Multi-Level Marketing is not a Business (It’s a Pyramid Scheme)

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direct-selling-pyramid-schemeOver 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. Continue reading

Why Multi-Level Marketing “Million Dollar Earner” Status is Nonsense

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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.

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Why Multi-Level Marketing Companies are Pyramid Schemes

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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. Continue reading

Video: Multi-Level Marketing is NOT Like Corporate America

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One of the common statements made by people in favor of multi-level marketing is that it is just like corporate America. We call MLM a pyramid scheme, and corporate America is a pyramid too! That’s simply not true.

While the SHAPE of the hierarchy of people looks like a pyramid in MLM and in corporate Amercia (one person at the head of the company, a few below, managing several below them, and so on)… that is where the similarities end. Continue reading

Avon is NOT a “Good” MLM

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avon-mlmLast week I wrote about Good MLMs Versus Bad MLMs. The truth is that there is no such thing as a “good” multi-level marketing company. Oh sure… MLM supporters will tell you that some “direct sales” companies are doing it right, and some are doing it wrong. They will tell you that every company has “bad apples,” but that you have to look past those and see the good people.

These arguments are all false. Companies call themselves “direct selling” in order to direct attention away from the fact that they are recruiting schemes. MLMs are all endless chain recruitment schemes in which 99% of participants are guaranteed to lose money. That is not a business… it is a game rigging in favor of the owners of the company, and participants are guaranteed to lose no matter how hard they try. Promoting this as a “business opportunity” is unethical and immoral.

It therefore follows that if the company and the opportunity are unethical and are not a business, the people promoting the company and opportunity cannot be good. A horrible, deceitful “opportunity” does not change into something right, moral, and ethical, no matter how “good” the person promoting it is. Continue reading

Why Products Offered by Multi-Level Marketing Companies Are So Expensive

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usana-health-sciences-chinaMulti-level marketing companies (MLMs) are nothing but legalized scams. Make no mistake… they are pyramid schemes, but the government allows them to operate. Why are these obvious Ponzi schemes (which, by the way, the MLMs will swear up and down they are not… thou doth protest too much) allowed to operate? Who knows why the government will not crack down on this massive consumer fraud. The best thing we can do is educate consumers about the evils of multi-level marketing so they can avoid these companies… that means NOT becoming a distributor and NOT buying any of their products.

MLMs use products to make their companies look legitimate. They can’t be a scam if they are selling an actual product, right? WRONG. The absolutely can be a scam, because the product is simply a “front” for the scheme they are running. The product is meant to make the company look legitimate and hide the fraud.

The products from nearly every MLM are overpriced. That is, they cost more than comparable products available through legitimate channels (i.e. real retailers). The distributors will tell you it is because the products are very high quality!!! The magic juice has vitamins that are more bio-available! The make-up has better ingredients! The clothes are made better! The pills have super secret magical powers that cure all illnesses! These are all lies. The products are not better. Continue reading

Proof that Herbalife Sucks

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mlm-scheme-pyramidI have researched multi-level marketing companies for nearly a decade. During that time, I came to the conclusion that the vast majority of participants fail. What does that mean? 99% or more lose money. Since the participants are largely getting in because of the “business opportunity” to “earn unlimited income” and find “financial freedom,” failing to turn a profit is indeed a failure.

A few weeks ago, a wonderful article on Herbalife was published on Seeking Alpha. It started out by discussing hedge fund manager John Hempton’s blind (and incorrect) defense of the Herbalife business model. In essence, he claims that since meal replacement shakes are sold, this is a legitimate business opportunity.

This is the defense that every MLM company uses. “We have a product. People buy it. Therefore we are not a pyramid scheme.” Continue reading

World Ventures Called A Scam by Blogger and Others

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worldventuresAttempts to silence critics of multi-level marketing companies (often referred to as legalized pyramid schemes) are nothing new. I have been on the receiving end of numerous threats  and one very large legal action for my criticism of MLMs. Medifast and Take Shape For Life had a huge loss in their $270 million lawsuit against me. I was also threatened by MLM Lawyer Gerry Nehra for my criticism of Shop to Earn. (Too bad Gerry Nehra is now on the receiving end of legal action for his MLM involvement!) Multi-level marketing company Mona Vie levied these threats. Then there was this whole situation.

The latest crybaby is World Ventures, a multi-level marketing company which says it is “…the world’s largest direct seller of curated group travel, with more than 120,000 Independent Representatives in over 24 countries and we are still growing…..”

Like any good MLM, WorldVentures simply cannot allow people to criticize the company. Negative opinions must be met with swift legal action! Continue reading

Article on NuSkin Fraud in China

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Today Citron Research released a report on the fraud being committed in China by Nu Skin Enterprises. NuSkin is a multi-level marketing company based in Utah, and it trades on the New York Stock Exchange under the symbol NUS. This report is a follow-up to an August 2012 report in which Citron revealed its basis for alleging that Nu Skin was perpetrating fraud in China.

Citron first points out how dependent on China Nu Skin is.  In the second quarter of 2012, revenues from China were $57 million. In the second quarter of 2013, Nu Skin’s China revenue grew to $197 million. That’s a 245% increase. Without the China revenue, NuSkin’s year-over-year growth would be negative.

An expose was published in China on NuSkin. A translation of the page can be found here. The article accuses Nu Skin of running a pyramid scheme, using endless chain recruitment to bring new marks into the fraudulent business opportunity. Distributors are encouraged to buy inventory in quantities they will never sell, all to move up in the pyramid and qualify for commissions. (Incidentally, this is the same way that Mary Kay Cosmetics has been successful.) Continue reading

Xyngular: Starve, Binge, Purge, Repeat!

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direct-selling-pyramid-schemeMulti-level marketing companies are getting lots of attention lately thanks to the Bill Ackman smackdown of Herbalife in December. MLMs offering “nutrition products” are of special interest to consumers, and with good reason. Companies like Isagenix, MonaVie , Usana, Mannatech, and Shaklee all offer magic potions that claim to help you lose weight, absorb more vitamins and minerals, and cure all diseases.

Of course, many of these health claims are strictly prohibited. Nutrition MLMs generally have disclaimers stating that their health claims have not been evaluated by the Food and Drug Administration, and that the products are not intended to diagnose, treat, cure or prevent any disease. But that doesn’t stop the distributors for making such claims, and the company management turns a blind eye to it. Continue reading