Multi-Level Marketing in Uganda

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No group of people, no matter how poor, are immune to the predatory practices of multi-level marketing (MLM) companies.  These companies are nothing but glorified pyramid schemes, causing financial losses for more than 99% who get involved.

A Chinese MLM called Tiens has set up shop in Uganda, despite the fact that the average income is $2 per day (so few people can afford overpriced snake oil). Tiens is using false income claims and lies about medical cures to recruit distributors.

Filmmaker Priya Biring did a 25 minute film on this MLM, entitled “Uganda’s Health Pyramid,”  and produced by Al Jazeera News.

Priya says the following in the article that accompanies the video: Continue reading

TelexFree: MLMs are Pyramid Schemes

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This week we heard news of $20 million (hidden in a box spring) being seized by the federal agents in its ongoing investigation of TelexFree, a multi-level marketing company that the government says was a massive Ponzi scheme. You can read all about the TelexFree case on Patrick Pretty’s blog.

News reports about TeleFree refer to it as a Ponzi scheme (also called pyramid scheme). What isn’t mentioned anymore is the fact that it operated as a multi-level marketing company, just like Amway, Mary Kay, Herbalife, LuLaRoe, and hundreds of other companies you hear about on a daily basis. While it is NOW acnowledged that TelexFree was a Ponzi scheme, there was a time when it operated exactly as these other MLMs do.

The FBI says the following about TelexFree: Continue reading

Loss and Failure Rates in Multi-Level Marketing (MLM)

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More than 99% of people lose money in multi-level marketing (MLM). In Chapter 7 of Dr. Jon Taylor’s book, The Case (For and) Against Multi-Level Marketing, he details the failure rates of participants in multi-lievel marketing companies. In order to analyze the true failure rates and to calculate actual profits or losses from participation in these (improperly termed) “business opportunities,” it is necessary to wade through confusing and incomplete disclosures and to estimate figures that are critical but not provided by the companies.

Dr. Taylor completes a thorough analysis of the numbers. Of the hundreds of multi-level marketing companies active in the United States, Dr. Taylor could find income disclosure statements for only 30 of them. What are the others hiding?

The analysis of these 30 income disclosure statements was completed through the following process:

1. Obtain Average Earnings Statistics – These purport to show the average earnings by distributor level.
Continue reading

Myth of Retail Sales in Multi-Level Marketing

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Multi-level marketing companies (MLMs) like to refer to themselves as “Direct Sales” companies, because this puts the focus on the sale of the product or service, and takes focus off the business of recruiting.

I’ve been researching MLMs for years, and I’ve found that companies use the product or services simply as bait and a cover. It is “bait” for recruiting because it looks legitimate to a potential recruit. (How many people would join MLMs if they were truthful and told you that what you really had to do was constantly recruit new people?)

It is a “cover,” since it is what makes the schemes legal under state and federal laws. Pyramid schemes (which are simply a transfer of money up a pyramid-like structure) are illegal. But if you use a legitimate product or service as your cover and your reason for transferring money up the pyramid, you can successfully claim that your company is not a pyramid scheme. Again, the product or service takes the focus off recruiting.

But the truth is that the people involved in multilevel marketing companies do little actual retailing of products or services to third-party customers (non-members of the scheme). The vast majority of the purchases of products and services are made by the members of the MLMs themselves, either to stock inventory (which they will probably never be able to sell) or for personal consumption. Continue reading

LuLaRoe Review: Bad “Business”

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lularoe-scam-fraudLuLaRoe leggings have become popular, and therefore the multi-level marketing (MLM) “business” of LuLaRoe has taken off. I’ve said over and over that multi-level marketing is not a business because more than 99% of participants lose money. But I wanted to take a look at this company specifically, because it’s been getting so much press.

Business Insider promoted the idea that LuLaRoe is making women rich. While there ARE a handful of women who are making a ton of money from the company, only an incredibly tiny fraction of participants can make this type of money. Why? Simple math. If you’re making a 3% to 5% commission on your downline (as you’ll see below), it takes $700,000 of wholesale purchases by your downline to earn $35,000 in a month. (I realize that various bonuses change the math, but I’m using these numbers to simplify things.)

Imagine how many people need to be in the downline and how much they each need to buy to generate this volume. Simple math tells you that everyone below the woman earning $35,000 can’t build a pyramid of this size. There simply aren’t enough people on the planet, and there are only so many customers available for each distributor.

