Commercial Office issues pyramid schemes warning

PHUKET TOWN: The Phuket Provincial Commercial Office (PPCO) has issued a warning to the public about the spreading business practice of direct selling, also known as multi-level marketing (MLM). Direct sales operations are expanding further into all regions of Thailand. The products range from electrical appliances to herbal remedies. Most of these direct sale companies operate legally, are registered in Thailand, follow the guidelines and pay taxes. However, there are smaller companies that ignore the guidelines and rules and claim to be branches of larger companies in Bangkok or abroad. These operations are often classic pyramid schemes, the PPCO says. These MLM companies work by enlisting members who have to pay a membership fee, usually around 300 to 500 baht. The members are then persuaded to buy a product, at a high price. They are then persuaded to find an additional two to four members to join the “company”. These new members are talked into buying the product from members who joined earlier, and who then get a commission. The process continues with more and more people becoming involved. Should a member fail to find new members to join and buy the product, he or she will get no money and will not receive a refund for the product already bought. Most of the products are of low standard or are copies of others, but are usually expensive, enabling the seller to get a tempting commission, sometimes as much as 50%. Some members of such companies buy a large amount of the product in order to meet with certain conditions of the company, then find that they are unable to sell the product because it is too expensive or of too low a quality. This, in turn, can cause debts and serious difficulties for members as surplus stock builds up. In light of these problems, the PPCO is urging people to be cautious and practice due diligence before attempting to enter such businesses. For further information, call the PPCO at 076-212017.