Lazy Man and Money

No, Your MLM Health Product Doesn’t “Work.”

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This is an improved version of an article that I originally published on Feb 16, 2013 after years of researching MLM scams. The article received the attention of a group of doctors, scientists, and researchers and they asked if they could republish it on their website. One commenter said that this should be required reading and that I should bring this article back every year. Unfortunately, it’s been nearly 5 years since I pushed this to the top of the blog again.

I write today’s article in response to the thousands and thousands of comments that I’ve gotten from multi-level marketing (MLM) distributors for various products who make the claim that their products helped with such and such medical condition. Some of these include Le-Vel Thrive, DoTerra Essential Oils, It Works, Enagic Kangen Water, Youngevity, ASEA, Plexus, and Beachbody Shakeology. Those are just the companies/products that are still around.

Some of the popular MLMs that have disappeared are: MonaVie, Jusuru, Nerium, Vemma.

As you can tell, I wrote some in-depth reviews on all those companies/products. I think those are about half of the MLMs that I’ve cover in detail on this blog. Over the last 5 years I stopped covering MLMs for 4 reasons:

  1. They are all 99% the same – Health MLMs copy what makes sales from each other and below can be seen as their marketing blueprint. Once you debunked a 3 dozen of the same scams, it gets kind of boring.
  2. I had two wonderful boys who deserve my time.
  3. I got bored with winning defamation lawsuits. Four companies spent over 2 million dollars in lawyers and court fees. It creates a lot of work and time.
  4. Great organizations like Truth in Advertsing are now around to fill the need.

As Dr. Jonny Bowden has written:

“New Rules: No More Claiming Mona Vie Cures Cancer!

Nor, for that matter, AIDS. Nor lupus, GERD, acne, age spots, arthritis, a balding scalp or sagging libido.

Nope. Sorry.

And lest you think I’m picking on poor MonaVie, the same is true of Xango, Mangosteen, Xocai, Tahitian Noni, and all the other ridiculously overpriced and oversold juices promoted by scientifically illiterate multi-level marketing ‘distributors’ who repeat these claims with the sincerity and earnestness of a Kucinich volunteer.”

Dr. Bowden isn’t alone in citing that these testimonials are bunk. Neil DeGrasse Tyson, perhaps best known for the popular Cosmos show, says such testimonials are “the worst form of evidence that you could possibly bring forth.” The key quote begins around the 1:50 mark, but you should invest the 6 minutes to watch the whole video.



Having received thousands of testimonials like Dr. Bowden mentioned and documented them on this site, I think it is safe to say that the people making these claims are typically those who are scientifically illiterate. They don’t offer up the clinical trials that measure the efficacy of the products. The companies themselves never put together large-scale clinical trails to prove their products are safe and effective. They rely on the “worst form of evidence”, testimonies, because the scientific process in place would expose the products as ineffective.

Dr. Bowden wrote that article before the aforementioned Jusuru and Asea were around.

When you include the products that Bowden mentioned, we have 8 products that are all reportedly able to cure or aid with almost every condition known to mankind. I’ll add Xowii, Zrii, and Nopalea to round out to an even dozen. Though some of them have overlapping exotic ingredients like acai, there is no single ingredient common to all of them that could provide a reasonable explanation of healing benefits. Additionally other products with the same exotic ingredients such as Sambazon (which has organic acai) that are sold through traditional retailers have no reported healing benefits. These 12 products only have three things in common (that I can see): they are digested, they are all sold via MLM, they are all extremely expensive. In addition, each company (I think) has hired a doctor (or a scientific advisory board) to endorse their product, which is something you don’t find with Ocean Spray (a juice like MonaVie, Jusuru) or your standard multi-vitamin (similar to some Youngevity products).

Clearly the only logical conclusion is that selling a product via MLM bestows some magical properties allowing it to cure nearly anything or everything. Wait that isn’t logical, is it? Well I can’t think of any other reasons for the claims… or can I?

What’s Behind All These MLM Health Claims

There are a number of factors at play with these claims:

  • The Placebo Effect – This provides the most obvious answer as to why people feel these products help them. The American Cancer Society says that placebos have an effect in 1 of 3 people. Here’s a great 3-minute video illustrating The Strange Powers of the Placebo Effect. This alone explains why people report a product with no known therapeutic value “works”:



    Update: Actually I like this short video better:

    Need a little more convincing? Here’s Dove’s Real Beauty Patches campaign that has 20 million views:

    Note: It looks like Dove took down the original video at https://www.youtube.com/watch?v=EGDMXvdwN5c. Maybe the campaign ended, I found another version of the video here:

    While the product seemed to be effective to the women using it, it had no therapeutic ingredients at all. There’s not really a difference between an MLM miracle cure and this Dove patch. Both have testimonials of people swearing that it works. Neither has the large-scale clinical trials to convince the FDA that the product has a therapeutic effect.

    In Time’s review of the campaign, the author says: “I just can’t believe the thinly-veiled marketing ruse that there is a patch that can make us more beautiful. It makes women seem too gullible, too desperate, and overall helpless against the all-knowing master manipulators at Unilever.”

    Imagine what happens when the product is a juice or a pill and pitched for some internal medical condition. It’s much more believable than Dove’s patch, which gives you an understanding of the master manipulators of MLM.

    Some people try to claim that the placebo effect can’t possibly be a factor, because they didn’t believe it would help them. Research shows that even if you know you are taking a sugar pill with no active ingredients, it can make you feel better. So if you find yourself feeling better, you might just want to go to a local CVS and buy the cheapest you can find, maybe a low-dose of vitamin C.

    However, it’s worth understanding that it is well-known and well-researched that Vitamin Supplements Don’t Provide Health Benefits. Of course we knew that studies confirm that you shouldn’t waste money on vitamins for years.

    Need still more evidence of the placebo effect? It seems that 20% of people can “hear” this silent gif:

  • Spontaneous Improvement Regardless of Intervention – Sometimes things get better over time even without intervention. Many distributors are subject to drawing a causation between taking a product and the condition getting better when no such causation exists. The Latin for this fallacy is Post hoc ergo propter hoc, which means “after this, therefore because of this.” This is sometimes referred to as the “Rooster Syndrome”; “believing that the rooster’s crowing causes the sun to rise.”
  • Observer-Expectancy Effect – Since the products are usually pitched with the health claims, one taking the product may have this expectation.
  • Conscious Deception – Let’s call a spade a spade. It’s very difficult to convince people to buy $40 bottles of juice when they are used to spending $3 for juice. One of the easiest ways to close this gap is to pitch the product as an alternative to costlier medicines. I’m not saying that every MLM distributor is dishonest, but let’s agree that some are. What percentage? It’s impossible to say.
  • Price-Placebo Effect – As the Washington Post reported, people who were able to buy identical energy drinks at different prices showed very significant differences in unscrambling words. Even though the researchers made clear that the drinks were identical, those paying more had better performance. The researchers concluded, “The price-placebo effect comes from the fact that you form this global belief that low price equals low quality.” The article also showed, “A wine connoisseur who pays extra feels different from someone who pays less for the same bottle of wine, because the larger financial investment increases the motivation to be satisfied.”

