COMPARISON OF A MULTI-LEVEL MARKETING BUSINESS AND

PYRAMID SCHEME IN A DIRECT SELLING BUSINESS

A Research Paper Presented to the

Faculty of the Senior High School Department
Saint Joseph Institute of Technology – Basic Education
Butuan City

In Partial Fulfillment of the Requirements for the Subject

Practical Research 1

Skeeter Britney Costa

Juluis Paradiang
Junnel Mendoza
Gerilie Pasco
Erron Justine Chiong
Marc Sean Franco Labajo

November 2017
 Republic of the Philippines
Department of Education
Saint Joseph Institute of Technology
SENIOR HIGH SCHOOL DEPARTMENT
Butuan City

APPROVAL SHEET

This Research Paper entitled: COMPARISON OF A MULTI-LEVEL

MARKETING BUSINESS AND PYRAMID SCHEME IN A DIRECT SELLING
BUSINESS prepared and submitted by SKEETER BRITNEY COSTA, JULUIS
PARADIANG, JUNNEL MENDOZA, GERILIE PASCO, ERRON JUSTINE
CHIONG AND MARC SEAN FRANCO LABAJO in partial fulfillment of the
requirements for Practical Research 1, has been examined and recommended for Oral
Defense.

MICHAEL T. TIU
Adviser

Approved in partial fulfillment of the requirements for the course, Practical

Research 1, by the Oral Examination Committee on November 9, 2017.

JERALDINE V. HOYLAR JULIET G. GABOTERO

Member Member

REYLAN ELMO L. ORILLAN

Member

Recommended Approval:
\
CHARESS A. BARRIOS
Chairperson, Senior High Department

Approved by:

LIZ IRISH N. VILLAMOR, Ed. D

Principal, Basic Education

Date Approved
 ACKNOWLEDGEMENT

We the researchers would like to express our greatest gratitude to the people who

helped us to conduct this research to be a successful and effective one.

Foremost, we the researchers would greatly thank the parents of the researchers

who are always supportive on the researchers especially when it comes to the financial

needs and time to make this research happen.

Second, to Mr. Michael Tiu, the adviser of the researchers, for his continuous

support, advice, patience and immense knowledge that helped the researchers gain more

knowledge about the topic.

To Ms. Maan Marie Ervi Manilag, for her time when the researchers needs her,

assistance and comments that greatly helped us to improve our research.

To Mr. Reylan Elmo Orillan, who helped the researchers the most to come up

with the research topic because of his shared facts and guidance.

To the chairperson of the senior high faculty; Ms. Charess Barrios and panelists;

Ms. Juliet Gabotero, Ms. Jeraldine Hoylar and Mr. Reylan Elmo Orillan, for their

comments, questions and recommendations that made this study stronger and valid.

To the school principal, Dr. Liz Irish Villamor, for sharing her immense

knowledge, recommendations and suggestions that truly helped the researchers to create

an effective and organized study.

To D’9 Kids, for their unending support to the researchers may it be in terms of

financial or moral support. They have been a big part of the success of this study.
 iv

To the respondents, for their participation in the survey that supported this study

and helped the researchers get results of better quality.

Lastly, to our Almighty God for unconditional guidance and wisdom as the

researchers conducted this study. If not for Him, this study wouldn’t be successfully

done.

Skeeter Britney Costa

Juluis Paradiang
Junnel Mendoza
Gerilie Pasco
Erron Justine Chiong
Marc Sean Franco Labajo
 This research is carefully presented by the researchers to those people who are

involve in multi-level marketing business and to those potential victims of pyramid

scheme; for them to learn more about the said models; and also for them to be open-

minded for its possible outcome to the next generation.

Skeeter
Juluis
Junnel
Gerilie
Justine
Marc
 ABSTRACT

In these days, the intensity of meeting business survival and beating competitors in the
market gravitated managers to discover and develop innovative ways of improving
systems and processes. One of those innovations is the Multi-Level Marketing. Multi-
level Marketing (MLM) or also known as Network Marketing which is a modern direct
sales compensation plan in which the sales force is compensated not only for sales they
personally generate, but also for the sales of others they recruit, creating a down-line of
distributors and a hierarchy of multiple levels of compensation (Jennifer Beasley, 2012).
However, pyramid schemes have brought a negative image to multi-level marketing that
caused people to a fear in investing to a multi-level marketing business. This paper
reviews recent studies related to this research and gathered opinions from the respondents
which are used to conduct this research.The purpose of this study is to help the readers
understand what are multi-level marketing and pyramid scheme and it also seeks to
answer the questions about multi-level marketing and pyramid schemes. Additionally,
this paper explores the legality of these models particularly in the Philippines. The
researchers used qualitative design for this study because it focuses in gathering
information through interrogation, conversations and interviews without statistics. In this
study, the researchers found out that there is a big difference between multi-level
marketing and pyramid scheme, which can help people throw away the confusion about
these models. It is hoped that this study will inform and widen the knowledge of people
about these said direct selling models.

Keywords: multi-level marketing, network marketing, pyramid scheme, direct selling

 TABLE OF CONTENTS

TITLE PAGE......................................................................................................................i
APPROVAL SHEET.........................................................................................................ii
ACKNOWLEDGEMENT...............................................................................................iii
DEDICATION....................................................................................................................v
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ABSTRACT.......................................................................................................................vi
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TABLE OF CONTENTS................................................................................................vii
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LIST OF TABLES..........................................................................................................viii
LIST OF FIGURES..........................................................................................................ix
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1 THE PROBLEM AND ITS SETTING

Introduction..............................................................................................................1
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Conceptual Background...........................................................................................3
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 Conceptual Framework............................................................................................4
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Statement of the Problem.........................................................................................5
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Significance of the Study.........................................................................................5
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Scope and Limitations..............................................................................................6
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Definition of Terms..................................................................................................7
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2 REVIEW OF RELATED LITERATURE AND STUDIES
Background and Definition.....................................................................................9
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History....................................................................................................................11
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Legality..................................................................................................................18
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Factors that Convince a Person to Participate in a ................................................19
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Multi-level Marketing business.................................................................................
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Effects of Multi-level Marketing and Pyramid Scheme........................................21
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3 METHODOLOGY..................................................................................................
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Research Design.....................................................................................................24
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 Research Instrument...............................................................................................24
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Research Locale.....................................................................................................25
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4 PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA........26
5 SUMMARY OF FINDINGS, CONCLUSIONS ...............................................36
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AND RECOMMENDATIONS
Summary of Findings.............................................................................................37
Conclusions............................................................................................................38
Recommendations..................................................................................................39
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REFERENCES.................................................................................................................41
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APPENDICES
 Appendix A. Vision, Mission, and Core Values...................................................42
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...........................................................................................................................Appendix A.
................................................................................................................Mission and Vision
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Appendix B. Documentation................................................................................43
Appendix C. Consent Letter.................................................................................44
Appendix D. Survey Questionnaire......................................................................45

CURRICULUM VITAE………………………………………………………………..46

LIST OF TABLES

Table Title Page

1 Factors that convince a person to participate in a multi-level 29

marketing business
2 Factors that determines a legitimate multi-level marketing 31

business
3 Effects of multi-level marketing and pyramid scheme 33
 LIST OF FIGURES

Figure Title Page

1 Schematic Diagram 4
2 A visual model of the operations of a multi-level marketing 15
3 A visual model of the payment plan of a multi-level marketing 16
4 A visual model of the operations of a pyramid scheme 17
5 Research Locale 25
6 What are multi-level marketing business and pyramid scheme? 27
 CHAPTER 1

THE PROBLEM AND ITS SETTING

“Network marketing gives people the opportunity, with very low risk and very low
financial commitment, to build their own income-generating asset and acquire great
wealth.” 
– Robert Kiyosaki, 2013

Imagine someone is busy doing something and he heard someone knocking at the

door. When he opened it, he saw someone holding products and some brochures. This

person explains what the product is and tries to sell it to you. This is an example of direct

selling. “Direct Selling is the action of marketing and selling products directly to the

consumer in a non-retail environment” (Mindy Liliquist, 2017). This refers to the way an

organization performs business with customers (person-to-person selling).

