Unless a particular country has laws that prohibit direct selling, MLM is usually perfectly legal. Some countries, states or provinces have laws or regulations that may limit what you’re permitted to do in your MLM business (such as Not For Retail, cooling-off periods, no products kit sales in the first week or month or similar). The UK and Canada have laws that govern how you conduct your MLM business. So do some other countries.
These laws are usually a well-meaning attempt by authorities to prevent unethical conduct. Unfortunately, they're really an attempt to control motives and attitudes, which can't be legislated, so they too often end up having the wrong effect on the wrong people.
Legally speaking, MLMs have been legal in Singapore since June 2000, when the government finally recognised it as a method of product distribution, rather than a Pyramid Scheme. The U.S. government (the land where MLMs first originated with a links2 called Amway) has slapped a whole list of conditions on an MLM system to set it apart from Pyramid Schemes.
Is MLM ethical?
Like the question above, the answer is yes — depending on your motives and methods (why and how you do it). The principles on which MLM is based are completely ethical. However, unethical people can introduce practices (such as “front end loading”) which are entirely unethical. Others try to cover up the fact that their business is MLM, or the identity of their MLM company, or that you need to sell, using deceptive practices that are, in reality, unethical.
None of this means that MLM itself is unethical. It just means that, like in industries where a great deal of money can be made (cars, white goods, real estate, etc), you’ll find people who are prepared to exploit and manipulate others for gain. MLM is no different. All this really proves is that there’s obviously a lot of money to be made in MLM, or those parasites wouldn’t bother.
Many MLMs toe a very thin line to Pyramid Schemes. The problem does not lie with the marketing system (which actually represents a very cheap method of product distribution for the parent links2). Rather, it lies with the people who promote the products. In some cases, the way the system is run by the links2 also makes it a form of legalised Pyramid Scheme (if there is such a thing).