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7 telltale signs a direct-selling business is actually a pyramiding scheme

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Direct selling is face-to-face selling to the consumers by independent distributors or sales people. It’s a legitimate marketing medium that is used to sell different products: from cosmetics, apparel, intimate apparel, fragrances, toiletries, home products, water purifiers and food supplements.

According to the Direct Selling Association of the Philippines, proper caution must be taken before participating in any direct selling or multilevel marketing proposals. While those registered with the DSAP are assured of their legitimacy, there are still many who hide under the guise of direct selling, but in truth, are pyramid schemes. The following are some telltale signs that the business is a pyramid scheme:

1. The costs to enter the plan are unreasonably high.

2. Participants are compensated primarily for recruiting other participants.

3. The compensation is not based primarily on the sale of goods and services.

4.  The goods and services are not legitimate, and currently marketable.

5. The participants are required to buy more products than they can reasonably sell or use.

6. The plan does not allow return of unused inventory.

7. There is no written contract providing key terms and a definite cancellation period.


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