As time passes by, new ideas or concepts are discovered in every aspects of life

and that also includes the field of marketing. Before marketing, as a part of direct selling,

is a work of professionals but then, the multi-level marketing emerged, which has its

origin from direct selling.

According to Jennifer Beasley, (2012), there has been an extraordinary growth in

multi-level marketing business since 1990’s. Multi-level marketing (MLM) or also

known as Network Marketing is a modern direct sales compensation plan in which the

sales force is compensated not only for sales they personally generate, but also for the
sales of others they recruit, creating a down-line of distributors and a hierarchy of

multiple levels of compensation. “Multi-level Marketing is considered as an attractive

business proposition to many people because it offers the opportunity to become involved

in a system for distributing products to consumers” (Susan Ward, 2017). It means that the
 2

main objective of multi-level marketing is to provide products to the end-consumers.

Unlike the person starting a business from scratch, the multi-level marketing participant

has the support of a direct selling company that provides the product and it also offers

trainings as well. Besides earning money off their own sales, they also earn a percentage

of the income generated by the distributors that they have recruited (your down-line) or

you earn your commission.

Multi-level marketing or network marketing is a great business proposition but

despite of all the opportunities that multi-level marketing offers, many are not sure if it is

a legitimate opportunity. Why are there many people who are not convinced with the

offers of multi-level marketing? And what are the reasons of their doubt?

As no organization or system is free from flaws, Multi-level Marketing is often

charged or viewed as scams or pyramids schemes. Pyramid schemes claim to be in the

business of selling products to consumers in order to look like a multi-level marketing

company (Bill Schuette, 2017). This negative image of multi-level marketing causes

the people to be scared of investing in a multi-level marketing business. Besides, it is

easy to fall under the spell of misleading pyramid schemes because of its grand promises,

huge sums of cash, and minimal work and capital required.

According to the Securities and Exchange Commission (SEC)'s Lalaine

Monserate, (2015), there are almost one million Filipinos who have lost a total of 25

billion pesos to pyramid schemes in the year 2015. Imagine someone being a victim of

this said scheme. The said report shows that there are many people who fell under the lies

of pyramid schemes and it also shows that the influence of pyramid scheme is actively

present in the Philippines which made this topic timely.

 3

This research aims to explain the importance of this beautiful, blooming and sun

rising   industry. This is important for us to know about the history to current scenario of

multi-level marketing (MLM) in order  differentiate and compare multi-level marketing

from pyramid schemes and to distinguish the two, avoid becoming a victim of the said

schemes, and to decrease the victim rate of pyramid scheme.

Conceptual Background

Multi-level Marketing is defined in so many terms which often confuse people of

what it really is. In order to avoid confusion about this topic, this study focuses on

Jennifer Beasley’s definition of multi-level marketing in her study entitled,

Distinguishing Pyramid Schemes and Multilevel Marketing (2012) which defines multi-

level marketing as a marketing strategy in which the sales force is compensated not only

for sales they personally generate, but also for the sales of others they recruit, creating a

down-line of distributors and a hierarchy of multiple levels of compensation. Oftentimes,

multi-level marketing gets mistaken as pyramid schemes in which was supported by the

statement in Radha Rani and Dr. Narender Kumar’s research, Multilevel Marketing

versus Pyramid Schemes (2010) which states that “Multi-level marketing is charged with

similarity to pyramid schemes.”

Due to the constant misconception about the legality of multi-level marketing

which is linked with the pyramid scheme, the researchers made this study titled

Comparison of a Multi-level Marketing Business and Pyramid Scheme in a Direct Selling

Business which aims to distinguish multi-level marketing and pyramid scheme through

the help of the survey interview that the selected fifty (50) respondents completed. This

survey interview contains questions that the researchers made carefully. The answers
 4

from the said survey interview was analyzed and used by the researchers which then

resulted to the awareness of the people about the differences of multi-level marketing and

pyramid scheme.

These concepts reflect the objectives that the researchers have set in this study

and also why this topic should be studied deeper because it tackles about our economic

and societal issue.

Conceptual Framework

• Survey

Interviews -

opinions from

multi-level

marketing

participants

Fig. 1.
• Schematic
Analysis -Diagram

Findings of

results or data

gathered
 5

Statement of the Problem

In this study, the researchers aim to help the readers understand what multi-level

marketing (MLM) and pyramid scheme are. This also aims to discover how important

and wide are the knowledge of the people about this topic.

Specifically, it sought to answer the following sub-problems:

1. What is the profile of the participants in terms of:

1.1 Age;

1.2 Name of their participated multi-level marketing business;

1.3 Length of their membership in multi-level marketing business?

2. What are multi-level marketing business and pyramid scheme?

3. What are the factors that convince a person to participate in multi-level

marketing?

4. What are the flagships that determine a legitimate multi-level marketing business?

5. What are the implications that can be drawn from this study?

Significance of the Study

The researchers conducted a study entitled Comparison of a Multi-level

Marketing Business and Pyramid Schemes in a Direct Selling Business with a goal to

help the following:

 6

 Recruits/Future recruits. To give them awareness about the legitimacy of the

organization that they entered or joined. It will also prevent them from possible

harm that pyramid schemes may cause them.

 Students. To enlighten the students on what and what is not about multi-level

marketing and pyramid scheme that can help them differentiate the two.

 Teachers. In order to bring more knowledge to the teachers about the results,

data and information that this research will share and they can use for their future

lessons.

 Readers. In order to give courage and information to the readers so that they will

know the state or condition of their environment particular to the social problems

that are happening right now

Scope and Limitations

The scope of this study is to compare multi-level marketing and pyramid scheme

in order to invest in a legitimate business and avoid the harm that pyramid scheme may

cause. The researchers conducted a survey interview to the fifty (50) selected multi-level

marketing participants in Butuan City. The researchers also gave the respondents a guide

questionnaire. The answers of the said survey interview and guide questionnaires were

used as a basis to address the problems involved in this study.

 7

Definition of Terms

Consumer Act of the Philippines R.A 7394 - It is the policy of the State to protect the

interest of the consumer, promote general welfare and to establish standards of conduct

for business and industry.

Direct Selling - Face to face presentation, demonstration, and sale of products or

services, usually at the home or office of a prospect by the independent direct sales

representatives.

Direct Selling Association (DSA) - is the name of several similar trade associations in

the several countries that represent direct selling companies, primarily those that

use multi-level marketing compensation plans.

Direct Selling Association of the Philippines (DSAP) - is an organization of legitimate

multi-level marketing companies that is based in the Philippines. 

Down-line - Refers to multi-level marketing and describes people who work beneath

you, or 'down the line'.

