TikTok is banning content that promotes pyramid schemes and multi-level marketing companies

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TikTok is banning content that promotes pyramid schemes and multi-level marketing companies
Indian mobile users browses through the Chinese owned video-sharing 'Tik Tok' app on a smartphones in Amritsar on June 30, 2020. - TikTok on June 30 denied sharing information on Indian users with the Chinese government, after New Delhi banned the wildly popular app citing national security and privacy concerns.Photo by NARINDER NANU/AFP via Getty Images
  • TikTok has banned content that promotes multi-level marketing companies in a recent community guidelines update.
  • Multi-level marketing companies recruit people to sell products on commission, and incentivize members to recruit additional participants to buy and sell products, per the Federal Trade Commission.
  • A 2018 AARP survey found 73% of MLM participants lost money or made nothing.
  • MLM companies are legal as long as the main source of income for members comes from product sales, not through recruiting others.

TikTok has banned content promoting pyramid schemes and multi-level marketing companies.

The social media network updated community guidelines on Tuesday to ask users not to post or share content that "depicts or promotes Ponzi, multi-level marketing, or pyramid schemes."

"We do not permit anyone to exploit our platform to take advantage of the trust of users and bring about financial or personal harm," TikTok's new guidelines read.

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Multi-level marketing companies recruit people to sell products on commission, and incentivize members to recruit additional participants to buy and sell products, per the Federal Trade Commission. MLM companies are legal as long as the main source of income for members comes from product sales, not through recruiting others.

Read more: Snap has acquired Voisey, a hot new music app that looks an awful lot like TikTok

Pyramid schemes, which are illegal, profit from recruiting members rather than selling products. But both pyramid schemes and multi-level marketing companies rely on recruiting distributors to build the business.

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A TikTok spokesperson said in an email to Business Insider that the company has "multiple measures" to reduce the spread of content that aims to deceive users for financial gain. TikTok will remove content and accounts that violate community guidelines.

Many MLM sellers use Facebook and other social media sites to recruit other independent distributors of a product. "We were told very specifically, never post anything negative on your Facebook," a former distributor for multi-level marketing company It Works previously told Business Insider. "Like you were supposed to filter your Facebook as though once you joined It Works all your problems went away."

Read more: Inside Gary Young's criminal history, secret past, and his cultlike leadership of the Young Living 'essential oils' empire

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Data shows MLMs offer menial income to sellers. Direct Sellers Association estimates multi-level marketing companies brought in $34.9 billion in revenue in the US in 2017 from 18 million sellers - amounting to $2,000 per year for each member. A 2018 AARP survey found 73% of MLM participants lost money or made nothing.

Nearly all sellers for Young Living, an essential oils multi-level marketing company founded by Gary Young, earn just $4 a year, Business Insider's Nicole Einbinder reported. A former member filed a class-action lawsuit against Young Living in 2019 claiming the company operates like a pyramid scheme.

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