Identifying Features Of Pyramid Schemes

The characteristic feature of these schemes is the fact that the product being sold has little or no intrinsic value of its own or is sold at a price out of line with its fair economical value. Some cases include "products" such as brochures, cassette tapes or systems which merely explain to the buyer how to enroll new members, or the purchasing of name and address lists of future prospects.
The costs for these "products" can range up into the hundreds or thousands of dollars. A common Internet version involves the sale of documents entitled "How to make $1 Million on the Internet" and things like that. Another example is a product sold at higher than ordinary retail price for the same or similar products elsewhere.
The result is that only a person who is enrolled in the scheme would buy it and the only way to make money from it is through the recruitment of more and more people, to add below that person, also paying more than they should. This extra amount paid for the product is then used to fund the pyramid scheme. In effect, the scheme ends up paying for new recruits through their overpriced purchases rather than an initial "signup" fee.

Little or no information offered about the company unless an investor purchases the products and becomes a participant

Vaguely phrased promises of limitless income possibility

No product or a product being sold at a price ridiculously in excess of its real market value.

An income stream that primarily depends on the commissions obtained by enrolling new members or the purchase by members of merchandise for their own use, rather than sales to customers who are not participants in the scheme.

In most cases only the early investors to make any real income.

The key distinction between these schemes and legitimate MLM businesses is that in the MLM offers a meaningful income that can be earned solely from the sales of the associated product or service to customers who are not themselves enrolled in the scheme. While some of these MLM businesses also offer commissions from recruiting new members, this is not essential to the successful operation of the business by any individual member.

The distinguishing characteristic is whether the money in the scheme comes primarily from the participants themselves (pyramid scheme) or from dealings of products or service to consumers who aren't participants in the scheme (legitimate MLM).