MULTILEVEL MARKETING AND PYRAMID SCHEMES
Abstract:
Multi-level marketing is one of those business concepts that has become popular
virtually in all European post-socialist systems at the beginning of their transition towards
market economies; including the Western Balkans. Although hundreds of consumers have
become members of their variants, and many have also suffered losses within a short time
span, this has occurred virtually unnoticed by the local lawmakers. Hardly has the regulatory
inertia been changed by now save the countries that have in the meantime acceded the
European Union that possesses the “4Finance UAB” test to differentiate legitimate MLM
ventures from disguised pyramid schemes quite similarly to the earlier ‘Amway Test’ of the
Federal Trade Commission of the United States. Besides presenting these topics and filling a
gap in legal scholarship, the article reflects on the reasons why more attention should be devoted to these developments by regulators being sensitive to the collective rights of consumers.
Key words: multi-level marketing (MLM), pyramid schemes, naked pyramid schemes,
Ponzi schemes, financial regulation, consumer protection, Amway test,
‘4finance UAB’ test, European Union law.
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