 8

Federal Trade Commission (FTC) - is an independent agency of the federal

government responsible for providing consumer protection and making sure business

practices remain fair.

Hierarchy - a system or organization in which people or groups are ranked one above the

other according to status or authority.

Marketing - The management process through which goods and services move from

concept to the customer. It includes the coordination of four elements called the 4 P's of

marketing: product, price, place, and promotional strategy.

Multi-level Marketing - is a form of direct sales home business in which independent

representatives sell goods and services from a company to an end consumer. 

Pyramid Scheme - is a business model that recruits members via a promise of payments

or services for enrolling others into the scheme, rather than supplying investments or sale

of products or services.

Securities and Exchange Commission (SEC) - is the agency of the Government of the

Philippines responsible for regulating the securities industry in the Philippines.

Up-line – independent distributors who are above a representative’s genealogy, including

his or her sponsor.

 CHAPTER 2

REVIEW OF RELATED LITERATURE AND STUDIES

"Never depend on single income, make investment to create a second source"

- Warren Buffet, 2015

People are often confused with the similarities of multi-level marketing and

pyramid schemes which usually prevent them to invest in a legitimate business. It is

important, to understand the background and definitions of these models, still, there are

some who cannot differentiate multi-level marketing and pyramid schemes even after

understanding the definitions of these models. In order to help people differentiate and

compare the two, this chapter is divided into six sections: (1) background and definitions,

(2) history, (3) structure, (4) its legality, (5) factors that convince a person to participate

in a multi-level marketing business and lastly, (6) the effects of multi-level marketing and

pyramid scheme.

Background and Definition

Anyone would want to earn money in a quicker and easier way. Who wouldn’t

want to earn money in an easy way, right? That’s why people get easily attracted towards

multi-level marketing and sometimes, with the deceitful pyramid schemes because of its

various advantages that are told to them. Several studies have also given various grounds

on which multi-level marketing has become similar to these illegal pyramid schemes.

Sadly, absence of strong legislation makes the condition worse.

According to Vikrant Rana, (2017), “Multi-level marketing or network marketing

organizations are forms of direct sales companies”. Historically, direct selling companies

use a sales force of independent agents earning a commission on sales.

 10

The Direct Selling Association (DSA), 2010, defines multilevel marketing or also

known as network marketing, as a compensation structure and not a sales strategy. In a

multilevel compensation plan, independent consultants are compensated based not only

on one‘s own product sales, but on the product sales of one‘s down-line (those

individuals the direct sales-person has recruited, or recruits of recruits). Multi-level

marketing is considered by many as a great opportunity because people earn money not

just by their sales but also by the product sales of their recruits.

Multi-level marketing is a form of compensation in a direct sales company where

the salesperson can earn on his or her own personal retail sales and also on the sales of

people he or she personally recruited (down-line) into the business and on the sales of

people recruited by their recruits (down-line) (World Federation of Direct Selling

Associations, 2011).

However, a pyramid scheme is any plan in which a participant pays money for the

chance to receive money upon the introduction of new participants into the

program, whether or not a product or service is offered as well. Compensation hinges on

the continual recruitment of new members, all of whom need to recruit others to recoup

their own investment (Josh Stein, 2013).

In both models, a percentage of the down-line’s sales continue to move up to the

up-line until it reaches the first investor. The difference between a multi-level marketing

and Pyramid Scheme model is that the multi-level marketing participant can gain money

by its sales and not depend on its down-line. Unlike the pyramid schemes, the participant

can only gain profit or money from its down-line, thus, making it dependent on its

recruits.
 11

History

Multi-level Marketing

The roots of multi-level marketing are intertwined with those of the Amway

Corporation and its Nutrilite product line. The Nutrilite concept is said to have originated

about during the early 1930s in the mind of Carl Rehnborg, an American businessman

who lived in China from 1917 to 1927. According to Amway publications, this gave

Rehnborg "ample opportunity to observe at close range the effects of inadequate diet." He

also "became familiar with the nutritional literature of his day." Concluding that a

balanced diet was needed for proper bodily function, he began to envision a dietary

supplement which could provide people with important nutrients regardless of their

eating habits.

After seven years of "experimentation," Rehnborg produced food supplements

which he gave to his friends to try. According to his son, Sam, who became Nutrilite's

president and chief operating officer.

After a certain length of time, Dad would visit his friends to see what results had

been obtained. More often than not, he would find the products sitting on the back

shelves, unused and forgotten. It had cost them nothing and was therefore, to them, worth

nothing. It was at this point that he rediscovered a basic principle-that the answer was

merely to charge something for the product. When he did, the friends, having paid for the

product, ate it, liked it, and further, wanted their friends to have it also. When they asked

my dad to sell the product to their friends, he said, "You sell it to them and I'll pay you a

commission.”
 12

Carl Rehnborg's food supplement business, which thus began as the California

Vitamin Corporation, changed its name to Nutrilite Products in 1939 when it moved to

larger quarters. According to Federal District Court records, significant out-of-state

distribution of Nutrilite supplements began in 1945. In 1947, the FDA began a 4-year

struggle to force Mytinger, Casselberry, Rehnborg, their respective companies, and some

15,000 door-to-door agents to stop making wild claims about their products. Potential

customers were being given a booklet, "How to Get Well and Stay Well," which

represented Nutrilite as effective against almost every case" of allergies, asthma, mental

depression, irregular heartbeat, tonsillitis, and some 20 other common ailments. The

booklet, which contained testimonial letters, also implied that cancer, heart trouble,

tuberculosis, arthritis and many other serious illnesses would respond to Nutrilite

treatment.

After Mytinger and Casselberry, Inc., was asked by the government to show cause

why a criminal proceeding for misbranding should not be started, the booklet was

revised. A "new language" was devised which referred to all diseases as "a state of

nonhealth" brought about by a "chemical imbalance." Nutrilite would cure nothing—the

patient merely gets well through its use. Most direct curative claims were removed from

the booklet, but illustrative case histories were added. Although continued governmental

pressure led to removal of the case histories, the booklet remained grossly misleading.

Amway's founders, Rich DeVos and Jay Van Andel, were friends who became

Nutrilite distributors after high school graduation. They were extremely successful and

built a sales organization with over 2,000 distributors. Fearing that Nutrilite Products
 13

might collapse, they formed a new company, the American Way Association, later

renamed Amway. They began marketing biodegradable detergent products and other

household cleaning products and later diversified the product line to include beauty aids,

toiletry, jewelry, furniture, electronic products, and many other items.

Since multi-level marketing sounds like a pyramid scheme, the multi-level

marketing industry began using the term “network marketing”, which sounds more

legitimate. Later, many multi-level marketing businesses joined the Direct Selling

Association and referred to their programs as “direct selling.” (Jon M. Taylor, 2011).

Pyramid Scheme

It is difficult to determine from recorded history when the first no-product

pyramid schemes were promoted, but by the 1980s several were operating. One example

was “The Airplane Game,” in which participants were recruited into four layers, or

“tiers” – one captain, two “co-pilots,” four “crew” members, and eight “passengers.”

Typically, one would pay up to USD$1500 to enter at the level of passenger, in the hopes

of receiving a USD$10,000-plus payout when one ‘piloted out’ at the top of the scheme.

