Sorted independent finance guides are full of helpful information on everyday money matters.

Making money from sponsorship commissions, not product sale

PETALING JAYA, July 6 (Sin Chew Daily) — Ministry of Domestic Trade, Cooperatives and Consumerism enforcement division direct sale unit senior assistant chief Mohd Mokhtar pointed out that pyramid schemes are largely identical to multilevel marketing with the exception that multilevel marketing companies make profits from the sale of products and services while pyramid schemes normally do not provide any product or service as they make money from the commissions in recruiting new members.

He told Sin Chew Daily illegal; pyramid schemes do not offer any product for sale, and the profits they have made come mainly from the admission fees of new members. He said the admission fees for new members are very high, normally over RM1,000.
He said pyramid scheme is not a sustainable business operation mode. When the lowest level participants fail to get more people to join, from the top to the 10th levels will collapse completely.
“On the contrary, multilevel marketing companies make their profits through sale of products and services, and these companies can survive so long as there is still sale.”
He said the multilevel marketing industry is controlled by the country’s law. According to the Direct Sales Act 1993, all multilevel marketing companies operating in Malaysia must apply for license with the ministry of domestic trade, cooperatives and consumerism. The ministry will then study their marketing plans for presence of pyramid marketing element, and the operators’ licenses would be revoked if found to contain such elements.
He said a dilemma faced by the ministry’s enforcement division is that greedy members of the public do not even bother about whether the scheme is a scam. They only come and complain after they realize they have been swindled and failed to get back their money, but they do not offer full cooperation.
He urged the public not to be greedy to fall victim to pyramid scams.

Direct Selling Association of Malaysia (DSAM) president Frederick Ng told Sin Chew Daily orthodox direct selling modus operandi has been established upon the sale of of products or services, not upon commissions from recruitment or sponsorship of new members.
He said if a company’s revenue has been obtained from sale of products, the company will be dealt with under the Direct Sales Act 1993 for carrying out pyramid or illegal direct sale activities.
“A true direct selling company makes money by expanding its organization network through a fair and just marketing plan. Only such a legal and rational operation mode will be sustainable.”
Ng said the DSAM does not hope to see ignorant people to fall victim to pyramid operations.
There are 420 companies registered under the Direct Sales Act 1993, including not fewer than 100 foreign companies.
“Malaysia is a relatively open market for direct sales companies. Any foreign company intending to set foot on Southeast Asia will choose the country as a bridgehead for future expansion in the region due to its multilingual advantage.”
He said due to the widespread of right information, pyramid schemes are getting rare in the country over the past three to five years while the association is working closely with the government to prevent them.