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CAI

Consumer Awareness Institute

Non-profit Corporation

HISTORY of Pyramid Schemes and MLM - Network Marketing 

For Historical Background: You might wish to read Appendix A in  The 5 Red Flags: Five Causal and Defining Characteristics of Product-based Pyramid Schemes, or Recruiting MLM's" [PDF] by Jon M. Taylor, Ph.D. This is the revised full report of a more brief version prepared for the National White Collar Crime Center in 2001 and for the Economic Crime Summit Conferences in 2002 and 2004. These concepts and research findings have also been taught in seminars to federal and state law enforcement officials concerned with the effects of network marketing on consumers. If you wish to read an earlier report with more on the history and legality of MLM - and preliminary analysis of distinguishing features of a product-based pyramid schemes (before the 5 Red Flags were derived), go to "Product-based Pyramid Schemes: When should an MLM or network marketing program be considered an illegal pyramid scheme?"

The FTC Could Have Prevented All This – and Still Could Take Appropriate Action If Officials Were Up for It! The reason you are reading this at all is that the FTC decided in 1979 that Amway was not a pyramid scheme, subject to the "Amway rules," which are not enforced to any significant degree by Amway or any other MLM company. Read "OPPORTUNITY LOST: THE GREAT FTC BLUNDER." Also go to www.falseprofits.com to order Pyramid Nation: The Growth, Acceptance, and Legalization of Pyramid Schemes in America, by Robert Fitzpatrick, President of Pyramid Scheme Alert.

For a fascinating book on the history of fraudulent schemes that will provide a good backdrop for a serious study of the subject, seek the out-of-print book by Joseph Bulgatz with the lengthy title Ponzi Schemes, Invaders from Mars & More Extraordinary Popular Delusions and the Madness of Crowds. (Published by Harmony Books [trademark of Crown Publishers, Inc. of New York] in 1992.) If you are lucky, you may find a copy at your public library, from a used book buyer, or through Amazon.com.

MLM – the truth! 

PLEASE HELP!  We believe this site presents information about MLM/network marketing that is as close to the truth as can be found. It can save you much time, money, and grief, as it has done for many others. And since law enforcement has essentially looked the other way on this type of consumer abuse, it is left to informed consumers to inform and warn their friends and relatives about the potential losses they could suffer from participation in a “recruiting MLM.” So please print and distribute at least 5 copies of the answer cards to those you care about – and ask each of them to share answer cards with 5 people, and each of them with 5 more, etc., etc.  . . .  In this way, you can influence many people for good – through an endless chain of truth-telling.  Click here to see these handy answer cards (4 to choose from) that you can print and distribute now –  as well as carry with you for those awkward moments when you are recruited by a well-meaning friend or relative. For more information, click on the appropriate links above.