#846: Ruling on Multi-Level Marketing
846. QUESTION:
“Asalam alaekum waramatullah wabarakatuh Pls, I’ll like to ask a question. Are network marketing or multi level marketing (MLM) businesses (such as longrich, AIM global etc) halal or haram in Islam?. Jazakumullah khairan”
ANSWER:
Wa Alaykum Salām Warahmatullāh Wabarakātuh.
Honored one, may Allāh bless your heart and soul and make you of His Pious Servants amīn.
Know, may Allāh bless you, that Multi Level Marketing has been defined as “any Marketing Program in which participants purchase the right to recruit additional participants, sell products and services and be compensated for the sales by people they recruit as well as for their own sales.” This is the definition given to it by Stephen Barett, a Managing Director for MLM Watch.
And this definition says it all.
This Transaction is Harām.
One, it involves Gharar (Transactional Uncertainty). This is because the Participant is not aware if he will succeed in recruiting the required number or not. He also is not aware when this transactions are going to stop.
Two, it involves tricking people into this form of transaction and those who come early make much money while those who joined later lose a lot of money. Some researchers have maintained that the Loss Rate of Multi Level Marketing Schemes is at least 99% as was mentioned by Jon Taylor in ‘The Complete Guide to Understanding and Countering the Effects of Endless Chain Selling and Product-based Pyramid Schemes. This is gambling as the Ulamā have defined.
Three, deception and fraud. The company deceives people into thinking so high of it’s products
Four, it involves two transactions in one and it should be known that money is paid by the intending participant for the purpose of participating in the scheme not for the purpose of purchasing the product. Therefore what is marketed is the transaction, not the product and what is purchased is the marketing/recruitment right, not the product. These companies trick people into buying their products by deceiving them with these two transactions lumped up into one.
Five, it is a form of Ribāh. This is clear. The participant pays a small amount of money now for a large amount of money in the future in exchange for it.
This position that we have held is the position favoured by majority of the Ulamā of the time and a few that derailed from this justified their positions using very weak arguments such as a saying it’s a form of Ja’ālah (Brokerage) or Wikālah (Representation). All of these hold no weight because the transaction is clearly a form of deception and trickery by the companies that set them up.
Ibn Qayyim Al-Jawziyyah rahimahullāh said in Ighāthatu Al-Lahafān
“The change of appearances and names of unlawful things does not make them permissible if there is no real change in their essence and realities. Rather, this increases the mischief for which those things have been declared unlawful in addition to implying an attempt to deceive Allāh and His Messenger and ascribing cunning, deception and dissemblance to His Dīn and Sharī’ah that it prohibits something for a certain evil and mischief, and legalizes it for a greater evil”
This position we have explained comfortably responds to the question asked below:
“Assalaamu alaykum warahmatullahi Wa Barakaatuh
May Allah azza wa jal increase you in knowledge. Hoping to be guided by Allah’s Mercy, I would like to ask about the form of business practiced by GNLD, Tianshi and their likes. i.e. Network marketing – whereby you subscribe to them and market their products and lure other people to subscribe as well but through you as your earning is proportional to the number of people you are able to convince to join.
I am actually having second thoughts about it due to the following:
1. I feel like one would just have to market their products and convince people to buy either it’s recommended or not for that person (especially in the case of GNLD where the products are mostly medicine)
2. One would have to ‘sweet-talk’ other people to persuade them to join.
3. I feel that many of the hopes they promise to people are not realistic. These are some of my personal opinions about it but I really wish to know the Islamic standpoint on it before engaging in it, persuading people to it, or discouraging other people against it”
We say, and from Allāh comes help, that what your mind tells you is sound and you should thank Allāh for a sound mind.
The arguments of those that consider it permissible is lame.
Of them are:
Shaykh Abdullah bn Jibrīn, rahimahullāh, but he prefixed it on a condition that there is no deception in it. And it isn’t obscure from you the futility of this condition since deception is the bane of this sort of transactions as agreed by it’s forerunners.
Dr AbdulKarīm Khalil Al-Kahlūt, the grand Mufti of the Gaza Strip and Dr Muhammad Ahmad Āl-Sa’ad who prefix on the condition that it is free of Ribāh. This is also futile as it is clear that MLM transactions contain this.
Dār Al-Iftā of Egypt which passed a Fatwah of Permissibility and then returned to consider it impermisible after deliberations and further research.
We ask Allāh for Guidance and Tawfīq, amīn.
May Allāh bless you beloved ones.
Bārakallāhu Fīkum
Jazakumullāhu Khayran
2nd Safar, 1441AH.
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