    In addition, the LA Times reports ‘Expensive’ placebos work better than ‘cheap’ ones, study finds. An interesting quote:

    “Instead of testing a placebo against an actual drug, they pitted two placebos against each other. The only difference between the two sham treatments was their purported price.”

    So this study shows a direct correlation as to why even a non-salesman, product-user of MLM products could be convinced that the products “work” while even people using known “sham treatments” would report the same.

    Thus when I show that Youngevity products’ prices are 4 times Amazon’s for nearly equivalent nutrition, I get a response from distributors that they “feel” the difference. Let’s go back to the placebo video above (this one). It notes that paying more for a product makes the placebo effect stronger. That’s proof positive that there’s an additive effect to these points.

  • GroupThink – Unless you’ve taken a psychology class or two, you may never have heard this term before. Wikipedia explains it:

    “Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an incorrect or deviant decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints, and by isolating themselves from outside influences.

    Loyalty to the group requires individuals to avoid raising controversial issues or alternative solutions, and there is loss of individual creativity, uniqueness and independent thinking. The dysfunctional group dynamics of the ‘ingroup’ produces an ‘illusion of invulnerability’ (an inflated certainty that the right decision has been made). Thus the ‘ingroup’ significantly overrates their own abilities in decision-making, and significantly underrates the abilities of their opponents (the ‘outgroup’).”

    In addition Abraham Maslow’s Hierarchy of Needs, puts Belongingness amongst his 8 basic needs of humans.

    Both of these dynamics come into play with MLM as GroupThink inhibits the ability to analyze the opportunity. In fact, MLM proponents often suggest that people can “plug into the system” removing all individual creativity, uniqueness, and independent thinking. MonaVie has used GroupThink to send its distributors a message of “you are either with us or against us” and tell them to unfriend distributors from social networks who have moved on to other companies.

    I’m reminded of the Funny or Die demonstration of how students tricked into drinking nonalcoholic beer exhibited drunk behavior:

    Groupthink at its finest, right?

  • Social Proof From a Trusted Friend – Many of these products are introduced by a friend or family, who are often quite zealous about the product and the “business opportunity.” This enthusiasm coming from a trusted source creates an obvious motivation for wanting the product to “work.”
  • Cognitive dissonance – Cognitive dissonance can be thought of a person altering reality to fit his/her perception. Specifically, the Wikipedia article claims, “After someone has performed dissonant behavior, they may find external consonant elements. A snake oil salesman may find a justification for promoting falsehoods (e.g. large personal gain), but may otherwise need to change his views about the falsehoods themselves.”

    This is the same kind of phenomenon that is found in those predicting the world is going to end, except at least with those people there is a clear expiration on their erroneous belief… when the world doesn’t end. Unfortunately, with MLM health products, there is no clear and obvious end-result that can be pointed to.

Any of the above by themselves would explain the testimonials. However, when you combine them all together, the result of the testimonials is little surprise. We humans in general are an optimistic bunch and we all want to believe that these products are the solution to our health and financial security for not only us, but our friends (by sharing the “opportunity” with them). To use the Washington Post’s words, “our motivation to be satisfied” is significantly increased by the business opportunity and our desire to help our loved ones.

Let’s run some numbers. If the placebo effect is responsible for 1 in 3 people making a claim the MLM products work, what about all the above additional factors layered onto that? I’m going to speculate that pushes it to 60%, perhaps even higher. I admit this is speculation, but I don’t have a research lab and wouldn’t know how to really conduct an accurate experiment combining all these factors. If an MLM gets 10,000 people to try the product, that’s 6,000 people who are going to come away with a positive experience. The other 4,000 will move on with their lives and probably never mention the product again. A good percentage of the 6,000 will join the MLM to make money and spread the word that the products “work.” They explain away the 4,000 by saying something to the effect of “Everyone’s different and nothing works on everyone.” In actuality, the products haven’t been shown to work for anyone.

(And if my speculation of 60% (due to the factors above) is off, the placebo effect alone still counts for 3,333 people thinking it worked and another 6,667 that continued on with their life never thinking about the product again.)

Nonetheless that’s where you get thousands of testimonials for any number of unrelated medical conditions across any number of unrelated products that are all sold via the same MLM distribution method. Maybe it’s just me, but I find it a better explanation than, “Whenever a product is delivered via MLM the product gets bestowed with magical healing powers.”

For these reasons, it really is best to avoid the “Just Try Our ‘Product X!'” pitch when it comes to MLM products. You don’t have the time or the money to try all the health products in the world anyway.

It’s easy for distributors to ignore the fact that if any the products worked as promised, the companies would get their products approved as treatments for such medical conditions and make billions of dollars. Many MLM distributors falsely say that such claims can’t be about supplements, but when supplements work, the FDA allows claims to be made. You don’t have to look any further than calcium and vitamin D which have been shown to help with osteoporosis.

The Appeal to Good Health

Each of the companies that I mentioned makes an appeal that it will make you healthier. Since everyone has a vested interested in their own good health, it is an easy sales pitch to make. There are plenty of news reports citing promising supplement studies, which makes some of the products seem credible. The news rarely reports on the subsequent studies that show that the supplements don’t work. Something “not” working isn’t news and doesn’t bring in high ratings by giving people hope. This NY Times article covers this phenomenon well.

It turns out that there’s extensive evidence in studies involving millions of people that you shouldn’t waste your money on supplements. If you think this article is thorough, I implore you to read that one as I think it is just as thorough.

Still people seem to ignore it and go with anecdotal evidence instead. That kind of evidence can go both ways though. Here’s a Slate article from someone who grew up doing all the healthy things, but didn’t get vaccinated. The result was that she was sick all the time. The article even makes the point that it is anecdotal and decisions shouldn’t be based on it, yet that’s what people are doing with these MLM products all the time. If you took away the anecdotes from all the reasons above, you’d have a product that no one would buy at the exorbitant price points… unless as part of some kind of misleading business opportunity such as the MLM ones that the FTC describe here.

What is “working”?

You may have noticed I put “working” in quotes throughout this article. That’s because that’s the magic word distributors use when leaving comments on my site. “MonaVie works” and “Youngevity works”, etc. The interesting thing is that there is no consistent definition of what constitutes “working” with these products. I often ask them what clinical effectiveness research is behind the product, because as PubMed says:

“Clinical effectiveness research finds answers to the question ‘What works?’ in medical and health care.”

None of the products that I’ve mentioned have the clinical effectiveness research to say that it “works” for any medical condition.

But As Long As People Feel Better It’s All Good, Right?

A first glance this appears to make sense. Many supporters of MLMs have said, “Who cares as long as people feel better?”

