All of the article is here: http://ethanvanderbuilt.com/2013/09/27/product-based-pyramid-scheme- definition/


Modem pyramid schemes generally do not blatantly base commissions on
the outright payment of fees, but instead try to disguise these
payments to appear as if they are based on the sale of goods or
services. The most common means employed to achieve this goal is to
require a certain level of monthly purchases to qualify for
commissions. While the sale of goods and services nominally
generates all commissions in a system primarily funded by such
purchases, in fact, those commissions are funded by purchases made
to obtain the right to participate in the scheme. Each individual
who profits, therefore, does so primarily from the payments of
others who are themselves making payments in order to obtain their
own profit. – Source FTC Division of Marketing Practices James Kohm

Pyramid schemes—also referred to as franchise fraud or chain
referral schemes—are marketing and investment frauds in which an
individual is offered a distributorship or franchise to market a
particular product. The real profit is earned, not by the sale of
the product, but by the sale of new distributorships. Emphasis on
selling franchises rather than the product eventually leads to a
point where the supply of potential investors is exhausted and the
pyramid collapses. At the heart of each pyramid scheme is typically
a representation that new participants can recoup their original
investments by inducing two or more prospects to make the same
investment. Promoters fail to tell prospective participants that
this is mathematically impossible for everyone to do, since some
participants drop out, while others recoup their original
investments and then drop out. – Source FBI.gov

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