Fatwa ID: 01830
Answered by Mufti Mohammed Tosir Miah
Assalamu Alaikum, In India and probably in many countries, there are many companies doing business and promoting MLM networking methods with lucrative returns. I wanted to know whether it is permissible in accordance to the Shariah. Kindly revert, Jazakallah.
There are a number of reasons why Multi-Level Marketing is least to say 'doubtful' if not 'Haraam'. Being on the receiving end of such offers and advertisements in the past I can say first hand that the purpose of such dealings is to earn commission, not to buy the product. The commission can reach tens of thousands, whilst the product is not worth more than a few hundred. Given the choice between the two, any person would choose the commission. Thus such companies rely on marketing and advertising their product which emphasizes the size of the large commission which the participant can earn, and offers the enticement 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 the real point of the transaction is the commission.
There are many different permutations of Multi Level Marketing and I stress that the following answer is given according to the aforementioned information.
In a nutshell the aforementioned information is telling us that companies are offering a commission to interested distributors who will promote the companies products to the distributors family and friends.
According to this theory and interpretation, Multi Level Marketing will be permissible as long as a couple of conditions are found . It is similar to hiring an agent (wakeel) who is selling products on behalf of the company.
The reason why some companies will use this form of marketing is because word-of-mouth marketing is a far more powerful and effective method of marketing, especially, when that message comes from those whom we know and trust. And these companies are more than willing to pay the distributors, to communicate this message to their network of friends and family.
The conditions which need to be found are:
1. There should be no uncertainty in the products of the company. This in Fiqh terminology is known as Gharar. The term gharar literally means danger. The linguistic origin of the term gharar refers to items with a likeable appearance and disliked reality. Gharar sales refer to the existence of gharar either in the nature of the sale itself, or the sale is what qualifies as gharar. For example, selling birds in the air etc.
Gharar lexically refers to deception, where a necessary condition for acceptability may not exist.
In jurisprudence, the term gharar refers to purposive cheating and deception as well as ignorance of the object of sale and undeliverability of the object. (Extracted from Fiqh Al Islami Wa Adillutah p.82 v.1)
Imam Kasaani has said that gharar may occur in a number of forms: through undeliverability of the object of sale (e.g. a runaway horse or camel), non-existence of the object or the lack of full ownership of the object by the seller (e.g. fish in large volumes of water.) (Badaaius Sanaai p.15 v.3)
2. There should be no exaggeration and force in selling the products to your family members or friends.
The upshot of the aforementioned discussion is that Multi-Level Marketing is permissible. However, I should stress that this fatwa is based on the aforementioned contract. Different contracts may have different opinions.
Only Allah Knows Best
Written by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham.