Platform Promotion Rebate Mechanism: Compliance Marketing or Potential Pyramid Scheme?

In today's internet and Web3 projects, user incentive mechanisms have become a common operational strategy. However, the boundary between this mechanism and pyramid schemes is often vague. This article will delve into the compliance of the rebate mechanism and provide suggestions for avoiding legal pitfalls.

The Difference Between Rebates and Pyramid Schemes

The law focuses on targeting the initiators, organizers, and key decision-makers who play a crucial role in pyramid schemes. It can only be identified as a pyramid scheme crime if both conditions of "defrauding property" and "disrupting the economic and social order" are met simultaneously. Moreover, both "paying fees to obtain membership qualifications" and "forming hierarchies in order" must coexist to constitute a pyramid scheme in the legal sense.

Criteria for Judgment

1. Source of profit: Does it rely on "entry fees" or "head fees" from developing new members?
2. Compensation Criteria: Is the number of development personnel used as the main compensation standard?
3. Organizational Structure: Is a multi-level pyramid structure formed?
4. Product Value: Is a real and valuable product or service provided?

Suggestions to Avoid Crossing the MLM Red Line

1. Eliminate "entry fees" and "referral" behaviors

• No mandatory "entry fee" of any kind will be established.
• The compensation basis should be based on actual sales performance.
• Clearly state that the commission comes from real transactions
• Strictly distinguish between "promotion" and "referencing"
• Ensure data transparency and traceability

2. Use a simple rebate structure

• It is recommended to use "linear" level 1 rebate.
• If multi-level rebates are adopted, up to two levels are allowed, and multi-dimensional reward indicators are designed.
• Avoid the situation of unlimited levels and infinite transmission of benefits

3. Ensure that transactions are real, legal, and sustainable.

• Provide genuine, valuable, and reasonably priced goods or services
• Ensure the authenticity and legitimacy of transactions
• Establish a sustainable profit model that does not rely on new member contributions.
• Promotion and marketing must be realistic and must eliminate fraud and misleading information.

Conclusion

Compliance rebates are legitimate marketing tools, while illegal rebates may constitute a crime. For a project to develop sustainably, it must return to creating real value, focusing on high-quality products and services, rather than relying on layers of rebates. Only on the basis of compliance can stable business growth be achieved.