Multilevel marketing plans, also known as “network” or “matrix” marketing, are schemes aimed at selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you will receive commissions for both your sales of the plan’s goods or services and those of other people you recruit to sell for you or the distributor. Such plans usually promise to pay commissions through two or more levels of recruits, known as the distributor’s “downline.”

If a plan promises to pay commissions for recruiting new distributors, WATCH OUT! Most states outlaw this practice, which is known as “pyramiding.” You might remember the “Women Helping Women” and “NASCAR” pyramid schemes that hit Maine a couple of years back and got a lot of press. State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors.

Why is pyramiding prohibited? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people, except perhaps those at the very top of the pyramid, lose their money.

The Federal Trade Commission cannot tell you whether a particular multilevel marketing plan is legal. Nor can it give you advice about whether to join such a plan. You must make the decision yourself. However, the FTC suggests that you use common sense, and consider these seven tips when you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.

2. Beware of plans that ask new distributors to purchase expensive inventory. These plans can collapse quickly and also may be thinly-disguised pyramids.

3. Be cautious of plans that claim you will make money through continued growth of your “downline,” the commission on sales made by new distributors you recruit, rather than through your own sales of products.

4. Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn’t mean it is true! Ask the promoter of the plan to substantiate claims with hard evidence.

5. Beware of shills, decoy “references” paid by a plan’s promoter to describe their fictional success in earning money through the plan.

6. Don’t pay or sign any contracts in an “opportunity meeting” or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant or lawyer.

7. Do your homework. Check with Northeast COMBAT or the Attorney General’s Office about any plan you’re considering, especially when the claims about the product or your potential earnings seem too good to be true.

EARLY WARNING: The vultures are out in force after the terrible tsunami disaster in Asia. COMBAT is receiving reports of phony “fund-raisers,” especially online, claiming to be charities raising money to benefit tsunami victims. Don’t even trust legitimate-looking Web sites if you were solicited by unfamiliar e-mail invitations to visit these sites. Online crooks are “phishing” (setting up bogus Web sites that look like legitimate charities) to steal money meant to help tsunami victims.

By all means, please give generously to help the victims of that horrible tragedy. But make certain you are giving to a legitimate charity such as the United Nations, UNICEF, the Red Cross. For a complete list of legitimate organizations involved in the effort to help victims of the disaster, visit www.google.com/tsunamirelief.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast COMBAT-Maine Center for the Public Interest, Maine’s membership-funded, nonprofit consumer organization. Individual membership $25, business rates start at $125 (0-10 employees). For help and information write: Consumer Forum, Bangor Daily News, PO Box 1329, Bangor 04402-1329.