MLM (multi-level marketing)
A sales structure in which participants earn from their own sales and a portion of sales made by people they recruit — legitimate when product-driven, potentially fraudulent when recruitment-driven.
Also known as: multi-level marketing, network marketing, direct sales
Last reviewed: 1 June 2026
Multi-level marketing (MLM) is a legitimate if controversial direct-sales model where independent distributors earn commission on their own sales and residual income from a 'downline' of people they recruit. Thousands of companies operate genuine MLM structures selling products such as cosmetics, supplements, and household goods.
However, the line between legal MLM and illegal pyramid scheme can be thin and is frequently crossed. Red flags that suggest fraudulent operation include: income derived primarily from recruitment rather than retail sales, unrealistic income claims, large mandatory starter-kit purchases, strong social or community pressure to recruit, and the majority of participants losing money.
Regulatory studies of many MLM companies find that the vast majority of participants (often over 99%) earn little or no net income after expenses, with losses concentrated among those who join later and recruit fewer people.