1 Answer

Network marketing is not Halal. It is forbidden because it includes Riba, and Gharar (ambiguous transaction) according to fatwa number 22935 issued by The Permanent Committee for Scholarly Research and Ifta’ in Saudi Arabia.
The fatwa says that these companies rely on marketing and advertising of their product which emphasizes the size of the large commission which the participant can earn, and offers the incentive of a large profit in return for a small sum, which is the price of the product. It is Haram according to Shariah for several reasons:
1. It involves Riba of two types - Riba Al-Fadl (involving exchange of goods of the same type but of different quantity) and Riba Al-Nasi’ah (involving deferred payment of a larger amount if it were paid immediately). The participant pays a small amount of money in order to gain a lot of money, in other words he pays cash for cash of a different amount and with deferred payment. This is the kind of Riba that is forbidden according to texts and scholarly consensus. The product which the company sells to the agent is simply a screen for this transaction; it is not what the participant is seeking and it makes no difference to the ruling.
2. It is a kind of Gharar (ambiguous transaction) that is forbidden in Shariah, because the participant does not know whether he will be successful in finding the number of purchasers (participants) required or not. No matter how long pyramid or network marketing lasts, it must inevitably reach an end, and when a person joins the pyramid he does not know whether he will be in a higher level and make a profit, or in the lower level and make a loss. Mostly members of the pyramid lose out, except for the few at the top. Eventually, its losses, one thing which is feared the most by people. One of two things may happen, and it is usually the one that is most feared. The Prophet (peace be upon him) forbade ambiguous transactions. (Muslim)
3. These transactions involve consuming people’s wealth unlawfully because the companies and some participants benefit by tricking others and this is forbidden. Allah said, “O you who believe! Eat not up your property among yourselves unjustly.” (Qur’an,4:29)
4. This transaction involves cheating, deceiving and tricking people by showing the product as if that is the purpose of this transaction, when that is not the case, and by enticing them with the idea of large commission which people do not usually earn. The Prophet (peace be upon him) said, “Whoever deceives us is not one of us.” (Muslim) The Prophet (peace be upon him) said, “The two parties to a transaction have the choice, so long as they have not parted. If they are sincere and open in their dealings, the transaction will be blessed for them, but if they lie and conceal anything, the blessing of their transaction will be erased.”
This is not like brokerage because in it the broker receives payment in return for selling a product, whereas in network marketing the participant pays a fee in order to market the product. Brokerage means marketing the product in a real sense, unlike network marketing where the real aim is to market the transaction, not the product, so the participant markets to others who will market to others and so on.
The transaction is not acceptable in terms of receiving it as a gift because not all kinds of gifts are permissible in Shari’ah. A gift given in return for a loan is Riba. Hence ‘Abd-Allah Bin Salam told Abu Burdah (may Allah be pleased with them), “You are in a land where Riba is widespread among them. If you have some right over a man and he gives you a load of straw or a load of barley or a load of fodder, this is Riba.” (Bukhari)
Gifts are subject to rulings based on the reason for which they are given. Hence, the Prophet (peace be upon him) said to the Zakah collector who came and said,
“This is for you and this is what was given to me as a gift. Why don’t you sit in the house of your father and mother and see whether you are given any gifts or not?”

http://islamhorizon.blogspot.co.uk/2012/03/ruling-on-networking-marketing-in-islam.html