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OFT issue guidance on multi level marketing

The Office of Fair Trading (OFT) in collaboration with HM Customs, the Director of Public Health, and the Environmental Agency has issued public awareness guidance on the matter concerning Multi-Level Marketing (also known as Network Marketing) businesses (MLMs).

The OFT has noted an increase in this type of business activity locally and has therefore issued appropriate guidance in this area in order to make local distributors aware of the issues they may face when trying to do business in this manner.

The three entities have recently cooperated in an investigation relating to a particular MLM with numerous local representatives where the MLM had features that were very similar to an illegal pyramid scheme. Its goods have been seized upon importation for failure to meet local legal requirements, questionable advertising has been carried out on social media to promote the scheme and the goods being sold. And there were concerns about the safety of the goods themselves.

The OFT strongly recommends that local MLM distributors and those thinking of doing business in this manner consider the guidance issued in the awareness document.

The guidance also explains local legal requirements that may make operating as part of an MLM in Gibraltar unfeasible.

The guidance, can be found on the OFT’s website:

“The OFT’s concerns are not only how these schemes may harm consumers, but also how they may harm the persons who are recruited to be distributors. These persons are often stay at home mothers, students and vulnerable young adults who are simply trying to supplement their main income. They are lured to become distributors by the opportunity to make easy money, however, because some MLMs are similar to illegal pyramid schemes, not only do they rarely do so, they can instead end up in debt. In addition many do not realise that local legal requirements may make participating in these schemes economically unfeasible. They may therefore be doing business unlawfully, said the OFT’s CEO Francis Muscat.

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