There are at least three things wrong with this line of thinking:

  • The Economics – What about the people who are paying an expensive price who don’t experience anything special? They might be thinking that they are doing their health a great service, but aren’t. That money could be used for proven health improvements like healthier food or maybe a gym membership. What about the people who actually believe that the product represents a legitimate health breakthrough and invest a significant portion of their life savings in a “business opportunity” where it is extensively shown that 99% of people lose money.
  • Placebos are Dangerous – That article make the point pretty clear.
  • Self-Licensing Causes An Overall Decrease in Health – This Wikipedia article makes a point about study involving supplements:

    “A 2011 study published by researchers in Taiwan indicated that people who take multivitamin pills, especially those who believe that they are receiving significant health benefits from supplement use, are more prone to subsequently engage in unhealthy activities. Participants in the study were divided into two groups, both of which were given placebo pills; one group was correctly informed that the pills contained no active ingredients and the other group was told that the pills were multivitamin supplements. Survey results showed that participants who thought that they had received a multivitamin were predisposed to smoking more cigarettes and more likely to believe that they were invulnerable to harm, injury, and disease… Participants who believed they were given a multivitamin were also less likely to exercise and to choose healthier food, and had a higher desire to engage in ‘hedonic activities that involve instant gratification but pose long-term health hazards’, such as casual sex, sunbathing, wild parties, and excessive drinking… In the ‘multivitamin’ group, the more supplements a participant used, the less likely they were to exercise, and smoking was highest among participants who expressed a conscious belief that multivitamins increased health.”

In my MonaVie article, distributors had erroneously claimed that 2 ounces of MonaVie was equal to eating 13 fruits. They then said that this justified the $40 price for the bottle. As a result these people were making bad health decisions due to misinformation. That doesn’t even factor self-licensing in.

Are These Claims Even Legal?

It doesn’t seem as if they are. MLM distributors are typically not educated by the companies to follow the FTC guidelines on endorsements. That article states:

“Advertisers still must have adequate substantiation to support claims made through endorsements in the same way they’re required to if they had made the representation directly. In other words, advertisers may not convey through testimonials claims they could not otherwise prove with competent and reliable evidence. But one key revision of particular interest to electronic retailers is the new standard for endorsements that don’t represent the experience buyers can expect from using the advertised product themselves.

…

Despite the unequivocal requirement that the disclosures must be clear and conspicuous, some advertisers flouted this directive by cherry-picking their best case scenario, touting those results in banner headlines, and dropping an all-but-invisible footnote with the cryptic statement, ‘Results not typical’ or ‘Individual results may vary.’

No more. As the revised guidelines make clear, testimonials reporting specific results achieved by using the product or service generally will be interpreted to mean that the endorser’s experience is what others typically can expect to achieve. That leaves advertisers with two choices: 1) Have adequate proof to back up that claim, or 2) ‘Clearly and conspicuously disclose the generally expected performance in the depicted circumstances.'”

MLM distributors endorsing the products simply aren’t allowed to give a testimonial that they believe that the product helped with their arthritis… unless the MLM company has demonstrated significant scientific proof. As mentioned above, no MLM company has met the requirement to show the FDA that it works. I don’t know of an MLM company that has even tried.

Not only are these claims a violation of the FTC endorsement guidelines, they are a violation of The Dietary Supplement Health and Education Act of 1994 (DSHEA) where supplements can’t make claims to help with medical conditions with the notable exception of these well-studied claims such as vitamin D and calcium helping with osteoporosis.

As MonaVie CEO said to Newsweek in 2008 about keeping its million distributors (at the time) compliant with these laws, “It’s next to impossible, like herding cats.” Unfortunately, Newsweek didn’t pose the logical follow-up questions to him, “Why did you unleash the cats in the first place? Why don’t you just solve the problem by distributing through traditional means where there are no false claims?” The solution to the problem that MonaVie caused is obvious, it just doesn’t help sell $40 bottles of juice.

I’ve found that most often MLM companies will cover their ass in public with a blog post saying all the right things, but in private they coach distributors to use these illegal medical claims.

It’s not just a few bad eggs either. It’s commonplace. How common? Truth in Advertising extensively show as many as 97% of nutritional companies have these claims. Here are are some of their findings:

“TINA.org’s investigation found that out of 62 member companies selling nutritional supplements, 60 have distributors who are making (or have made) claims that their products can diagnose, treat, cure, prevent, alleviate the symptoms of, and/or reduce the risk of developing a multitude of diseases, which means they are making illegal disease-treatment claims.

TINA.org has catalogued well over a thousand such inappropriate health claims, ranging from cancer cures to disappearing gangrene.

…

TINA.org’s investigation found that out of 62 member companies selling nutritional supplements, 60 have distributors who are making (or have made) claims that their products can diagnose, treat, cure, prevent, alleviate the symptoms of, and/or reduce the risk of developing a multitude of diseases, which means they are making illegal disease-treatment claims.

TINA.org has catalogued well over a thousand such inappropriate health claims, ranging from cancer cures to disappearing gangrene.

Or as I like to put it, “How else are you going to sell $40 bottles of juice?” Perhaps that the reason why MonaVie collapsed. It was never the juice which was outed to be nothing more than “expensive flavored water” by its inventor.

What About Weight Loss Shakes?

A number of MLMs such as Herbalife, One 24, ViSalus and MonaVie sell some kind of weight-loss shake. These products “work” as expected. That is to say that their nutritional label is likely to be accurate. Beyond the label, there’s nothing that special. You can save a lot of money by going with Slim Fast or Carnation Instant Breakfast Essentials that has essentially the equivalent nutritional content at usually less than a 1/3rd the price.

Picking one weight loss shake over another isn’t going to make or break a diet. It’s everything else, eating well and exercising, that has been shown time and time again to work. People normally don’t stay on shakes their whole lives. Without a change of underlying diet and/or exercise habits the weight comes back. For this reason, I’m not a huge of fan of meal replacement shakes.

Final Thought

I’ll let you in on a little secret. When I create Lazymandium, a mix of garlic, tumeric, cacao, and chili powder, and sell it via MLM at a price of 30 pills for $50, it doesn’t “work.” I’m simply using known psychology to exploit you and make your wallet a little lighter for my own benefit.

Originally Published: Feb 16, 2013.

My Toddler Learned About MLM from this 2500 Year Old Fable

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My oldest son (age 4) is on vacation this week which, of course, means that the world is exploding with catastrophes. Well, not the real world, and not real catastrophes, but just one annoying problem after another.

After putting out most of the fires, it was time for a little story time before nap. I found a book of fairy tales that my mother had bought him. I opened it up to a random page and came across The Fox and the Goat. It’s shortest enough to quote a couple of versions that I saw online here:

“By an unlucky chance a Fox fell into a deep well from which he could not get out. A Goat passed by shortly afterwards, and asked the Fox what he was doing down there.

‘Oh, have you not heard?’ said the Fox; ‘there is going to be a great drought, so I jumped down here in order to be sure to have water by me. Why don’t you come down too?’

The Goat thought well of this advice, and jumped down into the well. But the Fox immediately jumped on her back, and by putting his foot on her long horns managed to jump up to the edge of the well.

‘Good-bye, friend,’ said the Fox, ‘remember next time: Never trust the advice of a man in difficulties'”

Here’s another version I saw:

“A FOX one day fell into a deep well and could find no means of escape.

