Multi-level marketing, also known as pyramid schemes, has been gaining force in the marketplace, and no one knows why. From the outside, it looks like these companies are very successful, but the inner workings of the company could be just the opposite. So how can these business practices be curtailed?
With the creation of RICO fifty years ago, the majority of pyramid schemes have been done away with, but there are still a few companies still getting away with it to this day.
Does RICO Work?
RICO (Racketeer Influenced and Corrupt Organizations) was originally created to take down organized crime, such as mafia groups. Since its initial creation, it has been expanded to cover other forms of corrupt organizations, such as police departments, motorcycle gangs, and pyramid schemes created by companies.
The repercussions of being charged under this Act is that all money and property are forfeited to the government, and assets can even be frozen before the matter goes to trial. The victims of these crimes are awarded “triple damages”: three times the amount of money they lost from the defendant’s actions.
The courts have expanded the scope of the Act to include civil wrongs committed by big companies, including those who work in Big Pharma and Wall Street. So how do MLM schemes fall under the scrutiny of RICO?
The organization of a company will be examined; those that are organized for multi-layer compensation and emphasize the recruitment of members over the selling of a product are generally regarded as MLM schemes. This is because the company stands to gain from all the money being lost from new members.
Falling into an MLM
Many unsuspecting people and up becoming a part of an MLM and lose thousands of dollars because they’re unaware of how these schemes work. Words like “investment” are used to fool them into thinking that they’ll earn this money back in the future, but it’s all a blatant lie to fill the pockets of the higher-ups.
However, RICO is bringing these activities into the light so that more and more people are becoming aware of these practices and what they really mean. If it’s too good to be true, it probably is.
Many people have complained that the terms of the RICO Act are too vague and that its reach is too great, that the federal government could classify any business practice as violating the act, resulting in prosecution. These proponents have argued that the Act should either be done away with altogether or be rewritten with more specific terms so that it has a clear focus. Otherwise, it could lead to a sweeping gesture on the part of the government to prosecute even small businesses for “violating” the Act.
RICO has done some good in the world in keeping large businesses from monopolizing and abusing the pockets of the little guy, just trying to earn a living. Without this law to protect them, many more businesses would still be operating their MLM schemes and ruining the economic sphere for everyone else.