Q. The Goldquest is a network marketing business that is gaining popularity, as it appears to be a quick way of raising money. To join, one pays $400 and receives a product of his choice, which is worth much less than the amount paid. He then has to recruit ten new customers, each of whom pays $400. When he has done that, he receives a commission equaling the amount he paid, i.e. $400. If he recruits 60 new members, his commission goes up to $2400. The company produces a Fatwa, which says that this business is acceptable from the Islamic point of view, provided there, is full disclosure of all the commissions paid. Please comment.
Mushtaq Ahmad
A. The ruling you have mentioned is conditional on the buyer knowing the full extent of what he buys, the details of the returns he receives, and the commission each one in the chain receives. Perhaps the scholar who issued this ruling has given a fuller statement, arguing different possibilities, and stating what the situation is like if full disclosure is not achieved. The company would only publicize what serves its purpose. Be that as it may, we need to look into this type of business very carefully before giving any verdict.
The first thing that this sort of business does is to sell a product for much more than the price it would fetch had it been on sale in shops. This is done so that the new client is keen to recoup his loss by recruiting more clients for the company. His first target is to get ten new clients. When he does this, he gets back his initial $400, and he would have the original product. But he is not compensated for the time and effort he puts in recruiting the ten clients. Meanwhile the company gets $4000, for only ten products and the commission it pays him. Perhaps its net profit is not less than $3000, for which it provides nothing in effort or merchandise. The investor is not satisfied with this. Now that he gets his money back, he wants to do more, because the very idea of getting involved with this sort of business is to get some income. He goes on recruiting and gets a similar commission for every 10 more clients.
There is much deception in the whole affair. The Goldquest brochures make the effort required sound easy, when it is not. It is certainly very difficult to persuade 10 people to part with $400 each on a product they know to be worth much less, only to get involved in a task of persuading 10 more people each to do the same. Many do not manage to get their initial 10 recruits, and as a result they lose their initial sum. The fact that they got something for it does not count for much, because what they get is worth much less than their starting payment. Besides, the process could easily lead to spoiling relations. Obviously when you go about finding your initial recruits you start with your friends and relatives. Those of them who subsequently fail to get 10 recruits in order to get back their initial outlay will blame you for landing them in such a mess.
There is only one beneficiary in the whole process, and this is the Goldquest Company. They have chosen an appropriate name that attracts people, but it is they only whose quest for gold is successful. Everyone else is a loser. The whole operation involves much deception, and as such it cannot be lawful in Islam.