A Goat, overcome with thirst, came to the same well, and seeing the Fox, inquired if the water was good. Concealing his sad plight under a merry guise, the Fox indulged in a lavish praise of the water, saying it was excellent beyond measure, and encouraging him to descend.

The Goat, mindful only of his thirst, thoughtlessly jumped down, but just as he drank, the Fox informed him of the difficulty they were both in and suggested a scheme for their common escape.

‘If,’ said he, ‘you will place your forefeet upon the wall and bend your head, I will run up your back and escape, and will help you out afterwards.’

The Goat readily assented and the Fox leaped upon his back. Steadying himself with the Goat’s horns, he safely reached the mouth of the well and made off as fast as he could.

When the Goat upbraided him for breaking his promise, the fox turned around and cried out, ‘You foolish old fellow! If you had as many brains in your head as you have hairs in your beard, you would never have gone down before you had inspected the way up, nor have exposed yourself to dangers from which you had no means of escape.’

Look before you leap.”

And just to belabor the point, here’s a YouTube video:

Deconstructing MLM via The Fox and The Goat

Most people familiar with MLM should instantly recognize the relevancy of this fable. Nonetheless, I will explain it as clearly as I can for all potential goats.

It has been repeatedly shown that at least 99% of people in MLM lose money.

It has also been repeatedly shown that few people make any real money selling product. Usually the products are very, very expensive and don’t compete well with reasonably priced non-MLM products. Also, many of the products are generally available on Ebay for very cheap prices from former goats distributors.

Nearly everyone in MLM is “a man [person] in difficulties.” It’s mathematically shown to be true.

The way out of losing money in MLM is to be the fox. The fox needs to convince many goats that the MLM’s water (sometimes literally) is great and to come into the well. It is as if the fox needs to put together 20 goats to build a goat-ladder to get out. And since this is a fairy tale, we’ll pretend a magician turns each of those goats into foxes and puts them in their own wells. We repeat the process over and over until there are millions of foxes stuck in their wells.

In the world of MLM, there are many ways that foxes convince the goats to come into the well. They may show pictures of luxury cars, houses, or vacations. Even the FTC says this is misleading. Other times MLMs use illegal health claims like these to target goats. That’s why I’m against companies like Youngevity, DoTerra, and Le-Vel Thrive, just to name a few popular MLMs that I have written about in the past.

Moral of the Story

I am completely floored that Aesop so accurately described MLM more than 2500 years ago. As best I can tell recruiting/pyramid schemes didn’t even exist back then. I don’t know what’s beyond “floored”, but I love that he found a way to explain it so that even a 4 year old can understand it.

Moral: If you come across a fox in a well, don’t be the goat. Show the world that you are smarter than a goat or a 4-year old.

Instead of falling into the trap, give that fox a ladder by sending him/her an article like this one. To (not-so-accurately) paraphrase Smokey the Bear, “Only you can prevent foxes in wells.”

Prostitution, Pot, and Pyramid Schemes

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My original title for this article was “Sex, Drugs, and MLM Scams”, but I can never pass up alliteration.

[Today’s article is going to deal with adult themes. You might have already gathered that from the title.]

This past weekend a news story caught my eye. The Boston Globe reported on a lemonade delivery service. That’s not very exciting, but the lemonade comes with a free gift… a side of pot.

The price of this Tazo black tea lemonade is $55. And, of course, they only deliver the tea to people who are over 21.

It seems that in Massachusetts giving away pot is legal. A delivery service that sells lemonade is legal too. So the found of the company, HighSpeed, is a smart businessman, right?

According to the article the local authorities don’t view it that way. One chief legal counsel write, “Obviously this is a thinly concealed scheme to obscure the illegal sale of marijuana by an unlicensed seller.”

One part of the article that I want to focus is this:

“Without touching on specifics, [lawyer Adam] Fine offered one reasonable test for the legality of giving away a gift of marijuana with another product: Is the cost of the item being sold in line with its normal price, its fair market value?

The Tazo tea lemonade I paid for: $55.

Tazo tea lemonade online: $1.27 plus shipping.”

I love this test. Is the product being sold in line with its normal price… its fair market value”

I’m not law enforcement, but if I were I’d tell them that they have to change their pricing if they want to continue what they are doing.

Prostitution

Let’s move on to sex, shall we?

Years ago, when I was in college, I had a brainstorm of a condom store. This store would focus on providing extremely great customer service for its patrons. To make sure that the condoms are of the best quality, the store would offer males a free demonstration with a member of its female staff.

Of course, the condoms from this store would sell for hundreds of dollars.

As George Carlin once said, “[Sexual Intercourse] is legal. Selling is legal. Why isn’t selling [sexual Intercourse] legal?” Mr. Carlin used a little more colorful language.

Of course we can use Adam Fine’s test here. The fair market value of condoms is not hundreds of dollars. I wouldn’t expect this kind of condom store to stay in business for very long, even though, technically, it would seem to be legal.

Pyramid Schemes

Pyramid

Back in 2008, I wrote an article about MonaVie, which was marketing a $45 bottle of juice. That price is very close to HighSpeed’s $55 price for its lemonade, right? It didn’t even come with a special delivery service.

MonaVie became a billion dollar company. Who knew there was such a large market for $45 juice, right?

A couple of years ago MonaVie was foreclosed upon for only 15 million.

What happened? MonaVie was an MLM company. MLM companies pair their products with what is billed as a “business opportunity.” I put that in quotes, because MLM is not a business and well over 99% of people lose money at it.

In MonaVie’s case, the opportunity required being “qualified” which could be done by buying the juice or selling the juice to others. As the fair market value for juice is closer to the $1.27 lemonade than the $55 that HighSpeed charges, I suspect few people actually bought the juice in comparison to the number of people who bought it themselves to be qualified for the “opportunity.”

It’s really the same concept as the HighSpeed’s marijuana or my mythical condom store above. In MLM, the questionable activity, the recruited pyramid of a business “opportunity”, is legitimized by the selling of product that is often not in line with its fair market value. That’s why the FTC has guidelines on MLMs/pyramid schemes.

My advice to readers is run away from any MLM that doesn’t have its product priced at its fair market value. For example, DoTerra’s essential oils can cost 10 times more than other oils. My analysis of Le-Vel Thrive shows that the vitamins can be as much as 50 times (seriously!) the fair market value.

My challenge to these companies is simply to put the product in retail at its pricing without the “opportunity.” You’ll probably never see an MLM company do that because consumers simply won’t buy the products and they’ll be out of business.

Conclusion

I think some people wonder why I’m so against MLM.

Pot has been shown to fairly safe. Safe, consensual sex harms no one. Pyramid schemes cause great financial harm. Unfortunately, law enforcement isn’t given the tools to shut down pyramid schemes.

Maybe someday that will change.

Now I’m off to research some retail locations with a bunch of rooms with beds. There’s a local hotel that went out of business recently, which could be exactly what I’m looking for.

We All Live in a Bubble

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I started writing today’s article in July. (I have roughly two hundred drafts on the virtual cutting room floor.)

