Tuesday, September 06, 2005

Fatwaa: MLM is forbidden in Islam

Bro, who asked me a question yesterday, today sent me following link which is from Islam Question & Answer, answered by Shaykh Muhammad Saalih al-Munajjid, the supervisor of this site.

Fatwa on pyramid marketing schemes

I'm publishing this whole article here. That site have given persmission.
Permission is granted to all to take material from this site, subject to the following two conditions: (1) Material used must be attributed to www.islam-qa.com , (2) Material must be reproduced faithfully and without alteration or omission. And Allaah is the Source of strength.

Question:


The Standing Committee for Academic Research and Issuing Fatwas has received many questions about pyramid marketing companies such as the “Business” and “Hibbat al-Jazeerah” companies, whose work may be summed up as being the attempt to convince a person to buy a product on the basis that he will also convince others to buy; they in turn will convince others, and so on. The more levels of participants there are, the more the first person will gain in commission, reaching thousands of riyals. Every participant convinces others to join in return for a large commission, if he is successful in getting new customers to join his list of members. This is what is called pyramid marketing or network marketing.

Answer:

Praise be to Allaah.

The Committee replied: This kind of dealing is haraam, because the purpose of this dealing is to earn commission, not to buy the product. The commission may reach tens of thousands, whilst the product is not worth more than a few hundred. Any smart person who is offered a choice between the two will 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 the price of the product. The product marketed by such companies is merely a screen or a means of earning these commissions and profits. Because this commission is really the point of the transaction, it is haraam according to sharee’ah for several reasons:

1 – It involves riba of two types, riba al-fadl (involving exchange of goods of the same type but of different quantity) and riba al-nasi’ah (involving deferred payment of a larger amount than 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 texts and to scholarly consensus. The product which the company sells to the agent is simply a screen for this transaction; it is not what the participant is seeking and it makes no difference to the ruling.

2 – It is a kind of gharar (ambiguous transaction) that is forbidden in sharee’ah, because the participant does not 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. The fact of the matter is that most of the members of the pyramid lose out, except for the few at the top. So what usually happens is loss, which is the case of all ambiguous transactions. One of two things may happen, and it is usually the one that is most feared. The Prophet (peace and blessings of Allaah be upon him) forbade ambiguous transactions, as was narrated by Muslim in his Saheeh.

3 – These transactions involve consuming people’s wealth unlawfully, because these contracts benefit no one but the companies and some participants whom the company encourages with the aim of tricking others. This is what is forbidden in the Qur’aan, where Allaah says (interpretation of the meaning):

“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 transaction, when that 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 sharee’ah. The Prophet (peace and blessings of Allaah be upon him) said: “Whoever deceives us is not one of us.” Narrated by Muslim in his Saheeh. And the Prophet (peace and blessings of Allaah 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 open 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.” Agreed upon.

With regard to the view that this transaction is a kind of brokerage, this is not true. Brokerage is a transaction whereby the broker receives payment in return for selling the product, whereas in network marketing the participant pays a fee in order to market the product. Brokerage means marketing the product in a real sense, unlike network marketing where the real aim is to market the transaction, not the product, so the participant markets to others who will market to others who will market to others and so on, unlike brokerage in which the broker markets the product to those who really want the product. The difference between the two is quite clear.

With regard to the view that the transaction is a kind of gift, this is also not true. Even if we accept that, not every gift is permissible according to sharee’ah. A gift given in return for a loan is riba. Hence ‘Abd-Allaah ibn Salaam said to Abu Burdah (may Allaah be pleased with them both): “You are in a land where riba is widespread among them. If you have some right over a man and he gives you a load of straw or a load of barley or a load of fodder, this is riba.” Narrated by al-Bukhaari in his Saheeh.

Gifts are subject to the rulings on the reason for which they are given. Hence the Prophet (peace and blessings of Allaah be upon him) said, concerning the zakaat-collector who came and said: “This is for you and this is what was given to me as a gift”: “Why don’t you sit in the house of your father and mother and see whether you are given any gifts or not?” Agreed upon.

These commissions are only paid for the purpose of joining the network marketing scheme, no matter what names are given to them, whether they are called gifts or anything else. That does not change their nature or the ruling on them in the slightest.

It is worth mentioning that there are companies that have appeared in the market which follow the practices of network marketing or pyramid marketing, such as “Smartest Way”, “Gold Quest” and “Seven Diamonds”. The ruling on these companies is no different from the ruling on the companies mentioned above, even though the products they offer may vary.

And Allaah is the Source of strength. May Allaah send blessings and peace upon our Prophet Muhammad and his family and companions.

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15 Comments:

At 9/06/2005 05:24:00 PM, Anonymous Anonymous said...

I know a very religious muslim & he was in Amway & is no longer because he said that SOME people will do bad things once they have money & with his religion he doesn't want to risk sponsoring someone & them doing bad things. Also he very much believes in the system on Tapes/CD's in your car while driving & to boot said to stay with it "it's a good business"

Stop being so negative, the way that the person was approached was wrong but we aren't all like that in the business. It's very difficult build the business if you are a full time student & you don't have a steady income.

 
At 9/06/2005 08:59:00 PM, Blogger Loser said...

I posted a "fatwa" and I'm negative?

Riddle me this batman, "fatwa" is about whole MLM business model, not "few" bad apples.

I was a good muslim too and lost $10,000 because of another good "muslim".

 
At 9/15/2005 11:05:00 PM, Anonymous Anonymous said...

okay you are saying it is against Alaah to be involved with quixtar. Are you out of your mind. There is nothing wrong with quixtar. Some people do evil things with money. It dosent mean money is bad. It's just the people.

Commisions are given out to everybody. Car sales men, broker, etc.

