Channel Sales MLM marketing - Network Marketing profits

As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)

One of our brothers/sisters has asked this question:

Kindly inform me that if I become a member of a company by purchasing their products or software etc, and then I shall sell this product to other people and make them members under my down-line, then I will get commission for every member. I will also get some commission when other members under my down-line get the members under their down-line. This channel sale is becoming very popular here in Dubai. Kindly inform me whether this channel sale is Halaal or Haraam.

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Answer:

Channel Sales

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is none worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.

This kind of dealing is Haraam, because the purpose of this dealing is just to earn the commission, and not to buy or sell the product. The commission may reach tens of thousands, whilst a few hundred shall benefit from the product. Any smart person who is offered a choice between the two will obliviously choose the commission. Hence these companies rely on marketing and advertising of their product which emphasizes the size of the large commission which the participant can earn, and offers the incentive of a large profit in return for a small sum, which is being paid in as the product’s price. The product marketed by such companies is merely a tool and means of earning the commission that is really based on the points earned out of the several consecutive dealings.

Shariah has very clear ruling on impermissibility of such dealing for the following reasons:

1.       It involves Riba (the usury) of two types, Riba al-Fadhl (involving exchange of goods of the same type but they are different in the quantity), and Riba al-Nasi’ah (involving deferred payment of a larger amount than that would be paid if it were paid immediately). The participant pays a small amount of money in order to gain a lot of money, in other words he pays cash for cash of a different amount and with deferred payment. This is the kind of Riba that is forbidden according to the Quran and Hadith.

2.       It is a kind of Gharar (ambiguous dealing) that is forbidden in Shari’ah, because the participant doesn’t know whether he will be successful in finding the number of purchasers (participants) required, or not. No matter how long pyramid or network- marketing lasts, it must inevitably reach an end, and when a person joins the pyramid he does not know whether he will be in a higher level and thus make a profit, or in the lower levels and thus make a loss. In fact most of the pyramid’s members lose out, except the few at the top layers. So what usually happens is loss, which is the case of all ambiguous dealings. One of two things may happen, and it is usually the one that is most feared. The Prophet (peace and blessings of Allah be upon him) forbade ambiguous dealing. (Muslim).

3.       These transactions involve consuming people’s wealth unlawfully, because these contracts benefit no one but the companies and some participants of the top layers whom the company encourages with the aim of tricking others. This is what is forbidden in the Qur’an, “O you who believe! Eat not up your property among yourselves unjustly” [al-Nisa’ 4:29]

4.       This transaction involves cheating, deceiving and tricking people, by showing the product as if that is the purpose of this dealing, but in reality it is not the case; and by enticing them with the idea of large commission which people do not usually earn. This is the kind of deceit that is forbidden in Shari’ah. The Prophet (peace and blessings of Allah be upon him) said: “Whoever deceives and cheats us is not one of us.” (Muslim). And the Prophet (peace and blessings of Allah be upon him) said: “The two parties to a transaction have the choice, so long as they have not parted. If they are sincere and fair in their dealings, the transaction will be blessed for them, but if they lie and conceal anything, the blessing of their transaction will be erased.” (Bukhari and Muslim)

With regard to the view that the amounts received by the members are tantamount to the brokerage, is not true. Brokerage is a fee or commission amount being received by an agent/broker in return for promoting the product, whereas in the so-called network- marketing the member pays a fee in order to market the product. Business-promotion means marketing the product in a real sense, unlike network-marketing where the real aim is to create a membership-network as vast as possible, and not the actual sale of the product, thus one member markets to others who will market to others who will market to others and so on.

With regard to the view that the amount is a kind of gift, is not true. Even if it is considered as a gift; but, according to Shari’ah every gift is not permissible. A gift offered in return for a loan is tantamount to Riba.

These commissions are only paid for the purpose of joining the network-marketing only, no matter what names are given to them, whether they are called gifts or anything else.

Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is only ones. Allah Alone Knows Best and He is the Only Source of Strength.

Your brothers and well wishers in Islam,

 

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