I was catching up with a friend and that one sentence really caught my attention. It’s something that I’ve always known to be true, but it has been pushed far into the back of my mind.

“We unfortunately (well fortunately) live in a bubble.”

I believe the discussion was about my efforts to warn people about MLM scams. This particular group of friends is highly educated and they hold very-high paying jobs. They are lawyers, doctors, software management, and economists. As a blogger, I’m an outlier, but if you consider me a former software engineer who is now a business owner, it makes sense.

If you think about what bubble looks like for a minute, it is a fortunate one.

However, there was the original focus of that sentence. It’s unfortunate that bubbles exist.

Not all bubbles are fortunate ones. That’s why I’ve been covering news stories about how many Americans can’t afford $400 in an emergency. It’s why I tell people to get Use Digit to save for the holidays now!

There are a lot of people who can fall for MLM scams that have the ‘trappings’ of legitimacy in John Oliver’s words. The MLMs often focus on people who are in more unfortunate bubbles, economically speaking. It’s difficult to get a lawyer to join an MLM scam, unless they do in a professional capacity… not a recruiting salespeople one.

Around the same time my friend said this, Mischa Barton received a lot of public backlash for the following posting on social media:

Mischa Barton's Bubble

I think there’s probably a place in Barton’s bubble where that makes sense. Unfortunately, most people don’t live in her bubble. It’s pretty easy to criticize her and say, “If you’ve got all this spare time to drink your wine on your yacht, maybe you should be the one ‘making change’.”

That’s an extreme example… and Barton’s apologized. I don’t want to make the post about Barton, but to emphasize what we already know, there are a variety of bubbles around.

My audience for this blog is almost entirely based in the United States. Many of the people living here are in a bubble themselves. There’s freedom of speech (except for me it seems). We have water instantly (outside of Flint), as opposed to Millions Of Women Take A Long Walk With A 40-Pound Water Can.

I can read about that bubble, but in a couple of hours I’ll probably have moved on. It is too far from my bubble. The bubble will become a distant memory in a couple of months. (Indeed, as I’m reviewing this article 4 months later it is a distant memory.)

Much of America lives in a different bubble than me

I have driven across the country and in my travels got to meet some people who are different bubbles. However, it’s been a few years now. If I’m ever going to have help people with MLM scams, I need to do a better job of understanding the people in that bubble and bubbles in general.

Today, we self-select our news. We used to get one or two local newspapers. If you lived in New York City, you wouldn’t get the same news as a farm in Indiana. Maybe, we should read some other news.

Our social media friends reflect our bubble. Our Next Life wrote about this echo chamber yesterday. It’s a great article and you should read it.

I’m not sure if there are too absolutes when comes to bubbles. One thing I’d suggest though, is try to work with another bubble and see what you can learn. You might be surprised that people are very willing to explain their view to you if you stop and listen.

I want to leave you with one final thought. This article is about different perceptions of MLM scams. It is related to anything that may be happening in the world of politics. If you suggest otherwise, you are going to get “Seattle’d”:

The FTC, Truth In Advertising, and John Oliver Eviscerate MLM Scams

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Regular readers know I’ve been covering Multi-level Marketing Scams for years now. It wasn’t intentional. It was as Homeland Security says, “See something, say something.”

For years, it felt like only a handful of other people saw the MLM scams. It felt that even the FTC was in on it as former FTC director David Vladeck unbelievably defended ignoring MLMs on CNBC.

In the last 2 weeks, MLM schemes have been eviscerated three times. I don’t use “eviscerated” lightly. Any single one of these alone would be the biggest threat towards outing the fraud from 2008 to 2011.

There’s start with the biggest blow, the FTC.

Keynote Remarks of FTC Chairwoman Ramirez DSA Business & Policy Conference

On October 25th, FTC Chairwoman Edith Ramirez spoke at the DSA conference. The DSA is the Direct Selling Association, a name that MLM co-opted because MLMs got the reputation for being pyramid schemes. The DSA is funded by member companies and attempts to protect their interests. It reminds me of the protection money small businesses would pay the mafia.

As an invited guest, Ramirez started very respectfully. It quickly turned in to the verbal equivalent of a Mortal Kombat finishing move. I wish I was in the room. I could see myself walking through hundreds of people helping them close their jaw. The best use DSA money would have been supplying everyone in attendance with a shot of whisky.

Ramirez laid out two areas that the MLM industry needs to improve upon, “One is misleading income representations; the other concerns business structures that are unfair or deceptive because they are not focused on real sales to real customers.”

1. “Legitimate MLMs Must Accurately Represent Business Opportunities”

Ramirez: “False and unsubstantiated earnings claims are deceptive and unlawful under Section 5 of the FTC Act. Unfortunately, however, our law enforcement experience shows that many MLMs continue to misrepresent the amount of money participants are likely to earn.”

My take: Many MLMs continue act deceptively and unlawfully.

Ramirez: “A legitimate multi-level marketer must accurately represent its business opportunity and what a participant is likely to earn… Practically speaking, this means that multi-level marketers should stop presenting business opportunities as a way for individuals to quit their jobs, earn thousands of dollars a month, make career-level income, or get rich because in reality, very few participants are likely to do that… Just last month, Mr. Mariano [President of the DSA] noted that the majority of multi-level marketing participants do not earn more than very modest income… These lifestyle claims [images of expensive houses, luxury cars, and exotic vacations] – whether made through statements or images – are deceptive when made to a general audience because participants are unlikely to achieve them.”

My take: This was a long area, but the modest income mentioned was around $200 a month. That’s the new claim that MLM marketers can use. They can’t show flashy checks on stage or entice people with vacations, luxury cars, or even suggest that they may quit their jobs. They are limited to making the kind of income claims ($200 a month) that you could possibly get from a yard sale or selling some things on Ebay.

However, as this great mathematical research on Seeking Alpha shows the likely income in MLM is ZERO or even a negative number. Combining that research with Ramirez’s words about using the likely income number, those involved in MLM should be prohibited from making ANY income claim at all in my opinion.

Ramirez: “Now, some of you may be thinking that what I am saying does not apply to you because you do not make income misrepresentations and you prohibit your distributors from making income misrepresentations. However, simply prohibiting your distributors from making income misrepresentations is not enough. MLMs must take reasonable steps to monitor and ensure that participants are not misleading others about the business opportunity.”

My take: This is what I call the “Impossible to herd cats” defense after MonaVie CEO Dallin Larsen famously said in Newsweek: “Meanwhile an 18-person compliance department investigates distributors suspected of making false claims—although with a million sales people on the books, that’s easier said than done. ‘It’s next to impossible,’ Larsen concedes, ‘like herding cats.'”

So essentially the FTC seems to be saying, “You must be able to herd cats.” If it’s as impossible as Larsen says, MLM can’t be legitimately run and the companies will have to abandon it. (We’ll get more into those false claims later.)

