The Better Business Bureau would like to caution people to do their homework and avoid the potential risks involved with fraudulent business schemes.
“We have received a number of inquiries from consumers who are interested in becoming independent distributors of health-related products,” says Lynda Pasacreta, BBB President and CEO. “They don’t know anything about the company, and are desperate to hear that it is legit. Unfortunately, most of the time the income is exaggerated, and ends up being too good to be true.”
These opportunities appear lucrative, but often are more hype than substance. In some cases, the person who wishes to be an independent distributor is compensated through the recruitment of new participants, is required to buy specific quantities of products, or must pay for training courses up-front before starting their business.
Not all business opportunities are fraudulent. Multi-level or "network" marketing plans are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you'll receive commissions for your sales and those of the people you recruit to become distributors.
However, the focus of these plans should be selling a viable product, not recruitment or other limitations, such as including your financial contribution, which is common to pyramid schemes.
Joining a multi-level marketing company is legal in Canada, but consumers still have to ask questions to determine if a business opportunity is right for them:
Find out if the investment is worth the risk.
What will be your return on investment after you have purchased product, completed training, and purchased advertising for your website? If there is a representative in your area, ask them about some of your concerns.
Consider the investment required.
Many of these opportunities may not be profitable on a part-time basis. Be sure to ask about the income potential over the short- and long-term, as well as the time commitment required to be profitable. There may be a minimum monthly sales commitment to earn a commission.
Find out if there is training required.
Some business’ offer “e-commerce” training before you can start up as a distributor on the internet. Make sure you understand what is being offered— does your investment only involve start-up training? Are you required to pay more fees to start distributing the product?
Check out any health claims and products.
If you’re interested in becoming an independent distributor of a health-related product, you may be encouraged to use the product. Consumers should check Health Canada’s website (www.hc-sc.gc.ca) to see if the product has been approved for use in Canada. Authorized health products will bear either an eight-digit Drug Identification Number (DIN), a Natural Product Number (NPN), or a Homeopathic Medicine Number (DIN-HM) on the label.
Check out the company.
What's the company's track record? What products does it sell? Is the product competitively priced? Is it likely to appeal to a large customer base? Call the BBB or check www.mbc.bbb.org for a copy of the business’ Reliability Report.
Victims should report fraud.
Consumers who suspect they have been the victim of deceptive business practices or who want information on the application of the Competition Act should contact the Competition Bureau at 1-800-348-5358 or online at www.competitionbureau.gc.ca.