Generally people believe that multilevel marketing is a very good business opportunity. Let us look at what is multilevel marketing or network marketing or referral marketing. All one has to do is join in as a member and introduce his friends and relatives to join as members.
Referring to this type of marketing, the Supreme Court of India in the case of Kuriachan Chackko and others vs. State of Kerala (2008) 8 SCC, stated that "the promoters of the scheme very well knew that it is certain that the Scheme was impracticable and unworkable making tall promises which the makers of the promises knew fully well that it could not work successfully. It could work for some time in that "Paul can be robbed to pay Peter" but ultimately when there is a large mass of Peters they will be left in the lurch without any remedy as they would by then have been deceived and deprived of their money. If it is so, it could be said to be a case for application of Section 420 (Cheating) with Section 34 (Joint Liability) of the Indian Penal Code, of course, at this stage."
Apart from this, the Supreme Court also confirmed that the Scheme falls under the mischief of Prize Chits & Money Circulation Schemes (Banning) Act, 1978.
In spite of these confirmations, many believe, rather wrongly, that multilevel marketing is a wonderful business opportunity.