Pyramid Schemes & MLM

FTC Sues Nerium: Illegal Pyramid Scheme

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Last week the FTC announced a lawsuit against Neora (formerly known as Nerium), alleging that it is an illegal pyramid scheme. Couple this with the recent end to AdvoCare’s multi-level marketing method of business at the hands of the FTC, and people like me (who think MLMs are abusive pyramid schemes) have a bit of hope.

More specifically, the FTC suit goes after Nerium under the parts of the FTC Act that prohibit unfair or deceptive practices and false advertising. The company was known as Nerium from 2011 to 2019. In February 2019, the company changed the name to Neora. It is suspected that the name change was because the Nerium name was connected to so many complaints and lawsuits.

The current suit says that “unlike a legitimate multi-level marketing business,” Nerium’s compensation plan emphasizes recruiting new “brand partners” (BPs) over the sale of products to consumers outside of the company. (Note to FTC: This is what all MLMs do. They ALL focus on recruiting, and the actual retail sales are pathetic for several reasons.) The FTC says the business model makes it unlikely that distributors can make money selling products in response to legitimate demand from third parties. Continue reading

AdvoCare Pyramid Scheme

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On Wednesday it was announced that AdvoCare and the FTC entered into a settlement which bars it from participating in any multi-level marketing (MLM) activities. AdvoCare will also give $150 million in consumer refunds.

The settlement comes after the FTC said AdvoCare was running an illegal pyramid scheme. There were allegations that the company “deceived consumers into believing they could earn significant income as distributors of its health and wellness products.”

There is interesting stuff in the complaint filed by the FTC: Continue reading

InteleTravel MLM “Opportunity”

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PlanNet Marketing Inc. offers the InteleTravel MLM opportunity. They avoid language that would give away the fact that it is MLM, but since people recruit a downline into multiple levels, it is indeed multi-level marketing.

Participants are referred to as “independent representatives” (IR). They pay upfront and monthly fees to have an “online travel agency.” Small commissions are made from selling travel services and packages, but the amount earned on the travel sales is quite low.

According to the InteleTravel compensation plan as of September 2019: Continue reading

How to Avoid Business Opportunity Frauds and MLM Scams

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In a past appearance on CNBC’s On the Money, Tracy Coenen talked about how consumers could protect themselves from business opportunity scams and multi-level marketing (MLM) schemes. MLMs parade themselves around as business opportunities, but they are nothing more than elaborate pyramid schemes that swindle millions of consumers each year.

LuLaRoe Pyramid Scheme Lawsuit

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And there is  another lawsuit against LuLaRoe. The  MLM  that sells leggings of questionable taste appears on the verge of collapse. A lawsuit filed in 2018 by Providence, a company that supplied LLR with goods first demanded $49 million. More recently, Providence says it is owed $63 million and it wants the court to seize $34 million in assets since owners Mark and DeAnne Stidham are a flight risk. And then the state of Washington sued LLR, alleging it is a pyramid scheme:

“LuLaRoe tricked consumers into buying into its pyramid scheme with deceptive claims of high profits and refunds for unsold merchandise,” Ferguson said in a news release. “Instead, many Washingtonians lost money and were left with piles of unsold merchandise and broken promises from LuLaRoe. It’s time to hold LuLaRoe accountable for its deception.”

The newest lawsuit was filed this month by plaintiffs Tabitha Sperring, Paislie Marchant, and Sally Poston. The lawsuit sums up the scam (coincidentally or not in language that sounds an awful lot like things I’ve written here): Continue reading

Almost Everyone Loses Money in MLM

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Don’t let your Facebook friends fool you: They’re not making money in the multi-level marketing company they keep pitching to you. And you won’t either. Multi-level marketing is not a business. More than 99% of participants in multi-level marketing (MLM) lose money. Companies like Mary Kay Cosmetics promote the “income opportunity,” but when the vast majority of MLM distributors say they lost money, the story changes to “they didn’t really want to make money,” or “they just did it for fun,” or “they didn’t try hard enough.”

The truth is that MLM is not a “business opportunity.” Almost everyone who participates is guaranteed to lose money. You can follow all the instructions, talk to everyone you know, invest money in the scam, and you will still lose money. Why? Because MLM is nothing but a pyramid scheme in which all the people at the bottom of the pyramid will lose money.

This video was published in 2016, but the information is still very relevant. It features victims of the Herbalife “business opportunity.” They put lots of money, time, and effort into their “businesses” and ended up losers.

The fact remains that all multi-level marketing companies are abusive systems which take money from the participants, offering them the (false) opportunity to earn money, knowing that they are virtually guaranteed to lose money.

Multi-Level Marketing is Not Like Corporate America

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Fans of multi-level marketing (MLM) often say that it is just like corporate America! There are levels of employees and managers… Corporate America is a pyramid and MLm is no different. That’s a faulty analysis. When I call MLM a pyramid scheme, I am not calling that because the management structure looks like a pyramid. I am calling it a pyramid scheme because of how it functions.

A pyramid scheme is a pay-to-play scam. People pay to become a part of it, and they pay continually through minimum purchases that are required to remain a qualified member of the scheme. MLM is based on the continuous recruitment of people into the scam using the promise of making money, despite the fact that more than 99% of participants in MLM actually lose money. MLMs sell a fake opportunity. While they appear to be focused on selling products or services, those things are simply a front to make the “opportunity” look like a legitimate business. Sadly, MLM is not a business. Continue reading

Why Multi-Level Marketing Companies are Pyramid Schemes

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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.

MLM is a type of pyramid scheme that our government allows to operated. Is it ignorance? Or is it deliberate? I don’t know, but it seems that educating consumers is the best way to fight against pyramid schemes which try to hide the nature of their activity by calling themselves “multilevel marketing” or “network marketing” or “home based businesses.”

Watch this video to learn more.

Good MLMs and Bad MLMs

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pyramid-selling-scamDefenders of multi-level marketing (MLM) will tell you that some companies “do it” right, while some companies “do it” wrong.

The fact that a multi-level marketing company like Mary Kay Cosmetics has been around for more than 55 years does not define whether it is a fraud or scam. Remember Enron (in business more than 15 years prior to the fraud being discovered) and Bernie Madoff (whose investment firm was in business for more than 40 years before his Ponzi scheme was revealed)? Length of time in operation has nothing to do with whether something is a scam or a fraud. Being traded on the New York Stock Exchange is not an indicator of legitimacy either. Continue reading

Why MLMs are Pyramid Schemes

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Multi-level marketing companies (MLMs) are nothing but pyramid schemes. Oh sure, there are websites that go to great pains to discuss the difference between MLMs and pyramid schemes. But when you boil it down, MLMs are indeed pyramid schemes, and ta class action lawsuit filed against Arbonne International last year explains this well.

First they describe a typical pyramid scheme:

A classic pyramid scheme operates as follows: recruits pay into the scheme for the right to receive compensation from the scheme based, in large part, on bringing new recruits into the scheme. Each recruit’s money is used to pay other recruits in the scheme (particularly more senior recruits), as well as the scheme promoter. The more recruits one brings in, and the closer to the top of the pyramid he is, the more money he might make. Recruits will necessarily lose their money unless they recruit enough new people into the scheme, who will also lose their money unless they recruit enough new people, and so on. Because there is little or no outside money flowing into the scheme from real operations (other than recruitment), because payments from recruits are shared disproportionately with the persons closer to the top of the pyramid, and because the scheme operator takes a healthy cut for himself, the vast majority of recruits are doomed to lose most or all of their investments.

Continue reading