Legal Direct Selling Companies vs Pyramid Schemes
Understanding the difference
DSA UAE is the only national trade association representing direct selling in the UAE and the wider MENA region. Since 2012, DSA UAE has represented one of the region’s significant socioeconomic sectors, building a strong platform through which the association provides a unified voice to engage with public and private stakeholders and other bodies, both locally and internationally.
In the process of approving its members, the association collects legal documentation, compensation plans, and registered products from each direct selling company applying for membership with DSA UAE. This ensures that all parties involved operate legitimately, ethically, and in alignment with the direct selling business model. We advise individuals to engage with companies that are members of DSA UAE.
In the process of approving its members, the association collects legal documentation, compensation plans, and registered products from each direct selling company applying for membership with DSA UAE. This ensures that all parties involved operate legitimately, ethically, and in alignment with the direct selling business model. We advise individuals to engage with companies that are members of DSA UAE.
Non Approved DSA Members
Legitimate direct selling companies contribute to a vibrant marketplace by selling competitive, high-quality products and services and providing a sustainable source of income for those who choose to sell those products. However, DSA UAE is committed to support the overall industry across the MENA region, consumers and representatives together. For the non-approved companies, you may differentiate the legal operators from unethical and illegal pyramid scheme businesses by answering to the following questions with a Yes or No:
- Does the company hold a valid trade license to operate in the UAE, as well as adequate office or retail space and local support team to handle member inquiries and support efficiently?
- Does the company have UAE VAT registration number and issues VAT invoices against each sales transaction?
- Does the company and its members provide accurate information about the company, its products and what one can expect as a member of the company?
- Does the company charge an affordable fee for a starter kit which usually includes items, such as samples, catalogs, order forms and other tools that help the member get started?
- Do they have tangible products or services that is competitive in the marketplace and is desired to be purchased by majority of the consumers?
- Does the company require members to hold little or no inventory for their personal consumption or sampling and has a clear buyback policy according to the recommendations of the local Consumer Protection Authority in order to protect them against inventory loading?
- Does the company base bonus/compensation primarily on the sales of products and services to the consumers?
- Is bonus/compensation generated only through sales of approved products and services across the members network?
- Does the company or their members take time to describe the products and services and the business model in a clear and easy to understand fashion and also give potential consumers adequate time to make a decision?
If the answer to any of the questions above is a NO, you should reconsider buying from or joining the company membership.
Avoiding Pyramid Schemes
Legitimate direct selling companies also promote consumer protection and guarantees. All members of the DSA UAE have also pledged to abide by a strict Code of Ethics that outlines a high set of standards for interactions with both members and consumers.
Pyramid schemes take advantage of and defraud people because they:
• Promise large earnings with little effort.
• Promise that one can earn a substantial income merely for recruiting people into the operation.
• May or may not be a tangible (physical or digital) product or service to sell, but if there is it generally has little or no actual value.
• Convince people to buy large amounts of inventory which they cannot easily sell to others and is not returnable (this is called “inventory loading”).
• Charge large up-front fees to get involved, either as a direct payment or in the form of an obligatory payment for “products”. Promoters of pyramid schemes will also try to pressure people to sign up immediately by suggesting the same opportunity will not be available later.
• Base compensation primarily on recruiting others or incentivizing similar activities with “headhunting fees”. Participants are convinced to pay to get involved with the promise of receiving “headhunting fees” when they recruit others.
Legitimate direct selling companies also promote consumer protection and guarantees. All members of the DSA UAE have also pledged to abide by a strict Code of Ethics that outlines a high set of standards for interactions with both members and consumers.
Pyramid schemes take advantage of and defraud people because they:
• Promise large earnings with little effort.
• Promise that one can earn a substantial income merely for recruiting people into the operation.
• May or may not be a tangible (physical or digital) product or service to sell, but if there is it generally has little or no actual value.
• Convince people to buy large amounts of inventory which they cannot easily sell to others and is not returnable (this is called “inventory loading”).
• Charge large up-front fees to get involved, either as a direct payment or in the form of an obligatory payment for “products”. Promoters of pyramid schemes will also try to pressure people to sign up immediately by suggesting the same opportunity will not be available later.
• Base compensation primarily on recruiting others or incentivizing similar activities with “headhunting fees”. Participants are convinced to pay to get involved with the promise of receiving “headhunting fees” when they recruit others.