How Did the MLM Company Manipulated the Commission System

The commission computation system is not transparent to the distributors. So, there are many ways and means for the unethical MLM companies to manipulate the distributors’ commission. During the period of business downturn or financial crisis, the unethical MLM companies would use the distributors’ commission as a temporary measure to fix their financial problems.

Most MLM marketing plans have a two-tier commission system. The tier one commission is based entirely on the group business volume points (BV, PV, SV etc). The tier two is based on qualified ranks’ pool. This is a pool fund set up for certain qualified ranks of the distributors.

Tier one commission is more difficult to manipulate. Although some unscrupulous MLM companies manipulated this, diligent distributors who keep track of his/her group business volume can detect such manipulation. MLM companies usually manipulate the roll-up business volume points from certain unqualified distributors. If the MLM companies are caught , they would always use the excuse of “computer system error” and recalculate the commission for the distributors. If nobody complains, they would get away with this manipulation and re-attempt it again and again.

Tier two commission is very easy to manipulate and difficult for distributors to detect. Most MLM companies do not publish a monthly list of qualifiers for these pool of funds.

These pool funds are mainly the “Travel Incentive Fund’, “House and Auto Fund” and the “Profit Sharing Fund” The total paid out for these funds is ranging between 4% to 8% of the business volume. And these funds are paid either monthly or annually. They can come either in cash or in kind. How does this pool system works and how did the MLM companies manipulated these pool funds?

For example, ABC Network Co. has an annual turnover (sales) of RM130 million and the Business Volume(BV) is 100 million points. The pool fund paid out is 8%. The total paid out value of these funds amounted to a whopping RM8 million.

The points earned by each qualified rank are:-

Platinum 8 points
Gold 7 points
Silver 6 points
Bronze 5 points
Sapphire 4 points
Emerald 3 points
Ruby 2 points
Jade 1 points

Note: These points are different from the Business Volume points for Tier one commission.

The total value of the pool depends on the business volume generated and the total points accumulated to share the pools depends on the number of qualifiers and their respective ranks, i.e number of qualifiers multiply by the points for each qualifier’s respective ranks.

Take the “House & Auto Fund” that is normally computed monthly as an illustration.. Assuming the Business volume for the month is 10,000,000 points. If this fund’s paid out rate is 2% and the total qualified points for this pool is 200, the pool distribution is calculated as follow:-

Business Volume 10,000,000 X 2% = RM200,000

The value per point for this pool = RM200,000 divide by 200 points =
RM1,000 per point.

Therefore, a Platinum distributor will earned RM8,000 (8 points X RM1,000 per point) for “House & Auto Fund” for the month. Similarly, an Emerald distributor earned RM3,000 (3 points X RM1,000 per point) from the same fund.

The same method of calculation applies to other pool funds, irrespective of whether they are computed monthly or annually.

So, how did the MLM companies manipulated these pool of funds.

Firstly, the list and number of qualifiers in each rank is not be published. Secondly, the points accumulated month by month is not published. Thirdly, non-qualified distributors may be added in to share the pool (favouritism) without the qualifiers’ knowledge and fourthly, the accumulated points in the pool can be arbitrarily added (cheating) to reduce the value per point. Finally, the “First Distributor” in the scheme is usually the MLM company itself. This “First Distributor” also takes a bite from the pool by some unethical MLM companies. This should not be the case. But in reality, it is.

MLM may not be a business of Integrity as claimed. Be wise and be bold. Check the MLM company that you “work” for. Many MLM companies manipulated the pool funds that they promised to pay to the distributors with “full integrity”. This is a BIG QUESTION MARK of the MLM Business.