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Are affiliate programs on the Internet a form of pyramid selling schemes? It's a common question, and the fact is that many of them actually cross the line into illegal territory. This includes many de facto affiliate programs operated using the $7 Secrets automation script.

Even more surprising is the reality that many popular affiliate programs are in breach of anti-pyramid selling or referral selling laws for one simple reason: they operate so-called "closed" affiliate programs...

They require affiliates to make a personal purchase (not for resale) before they can be eligible to earn commissions on referred sales.

This is more likely to be in conflict with referral selling laws than anti-pyramid selling laws, but most countries and states bundle these categories into the same laws... usually under the heading of deceptive trade practices. This is illegal in many countries, including Australia, the USA, Canada and the United Kingdom.

Here are just two examples of referral selling laws

The Texas Trade Practices Act (1973) says...

BUSINESS & COMMERCE CODE
CHAPTER 17. DECEPTIVE TRADE PRACTICES
SUBCHAPTER A. GENERAL PROVISIONS
§ 17.46. DECEPTIVE TRADE PRACTICES UNLAWFUL.

(19) using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods;

Here's what Australia's Trade Practices Act (1974) has to say...

TRADE PRACTICES ACT 1974 — SECTION 57
Referral selling
A corporation shall not, in trade or commerce, induce a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for giving the corporation the names of prospective customers or otherwise assisting the corporation to supply goods or services to other consumers, if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made.

It will pay you to check your local, state and national laws to be sure that your affiliate program is not in breach.

As always, ignorance of the law is not a valid defence. You're expected to do your due diligence. Seek competent legal advice from an appropriately qualified and experienced legal advisor — preferably one with experience in direct selling.