Robert FitzPatrick of Pyramid Scheme Alert is bombarded every week by consumers who want to ask him, “What about this MLM?”
You see, the marketers of multi-level marketing companies have gotten very savvy. They know that plenty of us have figured out their con game. They now have consumers convinced that theirs is “one of the good ones.” They’ve convinced consumers that they’ve seen the “bad” MLMs, and that theirs is surely one of the “good” MLMs. (Yet they never tell consumers which ones are the “bad” ones, do they? Why is that?)
According to Robert:
In just a few months time, PSA received direct inquiries about more than 100 different MLMs! Consumers appear to know that “some” MLMs are scams, but ernestly believe most are good. Since 60% of all consumers quit MLMs within a year after failing to earn a profit, and more than 90% cycle out in several years time after suffering loss, there is a massive base of negative experience. Yet, consumers are still searching for the “good” MLM that they believe is out there and will become their ticket to wealth or at least a refuge from the Recession.
Robert explains why consumers believe MLMs are generally viable despite all the evidence to the contrary. The secret is convincing a potential recruit to look at the “products” the multi-level marketing companies are pushing. Most often these are pills, potions, lotions, fruit juices, and the like.
Sadly, few people get the big picture about multi-level marketing schemes. For the most part, MLMs are all the same scheme! From old established schemes like Amway to new startups like the Trump Network, these are the same flim flam in different clothing. One MLM may sell vitamins while another sells weight loss herbs. One sells legal services insurance and another fruit juice. But all of them, in reality, sell the exactly the same product: an endless chain income promise. MLMs are all in the “business opportunity” business, not “pills, potions and lotions.” And all of them sell the same “opportunity”, which is the chance to sell the “opportunity” to others who sell the same opportunity, forever and ever. Amen.
The MLM makes it appear that these products are the focus, so their MLM is different. Different from what? From the real scheme behind MLMs, the endless chain recruitment.
But the truth is that all MLMs are the same. They all rely on continuous recruitment in order to have a chance to earn any significant income. And even still, the vast majority of participants who do recruit new “distributors” still do not make a viable income.
Consumers jump from MLM to MLM looking for the “right one.” They generally think there is some secret they didn’t know or some “right” product that they weren’t pushing. They never realize that over and over, they’re pushing the same bogus “product” in all the multilevel marketing companies… and that “product” is the recruitment into the “opportunity.”
So why don’t consumer protection agencies and non-profit consumer watchdog organizations go after the multi-level marketing industry? According to FitzPatrick:
For many in the media and at the Better Business Bureau, who ought to inform the public about the reality of MLMs, the truth that none of the big names of MLM offers legitimate income opportunities seems to be too “uncomfortable” to accept. If it were true, it would indicate a colossal fraud and a huge failure of regulation. Could this be? Recent experience would seem to open the door to the truth, yet denial still reigns.
And here’s another way the multi-level marketing companies deflect attention from their real purpose of recruiting into infinity… Make up phony reasons why they’re not one of those “bad pyramid schemes.”
Mary Kay Cosmetics is known for touting “we’re dual marketing” (a made-up term to keep focus off their multi-level marketing structure) or saying “our products are sold only twice, once to the distributor and once to the customer” (unlike those bad multi-level companies that have the product sold many times over through various levels).
Many of the MLMs refer to themselves as “direct sales” to hide their recruiting intent. After all, we all know that the companies involved in the “Direct Selling Association*”
Here’s another phony claim to hide the real truth behind multilevel marketing:
Another reason people miss the big picture and keep picking MLM shells with fraud beans underneath: they are told that if the scheme sells a product, it is automatically legitimate! Only schemes that charge large upfront “fees” are scams, they are told, even by the likes of the Better Business Bureau. But, they are assured, if the MLM charges you for products and marketing materials, it’s legit. This is utterly false and dangerously misleading, but many reporters and BBB offices are merely repeating what the MLM industry tells them.
In fact, no MLMs charge large upfront fees any more. They now use a different way to get your money and transfer it to the the schemers at the top of the recruiting chain. Nearly all the money they get now, whether upfront or monthly, comes from the salespeople’s own purchases of “products” (overpriced) and “marketing materials” (worthless). Most consumers pay and pay and pay and don’t ever earn a dime in income but they believe it was all legitimate (even though they lost money) because they purchased products (at absurdly high prices and in order to qualify for commissions they never got), rather than paid “fees.” Here’s the MLM trick: the purchases are the infamous “fees” in disguise!
And the ever-famous argument in favor of MLMs that goes something like this… “If they were doing anything wrong, the government would have shut them down!”
Unfortunately, that’s not the case. Multi-level marketing companies are swindling consumers out of billions of dollars a year, and our law enforcement agencies allow it to continue. Robert explains:
And then there is the sad and outrageous role of our Federal Trade Commission (FTC), which was corrupted by lobbyists and campaign contributions. In 2000, it virtually stopped investigating and prosecuting MLMs. This has given MLMs the aura of legality. MLMs now routinely use the very same defense that fraudster Bernard Madoff employed so successfully for years. When questioned about his scheme, he would say, “How could I be running a scam if the government is not even investigating me and has never prosecuted me?” So, too, MLMs use the lack of law enforcement as part of their false claim of legitimacy and the FTC’s inaction becomes a tool of the fraud.
The scammer have a million reasons why they’re legitimate and why it was the consumer’s fault that she or he made no money. After all, if it is the structure of MLM itself that causes a 99% failure rate, who would ever join? Sure, there are plenty of small business failures each year, but they are at nowhere near the excessive rate that consumers fail in multi-level marketing.
So let’s blame the consumers for the astronomically high failure rates! They didn’t try hard enough. They didn’t really want to make a profit. They quit too soon. They didn’t really know how to market. They didn’t talk to enough people. They didn’t put their full efforts into it.
These excuses for failure sound plausible until you’ve had the experience I’ve had… Millions of people have visited my site, Pink Truth, to talk about their experiences in Mary Kay and other multilevel marketing companies. I see over and over that many put forth great effort and really did want to turn a profit, but the system of MLM itself kept them from achieving that. These are people who have seen great success in their jobs, who would likely be successful at a legitimate business venture, but who were unsuccessful in MLMs.
Why? The structure of the MLMs guarantees the failure or almost everyone. There is no such thing as a “good” multi-level marketing company.
* Contrary to what the Direct Selling Association would have you believe, they are not a watchdog group for the industry. Their purpose is not for members to have a hand in policing the activities of other members. The organization’s #1 purpose is political lobbying. They exist to ensure that laws protecting consumers from the predatory practices of all the MLMs are never enacted.