Incentive to sell + incentive to recruit + multi-tiered compensation = MLM
The original definition of a MLM arose from the 1979 Amway decision, as the US FederalTradeCommission defined MLM as, A business model in which a company distributes products through a network of distributors who earn income from their own retail sales of product and from the retail sales made by distributors’ direct and indirect recruits.
In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.
Amway stresses that the main difference between a legitimate MLM business model and a pyramid scheme is that a legitimate MLM is focused on selling products, not recruiting more salespeople. In a legitimate MLM, it should be possible to make money by simply selling products directly to customers.