A discussion of MLM Ethics is essential to any serious talk of multilevel or network marketing. My purpose in writing this article is to demonstrate that MLM ethics are generally superior to their non-MLM counterparts.

In/about 1962, the courts completely exonerated Amway, the grand-daddy of all MLMS, that had been accused by the FTC of being an illegal pyramid. Soon after, the FTC created a new definition of the "pyramid" using the Amway model as its standard of legitimacy – but not before the media had permanently damaged the reputation of MLMs in the eyes of the public.

Let's examine this issue in the context of the "Formal Network". In contrast with a social network, the formal network is very intentional. It exists to fulfill a defined purpose.  Its members are expected both to benefit from and to contribute to the network’s resources. Benefits are generally awarded to those who earn them through their productivity – and by teaching new members, how to participate effectively in the network environment.

Formal networks, as defined above, may or may not be ethical. According to FTC regulations, it isn't sequential recruitment that defines a "pyramid" as a "bad thing" – nor is it the fact that only a small percentage of participants make significant money. By these criteria, most corporations are pyramids. The defining feature of the pyramid is simply the fact that nothing of real value is sold to the "customers".

But the ethically structured MLM organization has much to recommend it.  To see why, let's examine the "culture" of ethical formal networks. By "culture" I mean the basic building-block relationship between two people who interact within the organization.  Most of our institutions are hierarchies; so their culture is that of boss/underling. It is very common within this culture for the boss to discourage corrective feedback.  So usually, hierarchies become bureaucracies – wherein corrective feedback is systematically discouraged, forbidden, avoided, or destroyed – which are "bad things".

What makes MLMs better than hierarchies is the fact that their culture is highly sensitive to feedback. You can go to your sponsor and say, "I’m not doing so well.  Can you give me some help…some corrective feedback?" Your sponsor cannot fire you for your incompetence; and wouldn't if he could – unless he's really stupid.

If your sponsor knows what he is doing, he goes to work for you (you never work for him/her) and helps you become successful - teaching you everything you need to know to operate independently. The fact is that MLM or network marketing businesses, are not exploitative.  Bureaucratic behavior is simply not tolerated in the ethical formal network culture.

Remember, above all else, that the process of sequential recruitment does not define a pyramid. For a MUCH more extensive discussion of this topic, including the legal criteria that define pyramids, go to my website and click on the Navigation button that says "The Ethics of MLM". If you are an MLM participant, and have your own website, you can even link to that page to reassure prospective distributors concerning these issues.