Q: Is Multi-level marketing (MLM)/Networking permissible? It is very popular with Muslim women who sell Tupperware, AMC Cookware, Avon
etc. from home.
Details of the system are as follows:
– Explanation 1:
Multi-Level Marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they generate, but also for the sales of
the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation.Other terms used for MLM include pyramid selling,network marketing,and referral marketing.
Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing. Some people use direct selling as a synonym for MLM, although MLM is only one type of direct selling.
– Explanation 2:
A business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in
that payouts occur at more than one level. Network marketing programs feature a low upfront investment–usually only a few hundred dollars for the purchase of a product sample kit–and the opportunity to sell a product line directly to friend, family and other personal contacts. Most network marketing programs also ask participants to recruit other sales representatives. The recruits constitute a rep’s “downline,” and their sales generate income for those above them in the program.
– Explanation 3:
Multilevel Marketing, or MLM, is a system for selling goods or services through a network of distributors. The typical Multilevel Marketing program works through recruitment. You are invited to become a distributor (or contractor or consultant or associate), sometimes through another distributor of the company’s products and sometimes through a generally advertised meeting.
If you choose to become a distributor with the direct selling company, you’ll earn money both through the sales of the MLM’s products and through
recruiting other distributors, by receiving a portion of the income these distributors generate. And when those distributors recruit distributors of their own, you’ll earn money on the income they generate too. The distributors that you sign up with your Multilevel Marketing plan and the ones they sign up in turn are called your downline. The distributor that originally recruited you and whoever is above him or her in the recruitment chain is called your upline.
– Fatwa issued in Saudi Arabia:
To back up his position against MLM, Dr. Al-Bahith cites a fatwa (number 22935) that was previously issued in Saudi Arabia. The fatwa alludes to MLM companies promoting their products to the marketers/ distributors by focusing on the huge commission they could potentially earn. Such an approach is objectionable on several grounds:
– Firstly, MLM involves a type of ‘Gharar’ activity, i.e. ambiguous transaction that is disallowed under Sharia law. After paying the MLM company
a sum of money to join its marketing network, a distributor does not know whether he will find sufficient customers to sell to, and/or whether he can
recruit enough lower-tier marketers in order to benefit from the sales that they make. Thus, MLM preys on profit ambition that could have dire financial outcome if unrealized.
– Secondly, MLM involves unlawful consumption of wealth under Sharia law. This is because people are enticed into parting with their money and becoming distributors by the prospect of huge profit that may not crystalize. Such a business model is un-Islamic, as it is has said in the Quran that Muslims should not unjustly eat up properties that are among themselves.
– Thirdly, MLM involves trickery. Ostensibly, a MLM company is selling its products as if they are the purpose of its business. However, ‘customers’
often buy these products not to meet their consumption needs, but in order to become distributors. In turn, they lure others to become their distributors by promises of large commission income. This is downright deception, which Prophet Mohammad (Sallallahu Alayhi Wasallam) had warned against by declaring that “(w)hoever deceives us is not one of us”.”
A: According to what we have understood, this type of marketing and dealing is incorrect.
And Allah Ta’ala (الله تعالى) knows best.
Mufti Ebrahim Salejee (Isipingo Beach)