2. “Legitimate MLMs Must Be Driven by Real Sales to Real Customers”

Ramirez: “A legitimate multi-level marketer must be focused on, and must pay compensation that is based on, real sales to real customers, not wholesale purchases by its sales force… And, as the Ninth Circuit’s decisions in Omnitrition and BurnLounge made clear, MLMs that pay compensation for product purchases by recruits, rather than for actual sales to customers, are facially unlawful.”

My take: This changes the game for MLMs. As Ramirez points out these have always been the rules of game, but MLM scams have largely ignored it. The FTC seems to be saying, “You can’t ignore this any more. We want to see all compensation plans not reward people on purchases made by sales people. I had been warning MLMs, “The FTC says MLMs Must Focus on Sales to Outside Participants for years.

Ramirez: “a legitimate MLM must be focused on real customer… a legitimate MLM opportunity must be based on sales that are both profitable
and verifiable… a legitimate MLM should not use targets or thresholds that are met by mere product purchases; and… the compensation paid by a legitimate MLM must be tied to retail sales.”

My take: We’ll dig into this a little deeper in a minute, but notice the number of times Ramirez uses the word “legitimate.”

Ramirez: ” Simply put, products sold by a legitimate MLM should be principally sold to consumers who are not pursuing a business opportunity… When a product is tied to a business opportunity, experience teaches that the people buying it may well be motivated by reasons other than actual product demand.”

My take: Good emphasis on the sales to people outside the business opportunity. As I found in covering MonaVie, there wasn’t actual product demand for $45 juice. The product purchases were motivated by the business opportunity. Also illegal health claims played a role, but we’ll get to those in the Truth in Advertising section.

Ramirez also explains that BurnLounge was making $475,000 a month when it tied product purchases to the business opportunity. When the two were decoupled, revenue dropped to under $11,000 a month in only two months. It seems to me that some 97% of sales ($11K/475K) were based on an MLM “business opportunity”, which, as covered above, delivers limited or no income.

Ramirez: “The second issue I want to highlight concerns the meaning of ‘real sales.’ ‘Real sales’ are sales that are both profitable and verifiable… It requires that retail sales that generate multi-level compensation for a participant, or that advance a participant in the business plan, must be both profitable and verifiable. Herbalife is required to collect verification information for every claimed retail sale and take all reasonable steps to verify that these sales both occurred as reported and represent genuine purchases by a true customer”

My take: It sounds to me that MLMs now have to record all product and who they went to and how much of a profit the sale generated. This seems like a nightmare for MLM companies. The bookkeeping of all this is probably going to be trouble than it’s worth to be involved in an MLM. I’m curious how Herbalife is going to pull it off.

Ramirez: “Third, a legitimate MLM should not use targets or thresholds to satisfy eligibility for compensation or rewards that are met by mere product purchases… . Because the focus of a legitimate MLM, and the basis for the compensation it pays, must be real sales to real customers, business opportunity participants should buy product only in response to actual consumer demand. For this reason, any requirements or incentives that participants purchase product for reasons other than satisfying genuine consumer demand – such as to join the business opportunity, maintain or advance their status, or qualify for compensation payments – are problematic.”

My take: Once again, I’ve been saying for years, The FTC says MLMs with Required Minimum Purchases to Earn Commissions are Pyramid Schemes. Ramirez isn’t using the p-word (“pyramid”), but instead saying that MLMs aren’t legitimate. I’d call an illegitimate MLM a pyramid scheme, but that’s just my opinion.

Nonetheless, MLM companies are going to have remove those qualification requirements such as Personal Volume (PV) in their compensation plans. When that happens, expect something similar to BurnLounge where revenues dropped from $475,000 to $11,000. I would be surprised if this alone eliminated 95% of the revenue in MLM.

Ramirez: “The fourth point I want to highlight is that compensation paid by a legitimate MLM must be tied to real sales to real customers. If an MLM’s participants buy product that does not result in real sales to real customers, this revenue should not be used to fund compensation”

My take: Now MLM participants don’t need to buy product to qualify for commissions, but if they do, those purchases can’t be used to fund compensation. This would have instantly killed any company trying to sell $45 juice or $5/serving oatmeal. Their best chance would be to charge a fair price for the product, rather than over-inflated price as an admission ticket to the business opportunity of recruiting others.

I would be shocked if more than 2% of MLM companies could survive this.

Ramirez: “All of the points I have highlighted are intended to operate in combination to provide reasonable assurance that product purchases will be driven by real product demand. Providing this assurance is both appropriate and necessary; it is not enough for an MLM to simply assume the existence of real sales to real customers.”

Ramirez: “… in the past some MLMs have sought to rely on policies similar to those referenced in the Commission’s 1979 Amway decision – specifically, the so-called ‘buy-back,’ ’70 percent,’ and ’10 customer’ rules – as a sufficient basis for assuming that their product is purchased by real customers to satisfy genuine demand. This reliance is misplaced.”

My take: Many MLMs put these three things in their policies and procedures document and felt that they were safe. They were safe for a long time as the FTC looked the other way. They are no longer safe.

One MLM Lawyer’s Reaction to Ramirez’s Speech

Kevin Thompson, an MLM attorney, has posted a video on YouTube about this event:

I think his initial sigh is quite telling. Later on he characterizes Ramirez’ speech as a parent saying to her child, “I’ve had enough. I’ve had enough.” At the 3:19 mark he explains that the industry has had a problem.

Thompson also brings up an important point at the 3:30 mark, “the strategy of ‘let’s all travel together as a herd, and every now and then a gazelle will get eaten, and that’s the way it goes.’ That case-by-case approach has annoyed the FTC.

I think this is a good take on how the MLM scams have run themselves. It was like the mentality of people looting in a riot, “If we all do it, they can’t stop us.”

It makes sense they would feel this way. As this Bloomberg article points out, they were kind of correct. The FTC can’t sue more than thousand of companies when each one takes them years in court.

So what’s changed? The FTC isn’t using the p-word (pyramid) anymore. You won’t find it in Ramirez’ speech. Instead the FTC is going to rely on the well-established, easier to enforce (I think) characterizations of misrepresentation. It’s much, much easier than trying to prove that something is a pyramid scheme.

Kevin Thompson at the 4:46 mark, “… now people can’t pretend to be dumb anymore.”

I find this a shocking statement. It tells me that they knew all along they were scammers, but were pretending that regulators were mad at one company. As he says, “it’s industry wide.” Of course it’s industry-wide, the FTC has been saying this for decades as I’ve pointed out above.

I’m not going to go through the rest of video in detail… that’s not really the point of this article. However, Thompson then goes into analyzing Ramirez’ speech. He brings up a discussion about “ultimate users” and gives his opinion that the courts say it is okay for business participant to consider that to be true. Ramirez never mentioned “ultimate users” and it only shows up with a footnote to a court case that seems to me to say the opposite of Thompson suggests. He’s the lawyer and I’m not, but it seems like he’s at odds with some of what Ramirez said in her speech.

He also goes into a relatively lengthy discussion about what percentage can come from MLM participants. I found it interesting that he cites Herbalife’s 2/3rds percentage and then suggests that it could be unique to Herbalife… the very thing he just finished saying that MLMs shouldn’t do.

