Toppling the pyramids

The proliferation of unlicensed, pyramid-scheme “marketing” companies has been reported before, but the latest discovery of a company in Seoul forcing 5,000 students and recent graduates to do its nefarious work is beyond belief. We are dumbfounded that such modern-day slavery - exploiting unemployed young people and financially troubled college students - can exist in the capital of a country that prides itself on fairness and equality.

The conditions at the company in southern Seoul’s Songpa District, exposed in an investigative report by the JoongAng Ilbo, were appalling. According to the report, fourteen male and female college students lived in a filthy 15-pyong (49.5-square meter) basement apartment in a multihousehold residential building. According to the accounting books confiscated by the police, the marketing ring spent only 200,000 won ($174) per month to feed the 15 unfortunate souls. The victims mostly lived on instant noodles or a “soup” of flour and water.

The students were lured into the pyramid scheme to earn their tuition fees or escape hard lives in the countryside. Strictly controlled and brainwashed, they were forced to buy a load of junky products for resale. They were encouraged to borrow money to buy the products or recruit their friends back home into the scheme. At the end of the day, they were harassed by loan sharks and labeled financial delinquents. The nightmare was not just financial. Their health suffered along with their relations with families and friends. Among the victims of the schemes, dozens committed suicide or suffered mental disorders. Such illegal pyramid schemes are now a major social scourge.

The police and the Fair Trade Commission regularly crack down on these illicit rings. But the clandestine nature of such organizations makes it hard for authorities to keep track of them. These organizations capitalize on loopholes in the current regulations on direct selling and direct home sales. Legal marketing operations must go through a complicated procedure that includes guarantee of consumer protection, and there are heavy penalties for companies that cheat customers. But unlicensed networks posing as direct home-sales marketers can evade such constraints and supervision. Due to lack of laws against them, they often walk out of courts after being fined.

Such predatory pyramid sellers should no longer be tolerated. The regulations must be revised to include strictly what is legal in marketing organizations.