Report reveals dangers of pyramid selling

BEIJING - Online pyramid selling, an illegal and fraudulent method of business, lured more than 40 million people involving some 6 billion yuan ($913 million) in 2010 alone, a recent report reveals.

Pyramid selling, sometimes described as multi-level marketing, usually involves the promise of payment or services to entice other people into the scheme without providing any concrete investment or product. In the online world it is often disguised under the catch-all banner of e-commerce and threatens Internet security, according to the report jointly released by the Zhejiang-based China e-Business Research Center and the Beijing-based China Anti-Pyramid Selling Association.

Selling through a pyramid scheme is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a widening base, like a pyramid, of distributors and a hierarchy of multiple levels of compensation.