mlm

How Does MLM Affect People?

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pyramid-selling-scamThe late Jon Taylor, PhD wrote a thorough and excellent book about multi-level marketing (MLM): The Case (For and) Against Multi-Level Marketing: The Complete Guide to Understanding the Flaws – and Proving and Countering the Effects – of Endless Chain “Opportunity” Recruitment, or Product-Based Pyramid Schemes.

He put the book together in 2011 and 2012, but it is still relevant.

If you’re not familiar with MLM, you should acquaint yourself with the horrible statistics.  Basically, the odds of a distributor losing money in multi-level marketing are greater than 99%. Despite the fact that participants are almost guaranteed to lose money in MLM, these scams are marketed as business opportunities with the potential for unlimited earnings. Continue reading

Multi-Level Marketing is Not a Legitimate Business Model

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One of the common defenses of multi-level marketing is that it is a legitimate business method that has been around for a long time.

I’ve also been told that if it was illegal, it would have been shut down. Some companies that were widely touted as “legal” or “legitimate” MLMs, such as Advocare, HAVE been shut down or prohibited from using the MLM model. Who knows the rhyme or reason to that.

But neither the length of existence nor the lack of law enforcement action means something is legitimate or not a fraud. Remember Enron? Remember Bernie Madoff? These and others have been in business for a long time, and turned out to be complete frauds. Continue reading

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

LuLaRoe Fraud Complaints

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A recent article at CBS MoneyWatch exposes multi-level marketing company LuLaRoe and the alleged fraud being perpetrated on its consultants. You may remember that I criticized LuLaRoe and its MLM model a few months ago based on the false narrative that lots of women are getting rich by selling the leggings. One of my main criticisms:

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.)

Other problems that I have with this “business model”: 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

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).

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

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.

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. They 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