The pyramidal structure is shown below:

The “captain” at the top walks away with the money and then either drops out –

and the others each move up a level – or he/she either starts a new pyramid and repeats

the process all over or enters at the bottom and recruits his/her way up to the top in order

to cash in again. The problem is that at some point the game reaches a point of saturation

in which no one wants to enter the pyramid and it collapses – or is shut down by

authorizes. Then all those at the bottom levels lose money, which approximates 90% of

participants.
 14

The Airplane Game: The “eight-ball” model contains a total of fifteen members.

Note that unlike in the picture, the triangular setup in the cue game of eight-ball

corresponds to an arithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme in

the picture in contrast is a geometric progression 1 + 2 + 4 + 8 = 15.

It doesn’t matter how many times the pyramid has been recycled into another

pyramid, the scheme will eventually collapse, leaving approximately 90% in a loss

position. These schemes are widely considered to be unfair and deceptive practices. And

though the Federal Trade Commission (FTC) does not specifically address pyramid

schemes, such schemes have been deemed unlawful under the above clause in the Federal

Trade Commission Act.

Another recent genre pyramid schemes were the “gifting schemes,” such as

“Women Empowering Women,” in which participants donated or “gifted” money to the

operators of the scheme, who claimed it was legal since the money was paid as gifts,

rather than investments. But authorities did not accept this distinction, and the gifting

schemes were shut down (Jon M. Taylor, 2011). Even in what form pyramid scheme may

present, it is undeniable that pyramid schemes have cost many people their hard-earned

savings.

Structure

Multi-level marketing is a form of compensation in a direct sales company where

the salesperson can earn on his or her own personal retail sales and also on the sales of

people he or she personally recruited (down-line) into the business and on the sales of

people recruited by their recruits (down-line) (World Federation of Direct Selling

Associations, 2011). (See Figure 2 to visually understand this model)

 15

Fig. 2.A visual model of the operations of multi-level marketing

Source: https://conservancy.umn.edu/handle/11299/132131

A pyramid scheme works in much the same way. The key difference between

pyramid schemes and multi-level marketing is that the compensation hinges on the

continual recruitment of new members, all of whom need to recruit others to recoup their

own investment (Josh Stein, 2013). Also, the difference between the two is that multi-

level marketing receives commissions from consumers and bonuses from its recruits

while pyramid scheme earns only from its recruits.

Most of the multi-level business or organizations uses uni-level compensation

plan. It is the simplest, most straight-forward kind of payment plan, which makes it
 16

attractive to new recruits. Unlike other payment structures, the plan is only one level deep

(thus the name), and you must place all of your recruits on your frontline. Everyone you

enroll falls directly under you, and you earn a portion of everything they purchase or sell

(Trucash123, 2016). (See Figure 3 to visually understand this model.)

Fig. 3. A visual model of the payment plan of a multi-level marketing business

This payment plan opens great opportunity for people who are great in selling,

recruiting or even for part-time workers who are interested in earning money quickly or

short term.

Pyramid scheme is structured like a pyramid. It typically starts with one person –

the initial recruiter – who is on top at the apex of the pyramid. This person recruits a

second who is required to "invest" a certain amount, which is paid to the initial

recruiter.In order to make his or her money back, the new recruit must recruit more
 17

people under him or her, each of whom will also have to invest. If the recruit gets 10

more people to invest, he or she will make a profit with just a small investment.

Further, the new people become recruiters and each one is in turn required to

enlist an additional 10 people, resulting in a total of 100 more people. Each of those new

recruits is also obligated to pay their investment to the person who recruited him or her.

Recruiters get a profit of all of the money received, minus their initial investment paid to

the person who recruited them. The process continues until the base of the pyramid is no

longer strong enough to support the upper structure, and there are no more recruits

(Kario-Paul A. Brown, 2017).

Fig. 4.A

visual model of the operations of a pyramid scheme

Source: https://en.wikipedia.org/wiki/Pyramid_scheme
 18

Pyramid scheme starts with one person – the initial recruiter – who is on top at the

apex of the pyramid. This person recruits a second who is required to "invest" a certain

amount, which is paid to the initial recruiter. In order to make his or her money back, the

new recruit must recruit more people under him or her, each of whom will also have to

invest. If the recruit gets 10 more people to invest, he or she will make a profit with just a

small investment.

Further, the new people become recruiters and each one is in turn required to

enlist an additional 10 people. New recruits are also obligated to pay their investment to

the person who recruited him or her. Recruiters get a profit of all of the money received,

minus their initial investment paid to the person who recruited them. The process

continues until the base of the pyramid is no longer strong enough to support the upper

structure, and there are no more recruits (Kario-Paul A. Brown, 2017).

As recruiting multiplies, recruiting becomes impossible, and most members are

unable to profit. Pyramid schemes are unsustainable which makes the newest recruit as

the loser and the members on the top of pyramid are the only gainers. (As shown in

Figure 4)

Legality

The Section 53 of the Republic Act No. 7394 or Consumer Act of the Philippines

defines multi-level marketing as:

“a sales device whereby any person, firm, corporation or

association or other business entity 2 which sells, distributes,
manufactures, or supplies for valuable consideration, goods or services
through independent agents, contractors or distributors at different levels
wherein such participants may recruit other participants without
requiring, the payment charges, fees, or contributions as a prerequisite
for bonuses, refunds, discounts, dividends, or other considerations in the
program are or may be paid as a result of the sale of such goods or
 19

services or the recruitment, actions or performances of additional

participants.”

According to the Republic Act No. 7394 or the Consumer Act of the Philippines

also declares multi-level marketing as an accepted and legal way of marketing.

As stated in the Section 53 of the Consumer Act of the Philippines, pyramid

schemes are illegal which is defined as:

  “sales devices whereby a person upon condition that he makes

an  investment, is granted by the company or its representative a right to
recruit for profit, one or more additional persons who will also be granted
such right to recruit upon condition of making similar
investments,  provided that the profits of the person employing such plan
are derived primarily from the recruitment of other persons into the
plan rather than from the sale of consumer products, services and
credits…”

Moreover, pyramid schemes also fall under the category of investment contracts

insofar as it involved a solicitation of money that is pooled into a common fund with

promises of profits through the efforts of others. Being in the nature of investment

contracts these should be registered with the Securities and Exchange Commission (SEC)

pursuant to Section 8 of the Securities Regulation Code (SRC). Offering unregistered

investment contracts is illegal and carries a penal sanction under Section 73 of the SRC

(Moises Talladen, 2014).

Factors that convince a person to participate in a multi-level marketing business

Despite the on-going fight of multi-level marketing in proving its legitimacy and

differences with pyramid scheme, Philippines has become a big country member of

multi-level marketing (Doris Dumlao-Abadilla, 2015). But what makes a multi-level

marketing business convincing?

 20

Wil Chirinos, (2017), stated in his news editorial the following pros of multi-level

marketing that may convince a participant to join or invest in a multi-level marketing

business which includes (1) small amount of risk. The advantage of starting anmulti-level

marketing program is that there is a small risk to get started since it only requires

minimum start-up cost compared to that of traditional business. This is supported by what

Radha Rani and Dr. Narender Kumar, (2010), stated in their research, Multilevel

Marketing versus Pyramid Schemes.

“Multi-level Marketing Business is an attractive business

proposition because of its minimum start-up costs”

With a couple of money, it is possible to get started with a company of your

choice, marketing products that you consume already.

(2) The income potential also belongs to the list of these factors. Multi-level

marketing business offers great income as long as you have the skills set of a trained

network marketer, you make whatever income based on your stamina, dedication, and

your willingness to create sales.

