Does PayPal prohibit transactions for pyramid, matrix, and multi-level marketing programs?
Yes. To determine if transactions violate this policy, PayPal considers these factors:
- Commissions offered to recruit new members
- Requirements for new distributors to purchase costly inventory or "start-up kits"
- Members' profits derived from recruiting new members or from the sales of newly-recruited members ("downline") rather than their own sales
- Payouts from fees or contributions paid by new or existing members
- Money paid into the system that is significantly greater than money paid out
- Unrealistic or unsupported promises regarding profits or return on investment
- Percentage of the company's goods sold by a non-distributor
- Flow of money derived from new members predominantly moves "upline"
- Preservation of the business rests on the exponential growth of new members or customers
- Offers of speculative real estate or non-development property
- Business functioning as an auto-surf investment program or a high-yield investment program
- Warnings from governmental agencies about the business model
PayPal defines these programs as follows.
Pyramid schemes – Existing members receive payouts funded by new payments into the program from new member fees or existing member contributions.
Matrix programs – Individuals pay primarily to be added to a waiting list for a product. The individual at the top of the list receives the product only after a set number of people have joined after that individual.
"Get rich quick" schemes – Include any type of self-employment, start-up business, or investment opportunity where the claims of profit or returns on investment are unrealistic or unsupported.
Multi-level marketing programs – Individuals receive proceeds from their sales of goods or services and from those of recruited members. PayPal generally prohibits multi-level marketing programs that offer payouts to both the seller and the individual(s) who recruited the seller. PayPal reserves the right to permit certain multi-level marketing programs at its sole discretion.