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23 Jul, 2025
How to Differentiate Legitimate MLM Scheme and A Pyramid Scheme in Malaysia
How Can You Tell if an MLM Is Legit or Just a Pyramid Scheme ? When someone approaches you with a network marketing opportunity, it’s natural to wonder: is this a legitimate multi-level marketing (MLM) business or an illegal pyramid scheme? In Malaysia, this is a common concern, as many people aren’t sure how to tell the difference. Thankfully, identifying whether an MLM is legal isn’t as hard as it seems — once you know what signs to look for.
Below is a breakdown of the key points and characteristics that distinguish a legitimate MLM model from a pyramid scheme
1. Multilevel or Single Level marketing License
To operate a Multi-Level Marketing (MLM) or Single-Level Marketing (SLM) company in Malaysia, it is mandatory to obtain a license from the Ministry of Domestic Trade and Cost of Living. Each issued license clearly states the company’s name, paid-up capital, and expiration date. Therefore, it's essential to request and verify the license in advance before deciding whether to proceed further.
2. What is Legitimate MLM and Pyramid Company
Legal MLM Company:
Primary characteristics of a legal multi-level marketing (MLM) business is its focus on selling products or services directly to consumers to generate commissions. This means that distributors earn income primarily based on actual sales. While the model still involves recruiting new distributors, the main emphasis is placed on product movement as the foundation for earning commissions and achieving promotions.
Pyramid Scheme Company:
A key feature of a pyramid scheme is that commissions are primarily earned through the recruitment of new distributors, rather than through the sale of actual products or services. In many cases, there is little to no emphasis on genuine product movement. This pattern is one of the obvious traits of pyramid schemes and the public is strongly advised to stay alert and avoid such models. Another telltale sign is the tendency to earn unrealistic income projections or guaranteed earnings based solely on new distributor sign-up — often accompanied by expensive starter product packages.
3. Alternative tips and action
- Check the MLM company is registered and legitimate with Ministry of Trade and Cost of Living, and public can also check with the Securities Commission Malaysia (SC) to see if the company is registered for any investment activities. Be sure to verify any investment offers with official authorities before investing money.
- Be skeptical too good to be true income projection.
- Don't be easily endorsed or convinced by celebrity endorsements products or company.
- Do your research and seek more advice before joining or investing.
Conclusion :
By understanding the key differences between legitimate MLM and pyramid schemes, and by taking necessary precautions and verification public can make well informed decisions and avoid from becoming next victim of potential scams.