This factor is supported by the statement given by the Philippine Women’s

University Sociology Professor Bro. Clifford Sorita, (2014),

“Quick-money is very appealing to Filipinos because of the

“Instant Mentality” holds promise of getting rich in a short span of time
and multi-level marketing has the ability to do this if one exerts effort in
this field.”

(3) Sales talk by the recruiter or recommendation by family, acquaintances, and

friends also drives participants to participate in this model which is also advocated by

Clifford Sorita, (2014),

“Although the bandwagon effect” – people doing something

primarily because other people are doing it –  is not so big in the
Philippines, but when one of their friends, acquaintances, or family
 21

members are the ones who invited them to join, they have the tendency to
give in and join.”
The sales talk or recommendations made by people who are close to the

participant may be one of the reasons why they joined because of the trust they give to

them.

James A. Muncy, (2012), in his study “Ethical Issues In Multilevel Marketing: Is

It A Legitimate Business Or Just Another Pyramid Scheme?” developed five questions

which a person should ask before joining such system. These questions are (i) how is the

money being made? (ii) Is the product legitimate? (iii) How much does it cost to be

involved? (iv) How much work is to be done? And (v) how long has the company been

around? The answers to these questions can guide people for future.

According to the Federal Trade Commission (FTC), (2016), before signing on the

dotted line, one must ask lots of questions, and seek out independent opinions about the

business. The Federal Trade Commission also has set guidelines that help consumers

discern legitimate plans from illegal ones. The flagships that determine a legitimate

multi-level marketing are as follows: (1) Sales of actual product or services to consumers,

multi-level marketing offers products that are government registered since it sells

legitimate products, (2) commissions are paid on sale of products and not on enrolments;

multi-level marketing has a hierarchical commission set up on the sales of products, and

(3) company buys back inventory from participants at the time of termination, pyramid

schemes do not have any inventory.

Effects of multi-level marketing and pyramid scheme

The Article 53 of the Consumer Act of the Philippines (R.A. 7394), defines what

multi-level marketing and pyramid scheme is (Direct Selling Association of the

 22

Philippines, 2017). These business models contain different effects either on the society,

the business owner, the participant itself or the recruiter.

In the name itself, pyramid scheme is known as a fraudulent, dishonest and illegal

business and it is often disguised as a legitimate multi-level marketing business. This

fraudulent scam has caused the pyramid scheme investors in the Philippines to lose 2

billion dollars last 2003.

Reynaldo Wycoco, (2003), director of the National Bureau of Investigation,

revealed that his office had been deluged with pyramid scheme victims' complaints. ''It's

almost physically impossible to get all of their individual complaints,'' he said. Many of

them, he mentioned, ''are poor folk who were tricked into investing their money in

exchange for high returns.'' Others are wives of overseas workers, police and military

officials -- even politicians (Carlos H. Conde, 2003). This just reflects that anyone can be

a victim of this said scam even from rags or riches.

From 2003, pyramid scheme haven’t toned down. The latest reported news about

pyramid scheme case was on last 2015, where according to Securities and Exchange

Commission (SEC), 1 million Filipinos were victimized by this model wiping over 25

billion pesos (Doris Dumlao-Abadilla, 2015).

These incidents above revealed the greatest reason why pyramid scheme is illegal,

because it wastes the money from the hard-work of many people.

Multi-level marketing throughout the years, has helped many people, either the

seller, the recruits and especially the consumers.

John Di Lemme, (2016), in one of his best-selling books “Highly-Guarded

Strategies”, quoted;
 23

“Multi-level marketing is all about listening to what people want

and not talking to sell products”

This proves that multi-level marketing is not all about the sales, income or profits

that a seller, recruiter will make but it also values and respects what the consumer wants.

The need of people is what makes the multi-level marketing business. These needs are

assessed by the multi-level marketing business in order for to know what products they’ll

need to produce unlike the pyramid scheme that only focuses on recruits and doesn’t care

about what a consumer wants since it doesn’t sell any product.

The 25-year network veteran Paula Pitchrard, (2013), mentioned in the book

entitled “Owning Yourself”, that:

“In Network Marketing (Multi-level Marketing), you will think

that the reward is money, but the freedom will far outweigh the money and
in the end it will be all about the lives you change.”

In recruiting new members in multi-level marketing, great income is one of the

promises made by the recruiter to the possible participant. That is the reason why many

people gets easily attracted by this business model, but aside from this, multi-level

marketing implies freedom because it helps people earn income even without having a

full-time job. Also, one of its offered opportunities is to be able to help others who are

either in the surge of financial problem or those who wants to invest their money. This

just implies that every move, step or decisions a person makes may reflect effects that can

help or can cause harm to people that surrounds them.

 CHAPTER 3
METHODOLOGY

Research Design

The researchers utilized a qualitative design for this study because it focuses in

gathering information through interrogation, conversations and interviews without

statistics. In this study, the researchers conducted a survey interviews to the fifty (50)

selected multi-level marketing participants in Butuan City. It also aims to assess the

implications and effects of multi-level marketing business and pyramid scheme.

Research Instrument

In this research, the researchers used computers, cellular phones, opinion from

other people. The researchers also conducted a survey interview to gather data. From this

study, the information and data was gathered with the help of review of literature,

websites related to direct selling and from the survey interview the researchers

conducted; the researchers gathered enough information for this study by asking some

questions that the researchers made carefully. The said survey interview served as a

guideline for getting useful information. The first part of the question aims to know the

opinion of the respondents about what are multi-level marketing businesses and pyramid

scheme. Then the last part of the interview aims to determine the implications of multi-

level marketing and pyramid scheme. The data and information from the survey

interview that was conducted serves as the basis to apply the objectives of this study
 25

Research Locale

This study was conducted at selected multi-level marketing businesses (Avon,

Natasha, MSE, Aim Global, Royale, Sophie, DXN and Frontrow) in Butuan City. These

participated multi-level marketing businesses of the selected respondents can be reached

by riding public vehicles, private cars and motors from any point of the city. Attached is

the map indicating their corresponding locations.

Fig. 5.Research Locale

Source: https://maps.google.com/
 CHAPTER 4

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter comprises the presentation, data analysis and findings that the

researchers gathered from the fifty (50) survey interviews completed by fifty (50)

selected multi-level marketing participants in Butuan City. Here shows the questions that

are aimed to answer. This study is titled Comparison of a Multi-Level Marketing

Business and Pyramid Scheme in a Direct Selling Business in which the researchers

reviewed what multi-level marketing and pyramid scheme are, including their differences

and similarities. In this chapter, the researchers also discussed about the implications

from this study.

1. Personal Data

This section of the guide questionnaire covered the respondents’ age, name of

their participated multi-level marketing business, and their month/years of membership.

Though not central to the study, the personal data helped contextualize the findings and

the formulation of appropriate recommendations to enable people to distinguish the two

models: (1) multi-level marketing and (2) pyramid scheme.

1.1 Respondents’ ages at the time of completing the questionnaires

The respondents’ ages ranged from 19 to 50, with the majority being 22 years

old. The researchers found out that the youngest respondent who is 19 years old is also

the earliest respondent who entered the field of multi-level marketing, with the age of 17

years old.
 27

1.2 Name of the respondents’ participated MLM business

In here shows the name of respondents’ participated multi-level marketing

business. Avon, Natasha, MSE, Aim Global, Royale, Sophie, DXN and Frontrow are the

participated multi-level marketing business of the selected respondents for this study.

