Multilevel marketing companies are direct sales companies with a pyramid-shaped hierarchy resulting from recruitment, but they aren't legally considered pyramid schemes because revenue is driven by product sales rather than recruitment fees.

Watch an insider break down how multilevel marketing companies operate—from recruitment to retention.

Former LuLaRoe vendors have accused the clothing multilevel marketing company of operating a pyramid scheme, resulting in more than 50 lawsuits and a $4.75M settlement.

Founded in 1959 by Jay Van Andel and Richard DeVos, Amway, a home goods company, is the largest multilevel marketing company in the world by revenue, generating more than $7B annually.

Vemma reached a $238M settlement with the Federal Trade Commission over its pyramid scheme-style recruitment tactics that targeted college boys to sell energy drinks in the early 2010s.

Read about different levels of price discrimination

Price discrimination is a business practice in which different customers are charged different prices for the same product or service. It's one way for a business to boost profits and take advantage of its market position. There are three levels of price discrimination, differentiated by the consumers targeted and the reasons for discrimination.

Listen to an account of an 'airplane game' leader, a notorious, widespread illegal pyramid scheme that swept across the US in the 1980s.

Learn more about the four main market structures

In modern economic theory, there are four main market structures. Under each market structure, firms (or businesses) have differing levels of competition and reach different levels of price efficiency based on the consumer's willingness to pay for a product or service.

An oligopoly is a market structure where a few large businesses dominate the entire market

When a few large companies dominate a market, changes in pricing for goods and services affect the entire market. Airlines are a common example of an oligopoly. Because the barrier to entry in the aviation industry is high, only a few airline companies offer the majority of the industry's services. While there is some competition, pricing across the board is largely intertwined and based on other companies' prices.

Market concentration and high markups don't always signal a monopoly

When regulators and economists evaluate whether a company constitutes an illegal monopoly, they often consider its overall market share or its relatively high price markups. This piece argues that the Olley-Pakes decomposition is a better measure, identifying whether customers within a market are switching to more productive companies.

In 2012, Bill Ackman's hedge fund, Pershing Square, took a $1B short position against supplement company Herbalife after discovering that 82% of the company's distributors never made a profit, calling it a true pyramid scheme.

Utility companies are often considered 'natural' monopolies

Natural monopolies occur in industries where the upfront costs of entering the market are high, making competition unrealistic. Investor-owned power companies, like Duke Energy, often have natural monopolies, as building alternative power grids and transmission lines is too expensive and impractical for competitors.

Machine learning lets computers learn from data instead of relying on programming

ML is a core part of artificial intelligence and is foundational to applications like chatbots, fraud detection, and self-driving cars. Businesses are also adopting it to improve efficiency and identify patterns in data, though the latter may be inaccurate.

An overview of monopolies, when one company controls an entire market

In the business world, a monopoly exists when one company controls the entire market. Regulators take issue with monopolies because they have been found to limit consumer choices, raise prices, and hurt competition.

Unlike small businesses, startups aim to disrupt entire industries

They also differ from small businesses in that startups have a higher level of risk, may take on outside funding from venture capital firms to boost growth, and more.

The difference between marketing and advertising: Advertising is technically a type of marketing

While the terms are often used interchangeably, technically speaking, marketing is any effort to promote a product or service. Advertising, on the other hand, is any paid effort to promote a product or service. Learn more about the difference in this article.

Marketplaces on the dark web provide eBay-like vendor feedback scores

An HP analysis found that 77% of cybercriminal marketplaces require vendors to purchase a license to sell their products, which can cost up to $3,000. About 92% of these marketplaces also use a third-party dispute-resolution service to handle customer service issues, thereby promoting "honor among thieves."

How one supplement company cost a short seller $1B

Pershing Square, a hedge fund founded and run by Bill Ackman, put short positions on Herbalife in 2012, because it believed the company was a pyramid scheme. Ackman's longtime rival and legendary investor Carl Icahn began buying Herbalife shares, causing the stock price to rise—ultimately hurting Pershing Square's short position.

Money 'mules' don't always know they are laundering money

Money mules are anyone who receives money in a laundering scheme and then sends it forward, either to another company or to a financial institution. While some money mules—often called smurfs—actually work with criminals laundering money, getting someone to receive and then send money has become a popular scam.

The namesake of the Ponzi Scheme, Charles Ponzi made an estimated $15M from running a fake international arbitrage scheme in the 1920s.

Dual-class stock structures separate equity and decision-making authority

In the past few decades, dual-class stock structures have become an increasingly popular way for companies to raise capital in public markets without allocating traditional shareholder voting rights. Meta, Estée Lauder, and The New York Times are companies that are famously dual-class.

Dollar stores procure their merchandise in bulk to help cut costs

In order to keep prices cheap, dollar stores source this merchandise from a variety of places, including liquidation sales (an event that happens when retailers need to sell off inventory quickly), directly from distributors, foreign markets, and more.

