How to differentiate a legitimate direct selling company from pyramiding using the 8-point Test
The Department of Trade and Industry-Bureau of Trade Regulation and Consumer Protection (DTI-BTRCP), together with the Direct Selling Association of the Philippines (DSAP), conducted a seminar cum forum on “How to Spot a Pyramiding vs. Legitimate MLM Companies” last November 20, 2012 at the DTI International Building in Makati City.
The seminar, keynoted by DTI BTRCP Director Victorio Mario A. Dimagiba, was held to alert people on the recent multibillion-peso pyramiding scam by Aman Futures Trading Phils. Inc. In Mindanao and Visayas. It victimized over 100,000 investors, including public school teachers, soldiers, and policemen.
The main speaker, DSAP Board Member Josiah L. Go, who has also authored 13 business-related books, extensively oriented the attendees on DSAP 8-point test on multi-level marketing (MLM) in general, and on the kind of MLM that has a questionable scheme, which is what is referred to as “pyramiding.”
The main speaker, DSAP Board Member Josiah L. Go, who has also authored 13 business-related books, extensively oriented the attendees on DSAP 8-point test on multi-level marketing (MLM) in general, and on the kind of MLM that has a questionable scheme, which is what is referred to as “pyramiding.”
As part of its aim to protect the public against pyramiding schemes, the Direct Selling Association of the Philippines (DSAP) has released its “8 Point Test,” an evaluation method measuring the legitimacy of a direct selling company.
An advocacy implemented in partnership with the Department of Trade and Industry (DTI), the test is the basis of the DSAP in qualifying companies to be part of the organization.
The eight-point test includes the presence of the product, bank compensation on sales-based commission and not on registration, the intent to sell a product, the guarantee to earn income based on production and not on the number of recruits, opportunity on a product market, reasonable product return policy, the fair market value, and the compelling need of the public to a product.
The test refers to the eight questions that must be asked to determine if an MLM business is legitimate or not.
DIRECT SELLING ASSOCIATION 8 POINT TEST
How to differentiate a legitimate direct selling company from pyramiding using the 8-point Test
1. Is there a product?
2. Are commissions paid on sale of products and not on registration/entry fees?
3. Is the intent to sell a product not a position?
4. Is there a reasonable product return policy?
5. Is there no direct correlation between the number of recruits and compensation?
6. If recruitment were to be stopped today, will the participants still make money?
7. Do products have fair market value?
8. Is there a compelling reason to buy?
If the answer to all the questions is YES, then the company being evaluated is a legitimate company. But if the answer is NO, then there is a high probability that it is a pyramid scam.
DSAP Chairman Perry Mogar said companies that do not pass the 8-point test will be advised to work on the areas they need to improve on and go back to DSAP for second review and assessment.
Mogar added that the longevity of the company reflects the stability and credibility in the direct selling industry.
On the other hand, DSAP Ways and Means Committee Head Rosalio Valenzuela said that it is a requirement that products must end up in the hands of the costumers not with the dealers since direct selling is not recruitment-based.
“There is no investing of money in direct selling, we don’t just invest on money but we work on the products,” he said.
For health products, he added that consumers should check on the approval of the Bureau of Food and Drugs (BFAD) and not just DSAP’s 8-point test.
Mogar added that the longevity of the company reflects the stability and credibility in the direct selling industry.
On the other hand, DSAP Ways and Means Committee Head Rosalio Valenzuela said that it is a requirement that products must end up in the hands of the costumers not with the dealers since direct selling is not recruitment-based.
“There is no investing of money in direct selling, we don’t just invest on money but we work on the products,” he said.
For health products, he added that consumers should check on the approval of the Bureau of Food and Drugs (BFAD) and not just DSAP’s 8-point test.