1.3 Months/Years of Membership

The researchers discovered that the respondents’ still have not last long in this

field of multi-level marketing, the longest membership by the respondents of this study

is 3 years and 3 months is by far the shortest time of membership of the respondents.

Multi-level Marketing and Pyramid Scheme

Direct
Fig. 6.What are multi-level marketing business and pyramid scheme?
Selling

Model
 28

In Figure 6, a venn diagram is shown which contains the following words that are

related to multi-level marketing and pyramid scheme or the most frequent responses of

respondents to the question “In your own opinion, what are multi-level marketing

business and pyramid scheme?” In the collected data, the researchers realized that the

respondents already had an idea about what multi-level marketing business and pyramid

scheme are. The Consumer Act of the Philippines defines multi-level marketing as;

“a sales device whereby any person, firm, corporation or

association or other business entity which sells, distributes, manufactures,
or supplies for valuable consideration, goods or services through
independent agents, contractors or distributors at different levels wherein
such participants may recruit other participants without requiring, the
payment charges, fees, or contributions as a prerequisite for bonuses,
refunds, discounts, dividends, or other considerations in the program are
or may be paid as a result of the sale of such goods or services or the
recruitment, actions or performances of additional participants.”

As for the pyramid scheme, the Section 53 of the Consumer Act of the Philippines

defined it as:

  “sales devices whereby a person upon condition that he makes

an  investment, is granted by the company or its representative a right to
recruit for profit, one or more additional persons who will also be granted
such right to recruit upon condition of making similar
investments,  provided that the profits of the person employing such plan
are derived primarily from the recruitment of other persons into the
plan rather than from the sale of consumer products, services and
credits…”
 29

Table 1
Factors that convince a person to participate in a multi-level marketing business

FACTORS THAT CONVINCE A PERSON TO PARTICIPATE IN A

MULTI-LEVEL MARKETING BUSINESS

Easy Income/ To earn money

Sales Talk/ Persuasion/ Orientations

Minimum start-up costs or requirements

Possible self-consumption of products

In Table 1, a table is shown which contains the following factors that convince a

person to participate in a multi-level marketing business that were based on the gathered

information and data from the survey that the researchers conducted. According to the

respondents, easy income made possible by multi-level makerting is one of the factors

that makes people participate in this model. This agrees with the statement made by Rico

Bulatao, (2016), a former OFW now reunited with his family,

“I have experienced growth for myself and my family without

having to be “prisoners” manning small stores, being employed forever,
or being forced to be stay-at-home retirees when I became a multi-level
marketing participant.”

Since multi-level marketing doesn’t require full-employment in order to

participate in this model, it is just reasonable to say that it offers easy money because one

can earn money or income without investing full-time in the said business.
 30

Sales talk, persuasion and orientations made by the recruiter or the business itself

are also included in this list. According to the Philippine Women’s University Sociology

Professor Bro. Clifford Sorita, (2014),

“Although the bandwagon effect” – people doing something

primarily because other people are doing it –  is not so big in the
Philippines, but when one of their friends, acquaintances, or family
members are the ones who invited them to join, they have the tendency to
give in and join.”

There are many business opportunities in this world and that includes multi-level

marketing, that’s why there are many people who are spreading its effectiveness and

legitimacy in order to send its advantages and efforts to the end-consumers through the

use of talk and orientations that can determine its purpose.

Josiah Go, (2016), stated that;

“Multi-level marketing is called People’s Franchise because it

offers a road to success without the huge capital needed in traditional
franchising.”

This coincides with the answers of the respondents in this study, that the

minimum start-up costs or financial requirements is one of multi-level marketing

considered pros. Many people aspire to have personal freedom and financial

independence that’s why depending on the capital available, many people decide to

participate in multi-level marketing business since its requirements is not a burden for

those who want to invest or participate in this model.

Lastly, the possible self-consumption of products for the participants is one of the

multi-level marketing pros that can convince a person to participate in this said model.

This is approved by the Direct Selling Association (DSA), (1998), the multi-level

marketing industry recognize personal use as a legitimate end destination for products.
 31

This is then agreed by the Direct Selling Association of the Philippines (DSAP),

(2013),

“The multi-level marketing industry here in the Philippines

recognizes the Direct Selling Association (DSA) statement about the
personal use as a retail sale. Every distributor can use or buy their
products for personal use and it is what made the multi-level marketing a
business with unending opportunities.”

This factor shows that distributor doesn’t only earn income but they also have a

chance to test or use their own products on sale, and they take whatever advantages the

product offers.

Table 2

Factors that determines a legitimate multi-level marketing business

WHAT DETERMINES A LEGITIMATE

MULTI-LEVEL MARKETING BUSINESS?

Sells legitimate products

Government agencies registered

Legal Documents of the business

Securities and Exchange Commission (SEC) registered

Commissions are paid on sale of products and not on enrollments

Includes inventory

Table 2 shows the answers of the respondents in the question “What determines a

legitimate multi-level marketing business?” Business that sells legitimate products,

 32

government agencies registered, legal documents of the business for example the

Department of Trade and Industry or Bureau of Internal Revenue documents since it

involves the selling of products. These are some of the flagships of a legitimate multi-

level marketing business. Securities and Exchange Commission (SEC) registration, the

business commissions are paid on sale of products and not on enrollments, and the

business plan should include inventory, meaning the business or the company should buy

back at least 90% or all the products from the participant by the end of their term or at the

time of termination are also included in this list. Based on the given answers of the

respondents, the researchers realized that the respondents are able to distinguish the

legitimate plan between the illegal one (pyramid scheme) since their answers to the said

question are similar to the set guidelines of the Federal Trade Commission (FTC), (2016),

to help consumers discern legitimate plans from illegal ones. The flagships that determine

a legitimate multi-level marketing are as follows: (i) Sales of actual product or services to

consumers, multi-level marketing offers products that are government registered since it

sells legitimate products, (ii) commissions are paid on sale of products and not on

enrolments; multi-level marketing has a hierarchical commission set up on the sales of

products and (iii) company buys back inventory from participants at the time of

termination, pyramid schemes do not have any inventory.

Table 3

Effects of multi-level marketing and pyramid scheme

 33

Effects of Multi-level Marketing Effects of Pyramid Scheme

It can help many people Scam

Success in life Loss of money/investment

Convenience of the consumers Only the one in the top will earn more

Time freedom

Failure

The Table 3 depicts the different effects of multi-level marketing and pyramid

scheme based on the responds of the respondents in the question “What are the effects of

multi-level marketing and pyramid scheme?” The respondents agreed that multi-level

marketing can indeed help people. It is supported by the American business magnate, Bill

Gates, (2012),

“Network marketing can change and help people’s lives and if I

would be given a chance to start all over again, I would choose network
marketing.”

This shows that even the well-known personality in business agrees that network

marketing or multi-level marketing is a great help for people. Through the help of multi-

level marketing, people can achieve great income which will open the door for success in

life.

The respondents also mentioned that multi-level marketing business provides

convenience. Since multi-level marketing business is part of direct selling industry, this

means that products can be sold to end-consumers and they can buy the products offered

by the said business even without going to its physical store.

 34

The time freedom is also an effect of multi-level marketing according to the

respondents. Imagine how many people have been working for their lives in a company?

