Q. In network marketing, a person buys some products from a company at a very low cost, because the purchase is directly from the manufacturer. The deal makes him a member of a network whose task is to “spread the word” about the product and look for prospective members, who are usually drawn from among friends and family. What happens then is that he earns profit from his direct sales and also a percentage of profit from the sales of members that were recruited under his name. He then develops a ranking, depending on the number of recruits he secures. The higher his ranking, the greater his profit but the less is his effort as he would have many people working under him. What does Islam say to such an arrangement?

Abd Al-Rasheed

A. There are many forms of business these days which depend on persuading people to work as peddlers, selling goods to friends, colleagues and family in order to get a commission or a percentage. Different ways of temptation are placed in people’s way so as to get them to act in this way. This could be an initial sale at a low price, or a promise of receiving a commission, or a regular draw for prizes, etc. The whole scheme is described in tempting terms, speaking about the “ease” with which the customer could recover his initial payment, or make profit on future sales.

In this case, the temptation is to get so many people working in a network while the first one to start this network gets a commission based on their success in recruiting more customers. The question that should be asked here is whether the system does not run into the difficulty it seeks to overcome?

If the idea is to keep the price very low by cutting out both the wholesaler and the retailer, does it not create in their place a host of sellers each of whom is receiving a commission? Obviously, not everyone is buying directly from the manufacturer, but they form a sort of a hierarchy with some recruiting others, and the people at the top are getting commissions from all under them.

Yet in the many layers of salespersons, everyone is getting a commission. How much do these commissions add to the cost? How come the price is always kept low?

Besides, how many recruits can an ordinary person, who is not normally engaged in business, provide? If the product concerned were so tempting and appealing, because of its low price, why would the manufacturer need such a host of peddlers? Why does it not target its advertising to the end users, keeping the price low?

On the other hand, if we assume that one person is very successful in finding customers, who would in turn be trying to recruit others, why should he benefit by their efforts when he is no longer involved in their activities? They will be working hard trying to win new customers, while he is at the end receiving a commission for their efforts. This seems odd, as there is little effort on the part of that person.

Moreover, when someone he has recruited recruits another, is the new recruit added to his own pool? Can he keep a check on this? Or is it merely part of the lure put in his way in the first place, without meaning anything in reality?

The fact is that there is much deception by the manufacturer to get their recruits of salesmen. Not only so, but the deception spreads as these salesmen try to get others to do the same, so that they will earn their commissions.

As the hierarchy spreads, the deception becomes greater and more widespread. Islam forbids deals that involve lack of clarity, let alone deception. Here we have both and in quite a considerable measure. Hence, I feel that the whole exercise is unacceptable from the Islamic point of view.