Fatwa No : 81927
Buying a Machine from a Company and Earning Commission by Appointing Members

Buying a Machine from a Company and Earning Commission by Appointing Members

What do the esteemed Islamic scholars and respected Muftis say regarding the following issue: There is a company that has invented a machine priced at 10,000 rupees. Anyone who purchases this machine becomes a member of the company. After becoming a member, if he convinces two other individuals to purchase the same machine, he receives a commission of 1,040 rupees per person. These two individuals then go on to bring in two more individuals each, and the process continues in this manner. Subsequently, the original member continues to receive commission — 240 rupees per person — as new members join through the chain. Once a total of 16 people are brought in, the first member receives a prize consisting of a clothing set worth 50,000 rupees and an additional 20,000 rupees in cash, and he is promoted to the rank of manager. After becoming a manager, he earns a commission of 800 rupees per person, and upon bringing in a specific number of further buyers, he is awarded a car. The question is: According to Islamic Shari'ah, is it permissible to become a member of such a company and continue receiving commissions in this way? A detailed answer with evidence of the Qur’an and Hadith is requested.

الجوابُ حامِدا ًو مُصلیِّا ً

At the invitation of the officials of the XL Chanel Company, an opportunity arose to observe its business operations firsthand and to directly obtain information from the core representatives of the company. Based on this interaction, the following Islamic legal rulings (Shari'ah rulings) are written regarding the business practices of this company:
(1) If the purchase of the massage device (i.e., the machine) sold by the company is not conditional upon becoming a member or fulfilling other related requirements, and if the sole purpose of purchasing the machine is not merely to participate in the marketing system, then such a purchase is undoubtedly permissible and valid according to Shari'ah.
(2) However, in practice, the above-mentioned ideal scenario is not only absent but contradicts the core objective of the company. The main goal of the company is to connect customers to its structured referral chain. And as per the Islamic legal maxim:"Al-umur bimaqasidiha" — Matters are judged according to their objectives. Hence, due to the following issues, it is not permissible to participate in such a business.
In this business model, the purchase of the machine is linked with the condition of becoming a member. The Prophet Muhammad ﷺ prohibited sales that are conditional upon unrelated terms. Furthermore, the juristic rule is: "A condition that contradicts the essence of the contract renders the sale invalid."
This business contains the defect of “two transactions in one deal”, where within a single agreement, the machine is sold, and simultaneously, the buyer is appointed as a commission agent. Such a transaction is impermissible in Shari'ah.
If a person buys the machine not for its use but solely to join the company's marketing system, and the machine’s price is higher than its market value, then this is clearly a form of gambling (qimār), which is strictly prohibited in Islam.
Even if the price is equivalent to the market value, but the machine itself is not the real objective, and the actual goal is to earn from the referral system, then it still bears a strong resemblance to gambling. Therefore, it is necessary for all Muslims to refrain from participating in such unlawful business schemes, becoming a part of them, or assisting in promoting and spreading such ventures.
It should be noted that this is the response issued by the company in reply to the question.