Monopolies are considered the most extreme form of imperfect competition

True monopolistic companies face no competition, meaning there aren't any near substitutes for the goods or services the company provides. Often, no competition exists because the monopoly is either approved by the government or the barrier to entry is costly.

Startups follow a 'minimum viable product' strategy to determine demand

Michael Seibel, group partner for startup incubator Y Combinator, explains how to build a minimum viable product (also known as an MVP) for any startup idea. Using real companies that experienced the Y Combinator program as examples, he walks through how to determine an MVP feature set, how to present an MVP to potential investors, and more.

A 'bilateral monopoly' occurs when there's one supplier and one buyer in a market

Bilateral monopolies are often used to conceptualize labor markets in small towns. Using this concept, large employers have a monopoly over the labor market, while workers have a monopsony as the only available laborers.

A 'monopsony' is a market with a single buyer—rather than a single supplier

A monopsony is the demand-side equivalent of a monopoly, where a single buyer commands a market. In a monopsony, the buyer has an outsized influence over the price of a product or service because they control most or all of the sales in that market.

Unlike other franchises, the McDonald's Corporation owns the land and the buildings of individual stores, and franchise owners lease those assets—resulting in McDonald's often being called a real-estate company.

One of LVMH's key business innovations was widening the luxury market's target audience

While certain items under the LVMH umbrella can cost thousands of dollars, like large Louis Vuitton bags, others, like coin purses or lipstick, cost significantly less. Some argue that these comparatively lower-priced items allows LVMH's target audience to be much larger in size than it would have been if it only targeted the world's wealthiest shoppers, whereas others argue that it makes the brand more vulnerable to economic downturns.

The scam factories behind prolific scamming

Scammers are on the rise, and many of those behind them are trapped in so-called scam factories—shadowy organizations tricking honest workers into fraudulent employment.

Machine learning and deep learning are successive subsets of artificial intelligence

ML allows systems to learn from data, while DL uses complex neural networks to analyze large amounts of unstructured data. Neural networks enable capabilities like image and speech recognition through their use of algorithms to identify patterns in data.

Money laundering is a three-step process: placement, layering, and integration

"Placement" occurs when dirty money is introduced into the financial system. Then "layering" happens when the money is moved around to disguise where it actually came from. Finally, the money is placed in other assets or investments in a step called integration.

How mutual funds work

Mutual funds function similarly to other types of investments. If you want to invest, you go through a brokerage firm. However, they have a few key differentiators. Most are actively managed by a broker instead of passively earning you returns. Plus, they can carry some hefty fees.

Watch how American monopolies used vertical and horizontal integration strategies to command markets

Vertical integration occurs when a company controls the entire manufacturing or development process, whereas horizontal integration involves expanding a company's market share. Both strategies have been used by US monopolies to establish dominance in markets.

A direct listing is when a company goes public, listing shares on a stock exchange

A direct listing is when a company goes public, listing its shares on a stock exchange, rather than issuing new shares or raising capital. That means investment banks—traditionally serving as intermediaries—could lose out on some of the profits from these deals as more companies like Spotify opt for direct listings.

Direct lending typically involves 'senior loans'

Direct lending, the most common subtype of private credit, typically involves senior loans which are secured by a company's assets. "Junior capital," on the other hand, is a type of private credit that is not secured by a company's assets, making it generally riskier than direct lending.

Smart pricing algorithms can unintentionally work together to raise prices

Researchers have found that, through trial and error, algorithms designed to adjust prices based on market data can learn to mimic price-fixing tactics, even without explicit programming to do so. Over time, they "learn" that it is more profitable to avoid price wars and keep prices high when competitors lower prices.

Modern examples of oligopolies include the airline industry

An oligopoly is a market structure dominated by a few key suppliers. In the US, as of 2021, just four airlines (Delta, United, Southwest, and American) controlled nearly two-thirds of all domestic flights, making the US airline industry one example of an oligopoly.

Special-purpose acquisition companies let companies skirt the IPO process

A video explains how private companies have taken advantage of this loophole, why investing in these companies isn’t always a good idea, and how blank-check companies (as they’re commonly called) work.

Why companies go public

There are many ways the founders of private companies can make money off an exit. They could sell the company to a larger organization, for instance. But there are unique benefits to having a company listed on the stock market that aren’t often outlined in news alerts about IPOs.

Investors need a 'margin account' to short sell stock

Margin accounts are leveraged accounts through brokerage firms that allow investors to make trades without the full amount of capital on hand. Similar to a secured loan, margin accounts often require some form of collateral and typically have a cap on how much investors can borrow. However, trading with a margin account is much riskier than a traditional investment account. Fees and charged interest are due on margin accounts, regardless of trade performance, meaning it's possible for investors to lose more money than just their initial investment.