At the 10:40 mark Thompson says that companies have a tough decision to make. He then goes on to talk about how much of the Herbalife guidelines companies what to institute in their own company. He then says that companies are going to do an assessment of how much risk can they tolerate, “because if you match the Herbalife requirement, you’re fine. It’s a hard business to operate, but you’ll have no problems… Companies have to pick and choose which element they can live without.”

I find this mentality amazing. Going back to Thompson’s words that it’s a parent telling a child, “I’ve had enough.” The response seems to be that the child shouldn’t “shape up and fly right”, but pick and choose which actions are going to appease the parent the most. Any legitimate MLM should not only heed everything in Ramirez’s speech, but go above and beyond it. This isn’t the time for the child to test boundaries.

In my opinion, if any MLM company drags their feet or doesn’t adhere to ALL (not picking and choosing) the points in Ramirez’s speech, it is shining a spotlight on themselves that says, “We don’t want to be considered legitimate by the FTC.” That’s a dangerous place to be.

[*Deep breath* – only around 2250 words on thus far… let’s move forward…]

Truth In Advertising Exposes Illegal Health Claims by MLMs

One of things that shocked me in following MonaVie were the illegal health claims. Doctors shouldn’t have to write articles on Huffington Post that an MLM product doesn’t cure cancer. I shouldn’t have to detail a dozen or more reasons why MLM health products generally don’t work for medical conditions.

Just yesterday, Truth in Advertising (TINA) took it a quantum leap further, asking if the DSA is ignoring those illegal health claims. I woke up to this news this morning… after I had planned to write about the Edith Ramirez’s speech and John Oliver’s exposure of MLM scams.

Giving how long this article already is, it is hard for me to do justice to TINA’s extensive work. Their MLM health claims database has over a thousand instances illegal health claims from MLM companies.

Let’s get to the TINA article:

“Using DSA membership lists from March 2016 and November 2016, TINA.org’s investigation found that out of 62 member companies selling nutritional supplements, 60 have distributors who are making (or have made) claims that their products can diagnose, treat, cure, prevent, alleviate the symptoms of, and/or reduce the risk of developing a multitude of diseases, which means they are making illegal disease-treatment claims.”

The DSA is often held as a shining example of the best MLM companies. TINA and Edith Ramirez both mention their Code of Ethics. If 97% of nutritional companies are violating those Code of Ethics, does it have any value? In my opinion it is just window-dressing for the FTC.

As TINA points out, “The disease-treatment claims used to market these MLM supplements are not hard to find. Simply by Googling the name of one of the MLM companies and ‘cancer,’ or ‘arthritis,’ or ‘eczema,’ or ‘diabetes,’ or any other disease of one’s choosing, a plethora of websites and social media posts making false and deceptive claims pop up.”

Think about that… “A plethora of websites and social media posts making false and deceptive claims pop up” for each of these MLM supplement companies. Remember what Dallin Larsen said about stopping these claims from MLM distributors are impossible, like herding cats? (Scroll up, I can wait.)

However, it’s not just MLM distributors, it’s the companies themselves according to TINA, “Not only are distributors making dubious claims but TINA.org also documented DSA member companies making health claims that violate the law.”

One example of how a company incites distributors to make dubious claims comes from MonaVie’s marketing comparing 4 ounces of juice to eating 13 fruits. That claim came from ORAC scores. In 2012 the USDA removed that table because “ORAC values are routinely misused by food and dietary supplement manufacturing companies to promote their products and by consumers to guide their food and dietary supplement choices.”

TINA.org writes a powerful conclusion… especially in light of the Ramirez’ speech which didn’t address illegal health claims by MLMs:

“TINA.org’s investigation makes clear that there is a systemic problem within the MLM industry when it comes to health claims. Thousands of distributors are marketing MLM products to treat or cure diseases, with many relying on wildly inappropriate health testimonials to market their wares and the business opportunity. But federal laws and the DSA Code of Ethics require that such claims be supported by appropriate scientific backup and approval.

These general legal standards for health claims apply to all marketing claims, including testimonials. It’s simply not enough that a testimonial represents the honest opinion of the endorser. Under FTC and FDA law, MLMs and its distributors must have appropriate scientific evidence and approval to back up the underlying claim(s) being made.”

Unfortunately it doesn’t end there…

Truth in Advertising reached out Joseph Mariano, the President of the DSA, that I referred to above. Here are a few quotes from Mariano’s very brief response:

“Federal and state regulatory agencies are ultimately responsible for the direct selling channel… Beginning in 2017, 100 percent of DSA member companies will undergo a mandatory ethics review to ensure compliance with our Code of Ethics, including in the areas of income and product claims. While TINA.org may not like direct selling, it does not have the authority to decide how some of retail’s most successful brands choose to bring great products and services to market, empowering millions of working Americans.”

In my opinion, Mr. Mariano seems be telling TINA.org something like, “We are going to start to govern our ethics correctly in a couple of months. You have no jurisdiction here!” Whenever I can appropriately tie my MLM articles to Buffy the Vampire Slayer, I do so. I view Mariano’s response as:

Buffy - Get Out My Face

Here’s a brief open letter from me to Mr. Mariano of the DSA:

Given the FTC’s extensive admonishment (as covered above), you might want to listen to what Truth in Advertising is telling you about the FTC’s long-established policies. I know it was more than a year ago, but the FTC publicly thanked Truth in Advertising for its help in bringing Vemma to justice. As Truth in Advertising noted, “[Vemma] was lauded by the [DSA] in 2013 while actively violating an FTC consent order by marketing its mangosteen products with illegal health claims.”

Truth in Advertising has generously put their time and efforts in trying to help you stay in compliance with regulators’ compliance. I don’t believe your response conveys the respect it should to an organization looking to help you.

I’m always happy to talk to you on this topic. At the end of this article, I provide a couple of ways you can contact me.

[*Deep breath* – that was supposed to be the short part of this article… and we’re up to around 3500 words. As I was writing this section, I was floored by Mariano’s unexpected response given the circumstances.]

John Oliver Eviscerates MLM

Finally, I’m getting to the real reason that I’m writing… John Oliver addressed MLM on HBO on his show “Last Week Tonight.” (As with all of Oliver’s show, the language is geared for adults.)

Oliver does a tremendous job introducing people to MLM.

At the 5:38 mark, Oliver talks about “the dangling of vast lifestyle improvements is at the heart of the MLM pitch.” He explains that the materials pitch “luxury travel” and “fancy cars” while mentioning this company and Jeunesse. These are two companies I’ve covered extensively.

Oliver then directs his attention to Youngevity which I covered in April of 2012. Denice Chenault, a Youngevity distributor, makes the very claims that the Edith Ramirez focused on above. One shocking statement from her is “that little pyramid scheme thing that almost got you terminated for last year…”

Chenault says, “you’re going quit you job” (see Ramirez quote above about marketing of ‘quit your job’). She talks about getting into the silver Mercedes “that Youngevity paid for” (see Ramirez quote above about marketing of ‘luxury cars’).