How many times have you heard of someone receiving a promotion and another person

was more qualified for that promotion? They are locking their lives or time for a salary

that is not enough for their hard-work and effort. This relates to the thought of Debra

Gravelle, (2011), a member of multi-level marketing in one of her interviews with

Streetdirectory,

“The beauty of multi-level marketing is that you are in charge of

the rest of your life. You will get out of it exactly what you put into it. I
don't mean people who make millions and still have to go to work. I mean
people who do what they want, when they want and with whom they
want.”

Since joining in a multi-level marketing is not a full-time job and participants are

just an independent distributor of the products, the participant is free to do whatever they

want without someone locking their time and actions.

Every aspects of life have a bad or good effect, and multi-level marketing is not

an exemption. Many failures can be seen in the multi-level marketing industry. This is

because in multi-level marketing, you will only get out of it exactly what you put into it.

Multi-level marketing requires major efforts for it to stay on the top and to maintain its

effectiveness. This is actually a very generous compensation for those people that are

willing to stick it out for the long haul. The lack of patience, diligence, and effort causes

the failure in multi-level marketing which causes bad images for this model.

Scam, loss of investment and only the one in the top will earn more. These are the

answers of the respondents when asked “What are the effects of pyramid scheme?” It is

understandable to think of pyramid scheme in that way since it is an illegal business and

it is unsustainable which makes the newest recruit as the loser and the members on the
 35

top of pyramid are the only gainers since it is uses a pyramid compensation plan, the one

that is on the top earns more.

 CHAPTER 5

SUMMARY, CONCLUSION AND RECOMMENDATION

This chapter presents the summary of the research work undertaken, the

conclusions drawn, and the recommendations made as an outgrowth of this study. This

study is titled Comparison of Multi-Level Marketing Business and Pyramid Scheme in a

Direct Selling Business which aims to help the readers understand what are Multi-Level

Marketing (MLM) and Pyramid Scheme. It also aims to determine how important and

wide are the knowledge of the people about this topic. Specifically, it sought to answer

the following sub-problems:

1. What is the profile of the participants in terms of:

1.1 Age;

1.2 Name of their participated multi-level marketing business;

1.3 Months/Years in multi-level marketing business?

2. What are multi-level marketing business and pyramid scheme?

3. What are the factors that convince a person participate in multi-level marketing

business?

4. What are the flagships that determine a legitimate multi-level marketing

business?

5. What are the implications that can be drawn from this study?
 37

This is a descriptive and a qualitative research as it gathers opinions from the

multi-level marketing participants. The researchers analyzed what are multi-level

marketing and pyramid scheme, and in this way people will be able to compare what are

these models. The ability to compare multi-level marketing and pyramid schemes can

lead to security and lessen the pyramid scheme victim rate.

Summary of Findings:

1. The respondents’ ages ranged from 19 to 50, in which the researchers found out

that the earliest respondent who entered multi-level marketing was with the age of

17 years old with the longest membership of 3 years and 3 months. Moreover,

Avon, Natasha, MSE, Aim Global, Royale, Sophie, DXN and Frontrow are some

of the present multi-level marketing business in the city based on the participated

business of the respondents.

2. Based on the data gathered from the survey interview, the researchers found out

that the respondents already know what multi-level marketing and pyramid

scheme are.

3. The researchers found out the following factors that convince a person to

participate in a multi-level marketing business: (i) easy income/to earn money, (ii)

sales talk/persuasion or orientations, (iii) minimum start-up costs or requirements,

and lastly, (iv) the possible self-consumption of products.

4. After the researchers conducted a survey interview, the researchers indentified the

flagships that determines a legitimate multi-level marketing business which are

the following: (i) sells legitimate products, (ii) government agencies registered,

(iii) legal documents of the business, (iv) Securities and Exchange Commission
 38

(SEC) registered, (v) commissions are paid on sale of products and not on

enrollments, lastly, (vi) it includes inventory.

5. The researchers analyzed that this study, implies good effects for the field of

multi-level marketing through spreading the effects of multi-level marketing. This

paper also gives enlightenment for those who are confused of the two models;

multi-level marketing and pyramid scheme.

Conclusions:

There are many who cannot distinguish multi-level marketing between pyramid

schemes, there is a big difference between multi-level marketing and pyramid scheme.

By comparing these two models, the researchers concludes that studying and being able

to know what these two models can help the readers prevent the harm that pyramid

scheme can cause to people.

In a multi-level marketing business, the researchers found out that there are

different factors that can convince a person to participate in the said model. The

researchers concluded that every participant has its own reasons or factors of why they

joined multi-level marketing industry.

After the respondents gave their perceptions of what determines a legitimate

multi-level marketing business, it is easy to distinguish multi-level marketing and

pyramid scheme. It is simple to know if a certain business is a legitimate or an illegal one

because of the set guidelines of Federal Trade Commission (FTC) in discerning a

legitimate multi-level marketing business.

Lastly, the researchers realized that there are a lot of implications that can be

drawn from this study like spreading the good news about multi-level marketing and
 39

erasing the bad image that the pyramid scheme caused to multi-level marketing. This

study also enlightenment to the confused people and for them to be able to join in a

legitimate business that can offer great income to them.

Recommendations:

Based on the conclusions that the researchers mentioned, the researchers is all

heartedly recommending this research to the following in order to broaden the knowledge

of the regarding the direct selling models: multi-level marketing and pyramid scheme.

1. For the recruits and future recruits, when joining in a direct selling model, they

should know the difference between a multi-level marketing business and a

fraudulent one (pyramid scheme) for them to identify if the said business is a

legitimate one. The researchers are recommending this study for them to

compare the two models and invest in a legitimate business.

2. For the government agencies or organization that are involve in direct selling and

securities, they should give importance in spreading the good word about multi-

level marketing and what it has to offer. These agencies and organizations should

also hold seminars that will help people in comparing multi-level marketing and

pyramid schemes.

3. For the teachers, through the data and information gathered in this study, they

should be an instrument in giving more knowledge to their students about these

two models that can help them prevent such harms that pyramid scheme may

cause.

4. For the readers, as they read this study and achieved the enlightenment that about

multi-level marketing and pyramid scheme, they shouldn’t keep their learnings
 40

and knowledge about this study to themselves. They should give a big hand in

giving an opportunity to earn and to lessen the rate of pyramid scheme victims in

the country.

5. For the future researchers about this topic, they should try to read this research

and we the researchers are hoping that this study will add up to their knowledge

about this topic. They should also explore more references that will make their

research about this topic, stronger and valid.

 REFERENCES

Abadilla, Doris (2015). 1M Filipinos lost P25B to pyramid scams.

Beasley, Jennifer (2012). Distinguishing Pyramid Schemes and Multilevel Marketing.

Brown, K.P (2017). What is Pyramid Scheme?

Buffet, Warren (2015). Better Investments.

Chirinos, Wil (2017). 10 Key Benefits Why MLM Programs Are Great Business.

Dinglasan, Rouchelle (2014). Why Pinoys fall prey to quick money schemes.

Kiyosaki, Robert (2013). Rich Dad Poor Dad.

Liliquist, Mindy (2017).What is Direct Selling?

Muncy, James (2012). ETHICAL ISSUES IN MULTILEVEL MARKETING: IS IT A

LEGITIMATE BUSINESS OR JUST ANOTHER PYRAMID SCHEME?

Radha, Rani and Kumar, Narender. Multilevel Marketing versus Pyramid Scheme

Rana, Vikrant (2017). MLM schemes v. MLM direct selling entities: peeling off the

masquerade.

