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All classes easy prey for marketing scammers

By Li Xu (Global Times)

14:36, July 07, 2012

Multi-level marketing (MLM) is a business model first put into practice in the US in the 1940s, where salespeople are rewarded not only for selling the product but also for recruiting other salespeople. Genuine MLM selling is not a scam, nor is it particularly profitable.

However, MLM soon went astray when introduced to China at the end of the 1980s. Hyped as the last chance to get super-rich, MLM companies overwhelmed the market. This created a murky and chaotic market environment where the quality of the products and market demands were ignored, and people were much interested in recruiting others than selling products. MLM thus rapidly degenerated into pyramid schemes.

Although the Chinese government banned MLM in 1998, scammers still exist and have been developing their networks underground. They often disguise themselves as ordinary businesses looking for partners or offering opportunity for people, tricking people to come to their locations so to recruit them and "brainwash" them into believing their scams.

There are generally two styles of MLM scam in China: one is primarily expanding in the northern part of the country while the other is in the south. The northern style is relatively primitive, and its victims are mostly young people like students and graduates looking for work. The scams usually takes the form of direct-selling, online-selling and the suchlike. Victims are tricked into joining up with the scammers and living together in facilities provided by those crooks.

The conditions there are usually poor but the scammers want to manipulate them into believing that they are being tested for success. Luckily, this also means that victims won't lose too much financially in this scam, as the cost for the "investment" is generally a few thousand yuan.

The southern style, however, is much appealing to people in the middle class. Instead of giving mass training in a remote location, scammers carrying out this style of scheme will usually present themselves in a high-end fashion and provide individual training to victims.

Some of them will claim that their practices are secretly supported by the government. That's why professors, lawyers, and government officials alike have fallen for such tricks.

But the real damage these scams bring is not just financial losses. They can even break up families and turn close relatives and friends into stranger or enemies.

One typical story I can recall took place in Fuzhou recently. I was invited by a young man, Huang, to help save his mother from the influence of MLM scammers. Huang's mother visited Nanning, capital city of Guangxi Zhuang Autonomous Region, a few months ago, and was tricked into joining a scam network there. After she returned, she began telling Huang that she could earn over 10 million yuan ($1.57 million) in two years with only a tiny investment.

In order to help her out. I disguised myself as a family friend of Huang's cousin and won his mother's trust by pretending to be involved in the scams myself. I started reasoning with her about the dark side of MLM. I then told her that the law actually forbid this practice, and doing so would not only just end up putting herself in jail, but also hurting her family. She was shocked, and thanked me for my help.

But to effectively crack down on MLM scams requires more than individual efforts. The government needs to play a key role. It needs to tackle the crooks, educate the public, and tighten up the law. It's tough work, but the scammers can be brought under control.


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