Network marketing: what it is, how it differs from affiliate marketing and from a pyramid scheme
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Network marketing is a business model in which products are sold not by shops but by independent distributors, and in which you earn not only from your own sales but also from the sales of the people you have invited. “Tinklinis marketingas” (network marketing) is searched for about 170 times a month in Lithuania, and the question is usually the same: is it a way to earn or a pyramid scheme.
The answer depends on one thing – what is actually being paid for. This article covers how network marketing differs from affiliate marketing, where the law draws the line between a lawful model and a pyramid scheme, and what to ask before paying anything.
In short
- In network marketing remuneration is paid on several levels: for your own sales and for the sales of the people you invited.
- In affiliate marketing payment is made only for a sale to a buyer – you do not need to buy anything or recruit anyone.
- The law prohibits a scheme in which a person pays for the opportunity to receive remuneration primarily for bringing in others rather than for the sale or use of products.
- If the first step is a “starter pack” bought with your own money and the main advice is to invite others, stop.
How network marketing works
In English the model is called multi-level marketing (MLM) – marketing on several levels. The company does not sell its products through shops: they are distributed by individuals who buy from the company and sell to people they know. Every distributor can invite new distributors, and those can invite their own. A tree forms in which those at the top receive a share of the turnover of those below them.
The model itself is not prohibited: if the money comes from selling real products to real buyers, it is direct selling with multi-level remuneration. The problem is that the same structure very easily turns into a scheme in which the product is merely a cover and the real “product” is new members and their contributions.
Affiliate marketing, network marketing and pyramid schemes
| Affiliate marketing | Network marketing | Pyramid scheme | |
|---|---|---|---|
| What is paid for | A sale to a buyer | Your own sales and those of the people you invited | Primarily bringing in new members |
| Do you have to pay to start | No | Often – a starter kit or a purchase of goods | Yes, the contribution is the whole point |
| Do you have to recruit | No | It is encouraged | You will not earn without it |
| Who buys the product | Outside buyers | Buyers and the distributors themselves | Almost only members, or there is no product |
| What happens when new people stop coming | Nothing – sales continue | Income falls | The scheme collapses, those who joined last lose their money |
| Legal status in Lithuania | Lawful | Lawful if remuneration is for sales | Prohibited |
Where the law draws the line
The Law of the Republic of Lithuania on the Prohibition of Unfair Business-to-Consumer Commercial Practices lists, among practices that are always regarded as misleading: establishing a pyramid promotional scheme where a consumer pays for the opportunity to receive remuneration primarily for bringing other consumers into the scheme rather than for the sale or use of products, as well as operating or promoting such a scheme.
Three practical questions follow from this wording:
- Do you have to pay in order to take part? A sign-up fee, a mandatory starter kit, a monthly “activity” purchase.
- What does the remuneration consist of? If the main part is bonuses for invited people and their contributions rather than a commission on goods sold to buyers, that is a sign of a pyramid scheme.
- Are you promoting the scheme? It is prohibited not only to establish such a scheme but also to operate or promote it. By inviting others, you take on responsibility yourself too.
Warning signs
Stop if you hear
- “The most important thing is to build a team”, while the product itself is barely mentioned;
- to start, you have to buy a kit, a licence or a “place” in the system;
- regular, constantly growing income is promised;
- earnings are shown in screenshots, but it is unclear what sales they came from;
- the product is far more expensive than similar ones in a shop and is bought almost only by members;
- you are rushed: “only a few places left”, “the price goes up tomorrow”;
- you are asked to transfer money to a private individual or to a crypto wallet.
The Bank of Lithuania (LB) has publicly warned about such schemes. In one of its warnings the supervisory authority described a scheme in which people are urged to pay in a certain amount, while the promised benefit depends directly on the participants recruited and the funds they pay in, together with a promise of regular and constantly growing income – and it named these as obvious signs of a financial pyramid. The bank urges people, before entrusting their money, to make sure that the person holds a licence and to be sceptical of promises of getting rich quickly.
Real cases from police reports
The promise “pay in and your money will grow” recurs constantly in the police daily incident reports – only under other names.
- Kaunas, September 2026. A man (born in 1959) filled in an online advertisement about investment services. An unknown person phoned him and persuaded him to invest – the man lost 47 730 €.
- Tauragė, October 2026. A man (born in 2001) arranged a “deposit multiplication” service through an app, transferred 360 € and did not receive the agreed profit.
Questions before joining
| Question | Good answer | Bad answer |
|---|---|---|
| Can I start without buying anything? | Yes | You need a starter pack |
| Where will my money come from? | From goods sold to buyers | From the contributions of invited people |
| Would I buy this product at this price if I were not a member? | Yes | No |
| Can I return unsold goods? | Yes, on written terms | No, or “we will talk about it” |
| Does the company publish how much the average distributor earns? | It does, with figures | It shows only success stories |
| What happens if I invite no one? | I will earn from my own sales | I will earn nothing |
Separately, add up the time and the money: how much the kit, the monthly purchases, the events and the training cost, and how many goods you would have to sell just for the expenses to pay for themselves. If the sums work out only once you have invited ten people – that is your answer.
If you have already paid
- Stop paying. A request to pay in more in order to get back earlier contributions is a continuation of the same scheme.
- Call your bank – a transfer can sometimes still be stopped.
- Report it to the police via epolicija.lt or by phone on 112.
- Report it to the supervisory authorities: for unfair commercial practices – to the State Consumer Rights Protection Authority (VVTAT), for investment or financial promises – to the Bank of Lithuania.
- Keep the evidence: correspondence, contracts, payment statements, copies of the scheme's pages.
If you want to earn by recommending
What actually attracts people to network marketing – the chance to earn by recommending products – works without a network too. In affiliate marketing you get a link or a code, buy nothing, recruit no one and see every sale in the statistics.
Frequently asked questions
Is network marketing legal in Lithuania?
The multi-level remuneration model itself is not prohibited if payment is made for the sale of products. What is prohibited is a pyramid scheme in which payment is made for the opportunity to receive remuneration primarily for bringing in other people.
How does network marketing differ from affiliate marketing?
In affiliate marketing payment is made only for a sale to a buyer, and you do not need to buy anything or recruit anyone. In network marketing remuneration also depends on the people you invited, and to start you often have to buy goods.
How do you recognise a pyramid scheme?
You have to pay in order to take part, the main income comes from new members rather than from sales to buyers, and constantly growing income is promised.
Am I liable if I invited others into a pyramid scheme?
The law prohibits not only establishing such a scheme but also operating or promoting it, so inviting others is not an innocent act.
Where do you report a suspicious scheme?
To the State Consumer Rights Protection Authority (VVTAT), to the Bank of Lithuania (if an investment return is promised) and to the police if you have already lost money.
Sources
- Lietuvos Respublikos nesąžiningos komercinės veiklos vartotojams draudimo įstatymas
https://e-tar.lt/portal/lt/legalAct/TAR.55FFE350795A/xoSHTSdOaU - Lietuvos bankas. Lietuvos bankas perspėja gyventojus dėl įtariamos „Gold Line International“ finansų piramidės
https://www.lb.lt/lt/naujienos/lietuvos-bankas-perspeja-gyventojus-del-itariamos-gold-line-international-finansu-piramides-del-jos-veiklos-kreipesi-i-lr-generaline-prokuratura - Lietuvos bankas. Pakliuvau sukčiams: ką daryti?
https://www.lb.lt/lt/pakliuvau-sukciams-ka-daryti - Lietuvos policija. Paros įvykių suvestinės
https://policija.lrv.lt/lt/ivykiu-suvestines/
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