Schuette, Bill (2017). Multi-level Marketing or Illegal Pyramid Scheme?

Talladen, Moises (2014). Illegal Pyramid Schemes.

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Taylor, J (2011). LEGAL AND REGULATORY ISSUES.

Taylor, J (2011). MLM DEFINITIONS AND LEGITIMACY – what MLM is – and is not.

Ward, Susan (2012). Learn to Distinguish Between MLM and Pyramid Scheme.
Vision

Saint Joseph Institute of Technology, Basic Education envisioned to become a

dynamic and progressive Basic Education that holistically developed independent

lifelong learners with 21st century skills in Caraga Region in particular and in Philippines

in general.

Mission

To hold the students to become well-rounded individuals with great minds and

characters as member of the society and to inspire them with a lifelong love of learning,

challenging and rigorous curriculum, and empowering them with global competitive

skills.

Core Values

We demonstrate.... Love of God, country, and fellowmen with commitment and

integrity for excellence in the service to humanity.

 43

APPENDIX B

DOCUMENTATION

In this page shows the images of the researchers and respondents of this study

titled, Comparison of a Multi-Level Marketing Business and Pyramid Scheme in a Direct

Selling Business.

\
_________________
_________________
_________________

Dear Madam/Sir,
Good Day!
In order to fulfill our subject in Practical Research 1, the students are conducting a
research about Comparison of a Multi-Level Marketing Business and Pyramid Scheme in
a Direct Selling Business. It is also on the scope of the K to 12 Curriculum Senior High
School-Core Subject in which we collect data through observation and interviews of the
CS_RS11-IVd-f-2. Through this letter the students hope to fulfill the knowledge they
intend to present to the teachers. And in this letter, the researchers would like to conduct
a survey of selected residents or establishments in Butuan City that are involved with
Multi-level Marketing Business or Networking Groups. We hope that you will give us the
permission to conduct a research in your vicinity. The following students are the
researchers who’ll be conducting the research:

Skeeter Britney Costa Junnel Mendoza

Erron Justine Chiong Juluis Paradiang
Gerilie Pasco Marc Sean Franco Labajo

Any information that is obtained in connection in this study and gathered from
you will remain confidential and will not be disclosed.
Thank you for your time.
Approved by:

MAAN MARIE ERVI M. ASILOM

Practical Research 1 Teacher
MICHAEL T. TIU
Research Adviser
 SURVEY QUESTIONNAIRE

Comparison of a Multi-Level Marketing Business and Pyramid Scheme

in a Direct Selling Business

Name (optional):
Age:
Name of your participated MLM Business:

Length of Membership:

Questions:
1. In your own opinion, what are Multi-level Marketing business and Pyramid
Scheme?

2. What are the factors that convince one person to participate in a Multi-level
Marketing business?

3. What are the flagships that determine a legitimate Multi-level Marketing

business?

4. What are the possible effects of Multi-level Marketing and Pyramid Scheme?
 CURRICULUM VITAE

SKEETER BRITNEY SOYOSA COSTA

P-3 Libres St. Taglatawan, Bayugan City
09166845076
[email protected]

PERSONAL DATA

DATE OF BIRTH: September 26, 1999

AGE: 18

FATHER’S NAME: Emmanuel Austria

MOTHER’S NAME: Mary Rose Salo

PLACE OF BIRTH: Trece Martires, Cavite

RELIGION: Assemblies of God

SEX: Female

CIVIL STATUS: Single

EDUCATIONAL ATTAINMENT

SCHOOL YEAR

ELEMENTARY

Bayugan SDA Elementary School 2011–2012

SECONDARY

Father Saturnino Urios College of Bayugan Inc. 2015–2016

Saint Joseph Institute of Technology (Annex) 2017–2018

 47

JULUIS ARAGON PARADIANG

P-2 Brgy. Dumalagan, Butuan City
09463607873
[email protected]

PERSONAL DATA

DATE OF BIRTH: July 8, 1999

AGE: 18

FATHER’S NAME: Luis Paradiang

MOTHER’S NAME: Judith Paradiang

PLACE OF BIRTH: Dumalagan, Butuan City

RELIGION: Roman Catholic

SEX: Male

CIVIL STATUS: Single

EDUCATIONAL ATTAINMENT

SCHOOL YEAR

ELEMENTARY

F.S. Omayana Integrated School 2011–2012

SECONDARY

Saint James High School 2015–2016

Saint Joseph Institute of Technology (Annex) 2017–2018

JUNNEL MENDOZA
P-5 Alubihid, Buenavista, Agusan del Norte
 48

09957210275
[email protected]

PERSONAL DATA

DATE OF BIRTH: March 16, 2000

AGE: 17

FATHER’S NAME:

MOTHER’S NAME: Flordelyn Mendoza

PLACE OF BIRTH: Libertad Provincial Hospital

RELIGION: United Church of Christ of the Philippines

SEX: Male

CIVIL STATUS: Single

EDUCATIONAL ATTAINMENT

SCHOOL YEAR

ELEMENTARY

F.S. Omayana Elementary School 2011–2012

SECONDARY

Saint Joseph Institute of Technology (Annex) 2015–2016

Saint Joseph Institute of Technology (Annex) 2017–2018

GERILIE SINATAO PASCO

P-2, Brgy. 4, Buenavista, Agusan del Norte
09101869595
[email protected]
 49

PERSONAL DATA

DATE OF BIRTH: November 17, 1999

AGE: 17

FATHER’S NAME: Rogelio Pasco

MOTHER’S NAME: Rosalie Pasco

PLACE OF BIRTH: Buenavista, Agusan del Norte

RELIGION: Born Again

SEX: Female

CIVIL STATUS: Single

EDUCATIONAL ATTAINMENT

SCHOOL YEAR

ELEMENTARY

SPED–IS 2011–2012

SECONDARY

Saint James High School 2015–2016

Saint Joseph Institute of Technology (Annex) 2017–2018

ERRON JUSTINE PARAY CHIONG

Talisay, Nasipit, Agusan del Norte
09122465176
[email protected]
 50

PERSONAL DATA

DATE OF BIRTH: March 26, 2000

AGE: 17

FATHER’S NAME: Jocilyn Chiong

MOTHER’S NAME: Earlwin Chiong

PLACE OF BIRTH: Butuan City

RELIGION: Roman Catholic

SEX: Male

CIVIL STATUS: Single

EDUCATIONAL ATTAINMENT

SCHOOL YEAR

ELEMENTARY

Nasipit Central Elementary School 2011–2012

SECONDARY

Saint Joseph Institute of Technology (Annex) 2015–2016

Saint Joseph Institute of Technology (Annex) 2016–2017

MARC SEAN FRANCO LABAJO

P-2 Obrero, Butuan City
09303560717
[email protected]
 51

PERSONAL DATA

DATE OF BIRTH: January 7, 1999

AGE: 18

FATHER’S NAME: Marconi Labajo

MOTHER’S NAME: Mae Sharon Labajo

PLACE OF BIRTH: Butuan City

RELIGION: Roman Catholic

SEX: Male

CIVIL STATUS: Single

EDUCATIONAL ATTAINMENT

SCHOOL YEAR

ELEMENTARY

Saint Joseph Institute of Technology (Annex) 2011–2012

SECONDARY

Saint Joseph Institute of Technology (Annex) 2015–2016

Saint Joseph Institute of Technology (Annex) 2016–2017