Let’s talk about some of the specifics downfalls to this fake business. Continue reading

More on John Oliver’s Takedown of Multi-Level Marketing (MLM)

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john-oliver-multilevel-marketingRobert FitzPatrick, one of the foremost experts on multi-level marketing, published a piece entitled “What John Oliver Didn’t Have Time To Say In His Hilarious Exposé Of Herbalife And MLM” on Seeking Alpha. (register for free to read the whole article) As always, he did a masterful job o flaying out the case against MLMs, which are nothing more than elaborate pyramid schemes set up to look like legitimate businesses.

As of the writing of this post, the YouTube video of the complete episode Multilevel Marketing: Last Week Tonight with John Oliver (HBO) had over 5 million views. The program made the point (in a very articulate, yet humorous way) that MLMs are nothing but pyramid schemes.

FitzPatrick expands on the episode: Continue reading

John Oliver Exposes the Scam of Multi-Level Marketing

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Last Week Tonight With John Oliver devoted this week’s episode to multi-level marketing. Although he uses quite a bit of humor in his presentation, his analysis of MLM is spot on. Multi-level marketing companies are pyramid schemes, plain and simple. MLM is not a business. It doesn’t matter what product you’re trying to sell, the whole set-up is a fraud in which 99% of participants lose money.

The full episode is shown below, and is well worth the time spent watching. John Oliver mentions companies like Mary Kay, Herbalife, Market America (Shop.com), Jeunesse, and Youngevi. The producers did an excellent job of honing in on the important facts about an industry that is made intentionally confusing (in order to conceal their fraud, of course).

Book Review: Financial Advice for Blue Collar America

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financial-advice-for-blue-collar-americaI recently had an opportunity to read Financial Advice for Blue Collar America by Kathryn B. Hauer. The book is positioned as a practical guide for the average American who needs to get straight to the important topics, and the it definitely delivers on that promise.

The book starts out with the premise that being a blue collar worker actually CAN offer you an opportunity to gather wealth. Blue collar as used in this book means a job which doesn’t require a college degree, but requires a certain level of skill and training. This includes trades like carpenters, truck drivers, auto technicians, police, and skilled manufacturing workers. A sampling of current annual earnings for these jobs ranges from $40,000 to $82,000, which might be surprising to some.

Early on we learn about basic financial concepts such as net worth and cash flow, which are explained well. Also included are information on debt, budgets, saving, investing, the many types of insurance, taxes, and wills. These topics are covered briefly, but there is enough information for it to be valuable. Continue reading

GoFundMe Fraud Exposed by GoFraudMe Site

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gofundme-fraudGoFundMe scams seem to be growing by the day. While the GoFundMe fundraising site can be a great resource for people who need to raise funds for legitimate charities and needs, it has also become a hotbed of fraud. And with the site taking a nice 5% cut of every dollar that is donated through GoFundMe, it seems the company’s motivation to shut down fraudulent campaigns may not be too high. After all, the site makes money whether or not a campaign is legitimate.

GoFraudMe was started by Adrienne Gonzalez to keep the company and the site’s users accountable. It all started when Adrienne reported a fraudulent campaign, and GoFundMe did nothing about it. She knew the campaign was fraudulent because all costs for Bart (the zombie cat) were covered by the Tampa Bay human society, yet someone was raising funds to cover for the care (that didn’t need to be paid for). While the company does shut down some apparently scammy campaigns, it doesn’t seem to be all that aggressive in doing so. The Bart campaign is still active as of today! Continue reading

MLM: It’s About Recruiting, Not Sales

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pyramid-scheme-mlmI’ve been telling you for years that multi-level marketing is NOT about selling products. It’s about recruiting people into a fake opportunity. The products are the “front,” meant to make MLM look like a legitimate business. In reality, very little product is retailed to actual consumers. Instead, it’s sold to new recruits into the scheme, who have little chance of ever retailing those products for a profit.

Look no further than the case of Herbalife to prove my point. (This point is usually difficult to prove, as MLMs do their best to hide the numbers so we never see the truth behind the scam.) This month Herbalife entered into a settlement agreement with the FTC that has them paying $200 million and substantially changing how the company does business.

Herbalife falsely claimed: “Settlement Does Not Change Herbalife’s Business Model as a Direct Selling Company.”

The FTC clearly disagrees, and said in its press release about the settlement (emphasis mine): Continue reading