Posts Tagged ‘multi-level marketing’

World Ventures Called A Scam by Blogger and Others

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!

Are All Multi-Level Marketing Companies Pyramid Schemes?

Recently Robert FitzPatrick of Pyramid Scheme Alert sent out a newsletter that included a discussion of the issue of whether all multi-level marketing companies are pyramid schemes. MLMs are frequently accused of being pyramid schemes, as we see has been the case with Mary Kay Cosmetics, BurnLounge, Herbalife, Medifast, Fortune Hi Tech Marketing, and Usana Health Sciences.

It is common for participants in multilevel marketing schemes to ask whether one MLM or another is also a pyramid scheme. Consumers are hoping that they have found the one legitimate or good multi-level marketing opportunity. The following information comes from Robert FitzPatrick’s newsletter article on the topic:

Dave Ramsey Officially Sucks

dave-ramsey-sucksI have always been a big Dave Ramsey fan, and believed that his financial advice for consumers is first rate. But today Dave Ramsey got it wrong in a big way. On his blog, he published an article about making money in multi-level marketing.

The article failed to acknowledge the fact that over and over again, it has been proven that 99% of people involved in MLMs lose money. Front and center in the article was this lie:

Truthfully, if you have a go-getter personality, and you can follow some basic business and personal etiquette, you can make a lot of money in an MLM. The trick is to avoid all the potential pitfalls along the way.

Truthfully? No, there is no truth in what was said.

Multi-Level Marketing or Pyramid Scheme?

Recently Bruce Craig, a retired lawyer from the Wisconsin Department of Justice in the area of consumer protection, published an interesting article on multilevel marketing: An Investor’s Guide To Identifying Pyramid Schemes. The controversy surrounding Herbalife (NYSE: HLF), and initiated simply because David Einhorn asked a few questions about the company, was the impetus for Bruce’s comments.

I believe that most mulit-level marketing companies (MLM, for short) are pyramid schemes that are allowed to operate in the United States. They are very careful in their efforts to avoid the label of “illegal pyramid scheme,” but that doesn’t mean they’re not pyramid scheme in substance.

False Claims and Broken Promises in Multi-Level Marketing

Robert FitzPatrick, an internationally recognized authority on multi-level marketing and pyramid schemes and a court certified expert witness on MLMs and pyramids, details the lies told in MLM in this article, A Disguised Pyramid Scheme: The Non-Retail “Direct Selling” Company:

Instead, the non-retail direct selling schemes present a compelling and very alluring picture to potential recruits that diverts attention from the flawed structure and its disastrous outcome. Virtually all companies of this type in every country they operate in make the same alluring and misleading promises to recruits:

Create Your Own Multi-Level Marketing Company in Ten Easy Steps!

Hundreds of thousands of Americans get sucked into Multi-Level Marketing (MLM) companies each year. From Mary Kay to Amway to Herbalife to PrePaid Legal, the list is seemingly endless. Each offers its own special spin on the products it sells, but the main focus of an MLM is on recruiting new members.

MLMs live and die by the recruitment of new members, who make the bulk of the product purchases from the company. Little of the product is resold to an actual end user, but the MLM company doesn’t care. The sale has been made to the distributor (or associate or representative or member or consultant or whatever term you like).

Calculating Loss and Failure Rates in Multi-Level Marketing Schemes

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:

Why Retailing Does Not Occur in Multi-Level Marketing Companies

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.

Marketing Fraud: Why Multi-Level Marketing Pyramids and Financial Ponzis are Ignored By Law Enforcement

pyramidDear Colleagues, Consumers and Pyramid Scheme Alert Supporters,

A new essay recently posted on the False Profits Blog addresses a question many of you  have raised.

Why are multi-level marketing pyramids and financial ponzis able to ensnare so many people today? What is the power behind this Main Street epidemic?

This question goes beyond the lack of law enforcement, the failure of the FTC and SEC, or the difficulty of grasping “exponential expansion.”

The Lure of Multi-Level Marketing

I constantly marvel at how multi-level marketing (MLM) can continue to lure in millions of people a year, who collectively pump billions of dollars into these losers. Time and again, industry experts calculate a failure rate of 99% (failure = losing money on the deal) … And still consumers line up to sign up for these things.

Even the COLD HARD FACT that they have almost no chance of turning a profit does not deter them. Stop and think about it. These people have less than a 1% chance of turning a profit in MLM, yet they still sign up and pay hundreds or thosands of dollars each into these recruiting schemes. (Schemes… because the name of the game is signing them up and getting their money via fees to join and/or inventory purchases.) Consumers have a better chance of coming out ahead if they simply put their money on a table in Vegas.

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