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

Eight years ago, I wrote a piece about how financial guru Dave Ramsey sucks because he supports multi-level marketing. I was hoping that since then, things may have changed. They haven’t. Dave has even gone further with his support and promotion of MLMs as a legitimate way for people to make money. He ignores the fact that 99% of people lose money in MLM, and obviously thinks that the people who lose money just didn’t work hard enough.

In this recent article from Dave’s website, Ramsey Solutions, he wholeheartedly endorses MLM. You might think he’s going to be smart about this, given that he starts off sarcastically referring to it as the most incredible opportunity. Continue reading

For years I’ve been collecting income disclosure statements issued by multi-level marketing (MLM) companies. These are the proof that you have almost no chance of making money in MLM, no matter what the company or product.

Across the board, you see that the vast majority of the distributors make almost nothing in commissions. The “average earnings” for a company as a whole sometimes looks decent (who wouldn’t want to make an extra $2,000 per year!), but the averages are skewed by the handful of people at the top of the pyramid who make big money (at the expense of the many at the bottom).

I have updated our library of disclosure statements to include new disclosure statements for 2020. The newest ones include Amway, Beachbody, Inteletravel (PlanNet Marketing), Herbalife, LuLaRoe, Mary Kay, Melaleuca, Monat, Optavia, Paparazzi, Rodan + Fields, and Xyngular.

Hundreds of thousands of Americans get sucked into Multi-Level Marketing (MLM) companies each year. From Mary Kay to Amway to Herbalife to Avon, 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. (Warning: They’ll deny that the focus is recruiting.)

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 a third party customer, 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). Continue reading

Defenders of multi-level marketing (MLM) are often heard saying that it’s a legitimate business method! Even government regulators say MLM is legitimate. And it is true that state and federal governments in the United States generally allow multi-level marketing companies to operate with little oversight. This is despite the fact that structurally and operationally, MLMs are nothing more than pyramid schemes.

Oh sure, the MLMs are careful to use lots of window dressing that makes it appear they don’t violate anti-pyramiding laws. There are even lawyers who whore themselves out to tell owners of MLMs how to “stay legal.” And of course, the massive lobbying on behalf of “direct sellers” and multi-level marketing companies ensures that current laws against pyramid schemes will not be enforced, and that no new laws impeding MLMs will be enacted.

Typical positive MLM talking points include: Continue reading