DTI cautions public against pyramiding scams

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The Department of Trade and Industry (DTI) reminds the public to be cautious and vigilant when receiving offers promising an immediate return or high return on investment from companies purporting to be engaged in multi-level marketing, direct selling, or franchising.

Last year, the DTI issued Department Administrative Order (DAO) No. 21-09, or the “Guidelines on the Grant of the DTI Seal of Legitimacy for Legitimate Direct Selling and Multi-Level Marketing”, to help consumers distinguish legitimate Multi-Level Marketing (MLM) and Direct Selling (DS) companies from among those with questionable practices.

Under the said DAO, a Seal of Legitimacy Evaluation Committee (SOL EC) was established to assess the marketing and compensation plans of applicant MLM/DS companies. It is a public-private partnership, and the Direct Selling Association of the Philippines’ (DSAP) sits as one of its members.

According to DSAP, direct selling is “face-to-face selling to the consumers through independent distributors or sales people and is considered as legitimate marketing medium”. Pyramiding on the other hand, is defined as “an illegal money scam often confused with legitimate network marketing plans, where people are convinced to pay money for a chance to profit from the payments of others who might join later”.

The DSAP has set up an 8-Point Test to determine whether a company is engaging in pyramiding sales schemes. The DSAP’s 8-Point Test is incorporated in DAO 21-09. According to DSAP, “if the answer to all the questions is yes, then the company being evaluated is a legitimate company. However, if the answer is no on any question, then there is a high probability that it is a pyramid scam”.

1. Is there a product?

2. Are commissions paid on sale of products and not on registration/entry fees?

3. Is the intent to sell a product not a position?

4. Is there no direct correlation between the number of recruits and compensation?

5. If recruitment were to be stopped today, will the participants still make money?

6. Is there a reasonable product return policy?

7. Do products have fair market value?

8. Is there a compelling reason to buy?

The DTI urges the general public to use the DSAP’s 8-Point Test before joining any DS, MLM, or even franchising groups to ensure that the company is not engaged in a pyramiding scheme.

The DTI also urges the consumers to request the company’s marketing and compensation plan to ensure that earnings are based on the product sold rather than the number of recruits.

DTI-Consumer Protection Group Undersecretary, Atty. Ruth B. Castelo, underscores, “We remind consumers to be wary of companies offering potential higher pay-out and incentives upon successfully bringing in more members.”

“This public-private partnership between the government – DTI and other concerned government offices – and DSAP is vital in addressing pyramiding scams to protect consumers,” Undersecretary Castelo adds.

Currently, the DTI, through its Consumer Policy and Advocacy Bureau and Fair Trade Enforcement Bureau, are looking into reports received on the following:

1. Alliance in Motion (Aim) Global Network/Empowered Consumerism International Corporation

2. JC Premiere Business International, Inc./JC Worldwide Franchise, Inc.

3. Alphanetworld Corporation (Nworld)

4. Unlimited Network of Opportunities (Uno)

5. Royale Business Club International

6. Frontrow Enterprise Philippines, Inc.

7. Bionutriwealth Enterprises

8. Classique Herbs Corporation

9. Gfoxx International Inc.

10. Ggeb Mesenger Service

11. Herbalife Nutrition / Herbalife Planet

12. Unified Products and Services Inc.

13. Unilever Network

14. Zynergia Health and Wellness Corporation

15. Artopian International

16. Diamon Online Support

17. Home of Organic Wellness (HOW)

18. i-Fern*/I-fern Global Prosperity

19. Massdrop Marketing/Massdrop Marketing and Franchising

20. Santé Barley

21. Usana

22. Veronica Integrated Prestige (VIP) Marketing Inc.Wealthness Am Global Corporation

23. Zafire SFA/Zafire Natural Beauty and Wellness

24. Zynergia Health Wellness Corporation

The DTI also invites companies engaged in MLM and DS to apply for the Seal of Legitimacy.

The public can download a copy of the DAO 21-09 from the DTI website.

For consumer-related concerns and queries, you may send an email to ConsumerCare@dti.gov.ph or reach us thru the One-DTI (1-384) Hotline. END

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Diyaryo Milenyo

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