In fact, a regular contributor to Lazy Man and Money, Vogel covered this exact quote in December of last year. It went further than John Oliver quoted as it ended with “… you’re gonna plan what your life is gonna look like when you’re MAKING A MILLION DOLLARS A YEAR in just a couple a years.”

Oliver contacted and Youngevity and they responded that such claims are “not authorized by the company… and [are] against Youngevity policy which forbids income claims.”

However, as Oliver points out, these claims were made at an official Youngevity event. He also notes that Youngevity’s website highlights “Denice an Tom Chenault ARE Youngevity.”

Youngevity had the opportunity of stopping those unauthorized and forbidden claims. I didn’t see anyone rush up on stage to stop it. As a top distributor and a shining example of “Youngevity”, it seems like Chenalt should know better than to make those claims. How could top Youngevity distributors not understand that the claims are unauthorized and forbidden?

Youngevity now has a new opportunity of showing to the world (and the millions of John Oliver viewers and followers) what happens when distributors like Denice Chenault make unauthorized and forbidden claims. I’m not trying to single out Mrs. Chenault… John Oliver already did it. I wish her no ill will. I simply don’t want to give MLM companies a “free pass” for such claims. I think it’s probable that Chenault used those claims in private settings to recruit people. I think it would be reasonable and fair for Youngevity to eliminate any payments to Chenault from people in her recruited downline.

At the 8:27 mark, Oliver says, “MLM hold out that hope that if you work hard, you can take control of your life, start your business, and help your family, but how real is the opportunity?”

Oliver digs into Herbalife’s marketing to answer that question, but I’d argue that the FTC addressed it nearly two weeks before in the talk to the DSA covered above. In the words of the FTC, there’s no career-level income claims can be made about MLM.

Oliver points out that in 1982 Herbalife was making unsubstantiated health claims. More than 3 decades later, Truth in Advertising is highlighting unsubstantiated health claims from MLMs.

I give credit to John Oliver for taking the high road with regard to Herbalife founder Mark Hughes being called by a senate subcommittee into question (in 1985). Mark Hughes asked why the committee was so fat and suggested that they become customers. Oliver didn’t mention that Hughes died at 44 years old after ingesting a toxic combination of alcohol and Doxepin in his Malibu mansion.

I think it may have been bad form for John Oliver to suggest that the 29 year-old Mark Hughes shouldn’t throw stones in a glass house. How many of us have been called by a senate subcommittee at the age of 29?

At the 11:30 mark, John Oliver states, “People might be making claims like that [referring to the nonsensical illegal health claims], because they are desperate to move excess product.”

This seems to me to be a combination of what the FTC stated (MLMs need to move product) and what Truth in Advertising stated (illegal health claims are being made).

Oliver takes it a step further showing how nonsensical the Herbalife compensation plan is, as explained by John Tartol, a member of Herbalife’s Board of Directors (at the time.)

It gets worse. I understand that many people might not believe it is possible. I didn’t believe it either. Yet Oliver delivers.

At the 15:50 mark, John Oliver presents a video of Herbalife CEO Michael Johnson misrepresenting corporations as pyramid schemes. Johnson confuses a hierarchy of a corporation that has little or no recruiting with a pyramid scheme that does substantially reward for recruiting.

We all make mistakes, right? However, Michael Johnson was the top earning CEO in 2011. Shouldn’t he know his own business? Maybe you need to pay $100 million to find someone qualified enough to understand the difference. Oliver seems to have a good grasp and I’m betting you could get him for the bargain price of $20 million. I feel capable and I’ll do it for $19 million.

Joking aside, Michael Johnson stepping down from CEO.

At the 17:35 mark, Oliver plays some clips of the FTC’s Edith Ramirez discussing the Herbalife sanctions. The description of Herbalife’s recruitment focus matches that of the FTC’s guidelines of a pyramid scheme. Ramirez does everything she can not to those words. It’s clear to me (and others) that part of the settlement was that the FTC wouldn’t call it a pyramid scheme.

At the 20:45 mark, Oliver covers a familiar argument… MLMers saying, “My MLM is different.” He then walks us through some of the health claims that are being made… exactly what Truth in Advertising covered above. At the 21:07 mark, Oliver even highlights Le-Vel.

Yes that the same Le-Vel that is suing me for defamation. My guess is that they aren’t going to sue John Oliver or HBO.

And at the 21:15 mark, Oliver highlights Jusuru, which I wrote about years ago. My article on Jusuru go the attention of their VP of Marketing. After showing that he was incorrect, he decided to abandon the conversation. I still have the invitation open to Jusuru.

At the 24:30 mark, Oliver breaks down one of the biggest tools of MLM scams… the income disclosure statement. Companies often word it in such a way (such as defining what counts as active) that it looks better than it is. As Oliver points out, when you break apart NuSkin’s income disclosure statement, 93% of NuSkin distributors make nothing. To get to that realization, you have do math, which in my opinion defeats the idea of a “disclosure statement.”

Oliver then transitions to the political issues with MLMs. MLM companies lobby politicians and hire former government officials to make it look legitimate.

Betting on Zero Get a Distribution Deal

As I was writing this article over the last 24 hours, a great movie on MLM, Betting on Zero reached a distribution agreement.

I wrote about Betting On Zero when I met Bill Ackman. This movie is so damaging to Herbalife, that their supporters bought tickets just to “no-show” to prevent other people from seeing it.

It seems like Herbalife is going to have buy out hundreds or thousands of theaters for weeks if it wants to stop people from seeing the film. My guess is that they won’t do that.

Final Thoughts

At around 5000 words this is one of the longest article I’ve written. I doubt I’ve ever written more words in a 28 hour time span. It feels like I should be writing about the election or urging people to get out and vote.

As I mentioned at the beginning of the article any of these things alone would be watershed moment for the fight against MLM scams. When you combine them all together, it feels like a brand-new day.

Disclaimer

[Note: My use of the word “scam” in this article is my opinion based on what I wrote in this article: What is a scam anyway? My opinion is also formed by Edith Ramirez using words like “unlawful”, “deceptive”, and her extreme focus on the word “legitimate” in admonishing MLMs. It also influenced by TINA.org’s use of “illegal disease-treatment claims” as quoted in the article.

Aside from the use of the word, “scam”, I’m writing commentary which some people may or may not agree with. This entire article is my opinion.

I have taken my very best effort to be accurate and correct in this article. I am always open to corrections from others. Any thoughts about corrections can be emailed to me or submitted in the comment space below. I’ve spend many hours with little sleep working on this. Any errors that are not immediately reported should be chalked up to human error. As I’ve stated many times before, I perform limited (or zero) proofreading, which is why I prefer the quick and dirty blog format.

You may have noticed that I wrote “in my opinion”, “seems”, and “appears” in this article many times. As you may be able tell from this article, I’m doing the best I can to avoid frivolous lawsuits to eliminate my freedom of speech. I ask you to take a minute and think about how our forefathers would have drafted such an article this situation. They didn’t write, “Taxation without representation may not be correct in our opinion.” Alas, this is the state that the United States is in.]

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