“Be your own boss! Flexible working hours, no upfront capital needed. Training provided.” Sounds familiar? Over the years, a version of this pitch has been crafted to recruit people into multi-level marketing (MLM) schemes all over Singapore.
What Is A MLM Scheme?
MLM schemes is commonly defined as a sales structure in which a person recruits another person and receives commissions on the sales made by their recruit, and from the earnings of other people recruited by the recruit. In other words, people in the MLM scheme get rewarded not only for selling products, but for recruiting other salespeople. In some countries, notably the United States, MLM schemes are legal.
You might have also heard of the term “pyramid scheme”. It is widely regarded as an illegal subset of MLMs where salespeople pay membership fees in order to participate, and is subsequently paid commissions for recruiting additional participants into the scheme. These are illegal because the unsound financial structure of the business mean that people who operate pyramid schemes are necessarily be doing so with the intention to defraud others.
Let’s address one very important point that is the source of much confusion about MLM schemes: In Singapore, the law governing MLM activities does not make a distinction between MLM and pyramid schemes.
Who Enforces The Law On MLM In Singapore?
MLM activities in Singapore are governed by the Multi-level Marketing and Pyramid Selling (Prohibition) Act.
In a word, MLM schemes are NOT LEGAL in Singapore, unless they are specifically excluded through meeting specific criteria. Examples that are qualified for exclusion include insurance companies, master franchises, and direct selling companies.
Direct sales businesses, need to be registered with and abide by a Code of Ethics and Conduct spelt out by the Direct Selling Association of Singapore. This serves to protect the interests of both consumers and participants of direct sales businesses. The Consumers Association of Singapore has also been actively educating the public on multi-level marketing related issues.
Responsibility for enforcing the Multi-level Marketing and Pyramid Selling (Prohibition) Act is given to the Singapore Police Force’s Commercial Affairs Department (CAD) though the act is administered by the Ministry of Trade and Industry (MTI).
Penalties For Breaching The MLM Act
Under the law, all persons who participate in multi-level marketing or pyramid selling would commit an offence, even if they did so without unknowingly. Ignorance or lack of ill intent is not an excuse because through participating in MLM schemes, one would have caused damage to other people by bringing them into the scheme.
Currently, a conviction for MLM offences will result in a fine of up to $200,000 or to imprisonment for a term not exceeding 5 years, or to both. This is a very strong deterrent for anyone to ensure they do their due diligence before taking part in such schemes.
Where To Report Illegal MLM or Pyramid Schemes?
If you suspect a scheme has contravened the law, you should report to the CAD.
Telephone: 6325 0000
Lodge A Report Online: CAD Website
Lodge A Report In Person: 391 New Bridge Road, #06-701 Block D, Police Cantonment Complex, Singapore 088762
Consumers should educate themselves about MLM schemes and remember that if something sounds too good to be true, then it probably is.