If you are doing the marketing arent you entitled to some of the profits.

Your boss at work exploits you every day. You work and the money you generate, most of it your boss keeps and only a small percent you keep. Isnt that against Islam.

Isnt porn against islam, or prostitution. Probably not because the hijackers on 9/11 were busy jacking off to porn and trying to get prostitutes before bording the plane.

Go slam you Isslam stick some where else buddy.

 
At 9/16/2005 01:03:00 AM, Blogger Loser said...

Wow! Tell you Romeo and Juliet and you'll ask, "Were they related?". Are you from special Olympics? Did you even read the above post?

It is not me, a religious authority is saying. Read it from business point of view. It makes sense.

Commission / marketing $ based on real product and service are fine, based on a hope further based on hope is not.

Interest in Islam is forbidden. FYI.

I sell my services to my boss. I get money for them.

Porn, prostitution and killing innocent people all against Islam. Very severe punishment for them. Execution for killing innocent people.

Please prove that:

- 9/11 attack was done by ‘Muslims’. Not some fake video link or mere accusation.

- They were indeed jacking off before boarding.

- That attack was very well coordinated. Had to be! It was against America, not Mexico. Jerk-offs couldn't pull it off.

My Islam stick is slamming right where it should be.

 
At 9/17/2005 03:33:00 PM, Blogger Loser said...

Also, wasn't what Nazis did against chritianity?

Isn't what G. W. Bush does against chritianity?

Go tell your diamonds to stick their christian stick somewhere else buddy.

 
At 2/16/2006 12:11:00 PM, Blogger Loser said...

HotRandomizer: Stop spamming. I'll keep on deleting

 
At 8/01/2006 05:13:00 PM, Anonymous Anonymous said...

Sir I am sorry to say that your knowledge about quixtar is very close to none. I have never met an idiot like you who because of his own inability to produce income goes and tell other people not to do something for their family.

Well I assume that you have enough education to realize that a same marker which someone use to write Quran can be used by someone to poke into someone's eyes.

The simple reason I totally disagree with you is that I have also read Quran and I can see how beautifully someone can take out verses from Quran from their own reasons and deceive and other people.

Since you haven't even listen 50 tapes of BWW, so please stop bullshitting.

Let stop being negative and let other people succeed in life.

 
At 8/01/2006 05:48:00 PM, Blogger Loser said...

Since you haven't even listen 50 tapes of BWW, so please stop bullshitting.

How do you know? I may have.

 
At 1/12/2010 12:29:00 PM, Anonymous Anonymous said...

wel according to me i agree nutrally vit both of u above but more vit th annonymous coz as far as i know quixtar is not only th marketing company in th whole world...there r hundreds of em some leagal and some illegal...in case of illegal i agree wit u loser tat it mit be haram by taking somebodys money and running away..but wen its leagal so i dont think that ppl investing time and energy for marketing to make somebodys life better than what they r livin in is not at all haram...
in tat case promotion in small shops or malls is also haram coz even if u sell th product or sit lame th whole day u r paid huge commissions..ur not even investing 1% of ur time and energy

 
At 1/10/2011 04:04:00 PM, Anonymous Anonymous said...

Assalamualaikum wa rahmatullah.
I am a new web developer. I am assigned a project for an MLM based company. I am supposed to make a website for network marketing (MLM).
I hope i say "NO" to my boss tomorrow (11-Jan-2011) InshaAllah.
Brothers and sisters, pray for me

 
At 1/26/2011 03:27:00 PM, Anonymous Tafhim Ul Islam said...

Please do not fear the bad, bad people, bad work, bad anything. Stand your ground and stand for the good. Allah knows how to rescue you. Just plain believe it.

And for MLM, it's straight haram and inhuman. Why? They always form pyramids/triangle. If you draw pictures of these structures you will see the last level has the highest number of people/blocks/sections and they have no one under them to generate profit. I've never lost money in this stupidity and I (inshAllah) will never do that either.

 
At 8/06/2011 03:53:00 AM, Blogger Mourinho! said...

It just delights me to have found something to rescue me from the Misery of MLM. I am a newly recruited Distributor of Tiens and already enjoying the fruits of the business but with knowledge that MLM is Haraam, what more do I need? I quit here and now, pray for me brothers and sisters. Jazaakumullahul kheir.

 
At 12/28/2013 08:34:00 PM, Anonymous MK said...

If you guys read very carefully there are true network marketing companies where you cannot make money off someone joining the service but off through a sale of a product or service. In a pyramid scheme money is made of joining even when there is no sale of a product or service. Ask the Scholars about true MLM Amyway and Avon and see their response. I have asked their students this question since I only have access to them. So this fatwa is for schemes with no real legitimate structure and product/service.

 
At 12/28/2013 09:27:00 PM, Anonymous Murtaza said...

Pay attention to the fatwa. The fatwa prooves to us pyramid schemes are haram. Pyramid scheme in north america and uk is illegal. What happens is people join and make money off joining underneath them. In legit MLMs you can't do that otherwise it is illegal. Check this out about GoldQuest http://www.siliconinvestor.com/readmsg.aspx?msgid=24569542

Illegal. Legit MLM you have to sell a product or service for your referee to make some commission and you make more commission from your customer.

 
At 12/28/2013 09:28:00 PM, Anonymous Murtaza said...

Pay attention to the fatwa. The fatwa prooves to us pyramid schemes are haram. Pyramid scheme in north america and uk is illegal. What happens is people join and make money off joining underneath them. In legit MLMs you can't do that otherwise it is illegal. Check this out about GoldQuest http://www.siliconinvestor.com/readmsg.aspx?msgid=24569542

Illegal. Legit MLM you have to sell a product or service for your referee to make some commission and you make more commission from your customer.

 

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