Yoon, a college student from Daegu came to Seoul expecting to work at a large resort that a friend had introduced to him. Instead, his friend took him to an accommodation for multi-level marketing (MLM) employees, where dozens of people were living together. Workers from the MLM company took away Yoon’s cellphone and watched his every move. The MLM company’s representative approached college students, saying that they could earn up to ten million won.

However, many MLM companies enlist students as a salesperson and only focus on making them buy as much products as possible in order to take their money. These companies give salespeople a certain amount of money when they bring their friend to the company, who also become victims in the MLM process. Students are rarely able to sell the products that they have bought, and eventually end up with a huge debt adding up to several hundred million won. These students bring more friends to the MLM company in order to pay off their debts with the commission fee they receive and this leads to a vicious cycle.

Multi-Level Marketing is a system in which a consumer who has bought a product also plays the role of a salesperson and sells it to another consumer. Then this consumer sells the product to another person, forming at least three steps between the first salesperson and the last.
For example, A buys a product and introduces it to B, then B introduces the product again to C. In other marketing systems, A B and C don’t receive any sort of incentive. However in the case of the MLM system, A B and C receive benefits from introducing the product to another person. The benefit comes from the margin that is left after subtracting advertisement and circulation process costs. Also in MLM, salesmen can receive a portion of the sales that the people they have recruited make. Therefore, this system can stimulate people to work harder if carried out correctly, but is becoming a problem because some companies are misusing it.

It is said illegal MLM is a bigger problem in our country than others because Koreans have a tendency to think that showing affection (情) towards others is important. For instance, though a product may not be to one’s liking and a new business may not look like it has a high enough success rate to invest in, Korean people are not able to refuse a friend or co-worker’s offer or request. The more fundamental cause is youth unemployment. In the case of students who prepare their tuition fee through loans, or part time jobs, it is easy to become a victim of illegal MLM companies, since companies tell students that they can earn a large amount of money in a short amount of time, with little effort. Even more, there are no experts who have in-depth knowledge of the MLM process, and it takes about 1~2 years to catch them since the structure of MLM companies is so complicated.

Most salesmen get involved in the MLM system because of its exaggerated advertisements, not knowing much of it is true nature. Most salesmen do not receive the adequate amount of pay for their work, contrary to the merit based salary system that companies promise at first. Therefore, illegal MLM companies violate the healthy flow of the market economy. Also, the object of MLM sales is usually family, friends and neighbors. However, various conflicts arise because people tend to lose their money since the transaction process is not so transparent. Even recently, an illegal MLM company had been found to have gathered students by saying that they could “make a large amount of money in a short period of time” and made them buy very expensive products. If the students were not able to sell enough products, the company made them compensate for the company’s loss. Not having enough money, the students caused their friends to become involved in the MLM system also, so that they could at least receive brokerage.
Students fall for the lies that MLM companies tell and get a loan in order to buy 2 hundred to 3 hundred million won worth of products. In the end, they fail in selling the products but are not able to go back to school, or even get a job because of their huge debt and this leads to a waste of human resources.

The National Police have set from August 1st until September 30th as the special period for reinforcing illegal MLM companies. They are planning to crackdown on companies who 1. force employees to receive training or stay in a company accommodation against their will 2. use force in order to prevent cancellation of a contract 3. receive people as salesmen on the condition that they buy a certain amount of goods, forcing people to buy their products. Even if the control of illegal MLM is tightened, providing information and reporting from citizens is the most important, since preventing any additional victims from occurring is the best case scenario. If you want to find out if the MLM company they know is legal or illegal, go to http://www.macco.or.kr for more information.
 

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