JEDDAH, 25 July 2005 — Dr. Ausaf Ahmed, a senior economist at the Jeddah-based Islamic Development Bank, has warned the public against being cheated by promoters of multilevel marketing (MLM) firms, which offer huge profits to lure clients.
Addressing a seminar here recently, he said MLM companies were using the trick of Italian Charles Ponzi, who in 1920 fooled thousands of people in Britain by promising them 40 percent profit in 90 days.
The Saudi committee for religious edicts has ruled MLM business as Islamically prohibited as it involves usury and fraud.
“The products marketed by these companies are used as a cover or pretext to gain commissions and profits,” the committee said and reminded the public of a Qur’anic verse which prohibits the faithful from unlawfully eating the money of others.
In his lecture, Ahmed said MLMs would end up in total failure. “Demand and supply are the basic principles of any business, which has been ignored by these companies. If a fast-food company opens thousands of branches at all corners of Jeddah it will collapse in no time,” he said.
Market saturation is another problem; it is that not everybody will not purchase a product, no matter how good it is. Consumers will have their own choice while purchasing their needs in terms of quality and price. People are involved in these schemes for the incentives they get on recruiting others, not because they really need these products; that means MLMs are selling dreams not products, he observed.