What is the ruling of Sharia on network and pyramid marketing?
Answer:
All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
Network or pyramid marketing, in most of its widespread forms today, and taking commissions for it isn`t considered lawful brokerage. Rather, it is considered a form of forbidden gambling, because participants usually aim to bring as many customers as possible to get a fat reward for that. When a participant brings other customers and meets the conditions of the Network or pyramid marketing company, he gets a commission which is more or less than the amount he has already paid to participate. But, if he fails to bring customers, then he loses everything and this possibility leads to falling into the suspicion of uncertainty and gambling, which is forbidden by Sharia.
The cause for prohibiting this kind of marketing (Network or pyramid) is that the participant must make payment in advance, whether as participation fee or to purchase a commodity that he doesn`t actually need in the first place. Moreover, buying a commodity doesn`t make this type of marketing lawful because the aim is to participate in order to bring as many customers as possible so as to get the fat commission, which could be far more than the price paid for the commodity itself. However, in lawful brokerage, a broker markets the commodity to a customer who actually needs it while in network or pyramid marketing a participant markets to bring another participant and so on.
Even if a participant wanted the commodity itself, the general goal of the network or pyramid marketing company rests on gathering as many participants as possible and alluring the first participants who constitute the top of the pyramid with fat rewards at the expense of the rest of participants who constitute the bottom of the pyramid. In other words, there is a winning minority at the expense of a losing majority. From the perspective of Sharia, this is an act of corruption and corrupting others.
Committees of Sharia and scholars specialized in this type of marketing have pointed out that it involves many violations of Sharia.
It is worth drawing attention to the fact that network and pyramid marketing companies have diversified their methods and techniques. Nevertheless, their line of business is forbidden as it entails many violations of Sharia. And Allah the Almighty knows best.