the commission and the entire chain breaks. We should appreciate the person who created this logic & built his business around this logic..

    How is this See——

  16. Some more reviews,…

    raju2a said:
    Aug 16, 2008 02:50 PM

    Its all true that RMP agents / members are paying Tax to the country from the earnings, but where does the earning come from – i.e., from other people whom you bring into the chain and again they bring people into the chain. at the end you get money from other people’s pocket. You are making rich by fooling others. Stop this nonsense and earn money through proper known means and stop making people fool.

    How is this???

  17. Well said Raju… people believe in yours and work…. don’t day dream and leave your job, how muchever small it is…and don’t spoil relations..

  18. Hello Sudhir,

    You have done a quiet a good amount of research and made the post, Congrats.

    I would like to make some points here.

    a) No Governement has Banned Network Maketing Companies. They have banned companies which falls under the Money Chains. 1978 rules says that “Any Product or Service of not equally worth shouldn’t be promoted through the Network”. It doesnt bannes Direct/Network Marketing Companies

    b) Regarding the Products : RMP, Amway and all other legal ethical companies deal with Branded or inhouse products. RMP doesnt deal with Any cheap products. The HCL laptop available through RMP is available through a HCL dealer also. The same BAJAJ ALLIANZ life Insurance policy is available through an Insurance Agent also. Some of Amways products are mindblowing take the example of Nutralite or Car wash.

    c) I-AM-SATISFIED – Yes you may say that you are satisfied with current job, profession, income etc. But imagine the number of people you are serving. If you are in a good network marketing company you can help/serve millions of people. I suggest you to read a book from a famous economist Mr. Robert T Kiyosaki http://www.amazon.com/Business-School-People-Like-Helping/dp/9992267429

    d) Money coming from other people joining – In Network Marketing Money is not coming from other people joining, but it is from the Product Transaction that has happened. When You are buying a product, is the shop keeper getting money ?. Or is the Distributor of the product getting money ?.

    For more amount Network Marketing and its potential, check in the Internet. or call me +91 9986011351

  19. I would like to ask one question to you.

    Are all the Doctors in this world sucessful ?

    Are there MBA professionals sucessful in their career and profession. ?

    how many people had dreamt like Ambani and Never achieved anything in life.

    How many people are becoming the Best CEOs in their company ?

    Its the same!!! there are some network marketing who failed.

    There are more graduates who fail to get a job than people failed in Network Marketing.

    There are more employees who felt miserably in thier companies but continued to work for thier living..

    Why Blame on Network Marketing ?? There are so many bad things happening around you. Identify them and Blame.

    Wikipedia defines “Multi-level marketing (MLM), also known as Network Marketing, is a business-distribution model that allows a parent company to market its products directly to consumers by means of relationship referrals and direct selling.

    Network Marketing (or MLM) is a proven Business Model that frequently defies description. However, if you think in terms of getting paid for your recommendations for films, restaurants, and books, you will begin to grasp the concept.

  20. i want about the pearls agrotech company details & is website, please send me to my email :jiten60@gmail.com

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