Tracy Coenen on CNBC, talking about business opportunity scams and multi-level marketing (MLM) schemes. Consumers beware!
Alternative forms of medicine and therapy are all the rage. What are they an “alternative” to? Traditional western medicine, which is science-based. The American Cancer Society describes naturopathy:
Naturopathic medicine is a complete alternative care system that uses a wide range of approaches such as nutrition, herbs, manipulation of the body, exercise, stress reduction, and acupuncture. Parts of naturopathy are sometimes used as complementary therapy along with mainstream medicine. Naturopathic medicine is a holistic approach (meaning it is intended to treat the whole person) that tries to enlist the healing power of the body and nature to fight disease.
While there are some benefits to naturopathy, patients should not be fooled into thinking that it is a legitimate treatment for any medical condition. Yes, things like stress reduction and acupuncture can have positive benefits to the body overall. Proper exercise and paying close attention to your body and the signs it is giving are good.
Back in the day, arbitration was a reasonable alternative to court rooms. Consumers could seek justice when they were wronged, but in a forum that was quicker and cheaper than going to court. Unfortunately, arbitration has become nothing but a scam on consumers. Companies force consumers into arbitration via their contracts, mainly because the process favors the companies so heavily.
Namely, the arbitration clauses prohibit consumers from banding together to file class action lawsuits. Class action suits have a tarnished image, but are often the only option when there are thousands of consumers who have been harmed by products and services, but the monetary harm to each is relatively small. It is financially impossible for each consumer to pursue a relatively small case, so banding together in class action lawsuits creates economics that make sense.
Over the weekend, cracked.com posted an insightful article about the realities of multi-level marketing. Simply put, MLM is the same thing as pyramid scheme. It’s not a business. Almost everyone loses money. The behaviors are cult-like. And you will NOT be successful with MLM, so don’t bother trying to recruit your friends and family.
Author Kathy Benjamin calls pyramid schemes the world’s fastest growing industry, and she is right. You see the evidence all over Facebook. Several of you friends are inviting you to their party, or they’re posting staged before and after pictures and leaving cryptic messages that say “ask me how!” They often will not mention the name of the product they’re pushing, because they know they’ll lose you as a potential victim if you Google the product before they can fill your head with lies about how good the product is.
Social media has been exploding over the last year with claims that essential oils have cured all sorts of diseases and illnesses. Obviously, this is a total scam. Even worse, essential oils are being pushed through multi-level marketing (also a scam) with companies such as doTERRA and Young Living.
What is the real story about essential oils and multi-level marketing? As our friend Lazy Man has said: No, Your MLM Health Product Doesn’t “Work.” (This most definitely includes Medifast, Herbalife, Xyngular, Isagenix, Usana, and any other MLM with a “health product.”)
If Roca Labs (seller of weight loss goop it claims is just like gastric bypass surgery) hasn’t brought enough shame to itself (remember the fake endorsement, the other fake endorsement, the child porn doctor who tells us the products are wonderful, the bogus DMCA takedown notices, its suit against a witness against Roca, threats to sue just about anyone who wrote about the company’s tactics, and on and on….), today additional shame has been brought its way thanks to Marc Randazza.
Roca Labs sued Randazza, counsel for PissedConsumer.com and Opinion Corp. There are currently multiple suits pending between Roca Labs and Opinion Corp, basically all because Roca Labs doesn’t want Opinion Corp to provide a forum for unhappy customers to tell the public about Roca’s horrible product.
A class action lawsuit filed in California highlights issues that a number of people (including consumers, attorneys, journalists, and forensic accountants) have been discussing. I will let the complaint speak for itself. The highlights include:
Defendants advertise and market the Formula that it advertises as follows; “Roca Labs® (Florida, USA) invented the Gastric Bypass Alternative®, strongest non-. surgical weight loss in the world for the obese. The Formula procedure creates an immediate gastric bypass effect, leaving only 20% stomach space available for eating, practically forcing the user to eat only half and lose weight from day 1.” [www.rocalabs.com, hereinafter “the Website”]
Both statements are false. A gastric bypass is an operation that divides the stomach into multiple pouches and rearranges the small intestine connections to the stomach. Roca Labs’ Formula does not divide the stomach into parts nor does it rearrange the small intestine.
Multi-level marketing companies are quick to tout the success of their “million dollar earners.” Sounds impressive, doesn’t it? Who doesn’t want to make a million dollars?
Except that phrase “million dollar earner” hides the truth:
- What they don’t clearly mention is that this is cumulative earnings over a number of years, typically between 5 and 20 years.
- They also fail to mention that this is gross income, prior to any business expenses. The business expenses in multi-level marketing can get very high, and will include product purchases (in order to stay active and/or meet requirements for certain commission levels), travel, office expenses, training costs, business insurance, supplies, prizes for customers and downlines, venue rental for events, food for events, etc. The expenses can easily equal 40% to 60% of gross income.
This woman says that Primerica Financial Services representatives lie and misrepresent the business opportunity to others in order to get them to join and stay an active part of the plan (even if they’re not making any money).
Hi. My name is Anne and I was a Primerica representative (full time) for about 7 months (from May ’07 to December ’07). I ended up in a multi-level marketing job in Primerica as a young adult.
I like what the company stands for and stuff (as far as helping families with their products), but it’s such a difficult position to be in. A lot of your success is based upon how many people you know. I knew the products backwards and forwards, became a decent sales person, was able to conquer most objections, but because I didn’t have a big warm market to start out with, I sucked.
When I first joined into the company, I was promised that everything was easy and I’d be making as much if not more than I was at my full time steady desk job… so I quit my regular job because at the time when the opportunity was presented to me, it was a “regular” paying job just with very flexible hours.
Bill Ackman and Pershing Square produced an educational video about multi-level marketing companies and how and why they are pyramid schemes. Yes, I often hear:
- “Pyramid schemes are illegal!”
- “If XYZ Company was a pyramid scheme, the government would shut them down!”
Yes, pyramid schemes are illegal. No, our government generally doesn’t shut down pyramid schemes masquerading as multi-level marketing.