By Saeid Jafari, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.
During the past few years, network marketing has become a popular occupation among the youth in Iran. Having successfully managed to distance themselves from controversy involving pyramid schemes, these network marketing firms operate with all necessary licenses and permits.
As a business model, network marketing has been present in Iran since 2009. To generate substantial revenues, each marketer must recruit sellers to his or her network. In theory, if each marketer recruits two people as sub-marketers, and each of these individuals in turn recruits two more marketers, the original marketer will earn commissions from four people on the second tier.
The arithmetic is straightforward: eight earners on the third tier, 16 earners on the fourth tier, and so on. In other words, there is room for exponential growth if the number of earners on different tiers keeps increasing. In the United States, companies that fall under the network marketing umbrella include brands such as Avon and Tupperware.
Given some of its similarities with the sales models employed by pyramid schemes, network marketing has been the subject of much discussion in Iran. The debate involves the question of whether the method of profit earning is legal and religiously sanctioned. Ayatollah Ali al-Sistani, the senior Shiite religious authority in the holy Iraqi city of Najaf, has publicly declared that the business model is an unacceptable way of earning money.
Meanwhile, in Iran, prominent Qom-based Ayatollah Naser Makarem Shirazi has written on his website that network marketing is only legitimate if all profits are granted to the marketer in question, adding that “any other way of allocating profit is illegitimate.”
After much deliberation, an inquiry was put forth by the Ministry of Industry, Mine and Trade to Supreme Leader Ayatollah Ali Khamenei regarding the matter. In response, Khamenei on May 20, 2015, declared that network marketing is indeed a legitimate activity. Since then, uncertainty about whether the business model is legal has decreased.