[Today we’re continuing to celebrate National Consumer Protection Week with more MLM scam awareness. The FTC has some good advice on MLMs from its recent consumer warnings, “Most people who join MLMs make little or no money. And, if promoters emphasize recruiting as the real way to make money, walk away.”]
A few years ago, I wrote an article asking if Miessense Scam. One of their distributors wrote in an email to me:
I get the impression that people think you are against all direct selling / network marketing companies. Perhaps one of these days, you can take a look at the company I am involved with … although we are direct selling / network marketing, we consider ourselves much different than most of the others … we put an emphasis on obtaining customers more than we do recruiting reps.
When you see all the components of our company, you may just be able to write something positive and shut some of these naysayers up :)
MLMers often use this as criticism of critics. Usually, it is the more simple form, “You just hate MLM.”
No, it’s not that “I just hate MLM”, it’s that I hate consumer fraud and illegal pyramid schemes. If I wrote about how wrong domestic violence was, what kind of nut would respond with, “You just hate domestic violence!”?
That comparison hinges on my opinion that MLM is fraud and an illegal pyramid scheme. Hopefully, I’ll prove that in this article. However, the complexity of the fraud is so expansive that books spanning several hundred pages are written on the topic. I hold that as a higher level of proof than I can provide in this blog post.
My argument is going to be like a horse and water. You can bring the horse to water, but you can’t make him drink. I’ll bring the information to readers, but if they are brainwashed to think MLM is legitimate, I won’t be able to change their minds… even as I cite the FTC. Even as I cite an article designed to help deprogram the brainwashed MLMers.
MLM, Fraud, and Pyramid Schemes
It sounds dangerous to say that every MLM is a scam. However, I have looked at and written about dozens now, there hasn’t been one that has been CLOSE to being legitimate. Is every person in prison guilty of a crime? I can’t be certain for sure, but at some point the pattern is unmistakable. Here’s a sampling of some I’ve looked at:
| Le-Vel Thrive | It Works! | Plexus |
| Beachbody Shakeology | DoTerra | Youngevity |
| Neora | Asea | Vollara |
I’ve looked at a lot more than that box above, but many of them are out of business. Some of them have been found by the FTC to be scams after I’ve written about them. Those include AdvoCare, Vemma, and Herbalife.
Many of the MLMs I looked at were confidence games that relied on shady company “doctors” relying on bad science to push their nutritional supplement. That pattern has led to numerous MLMers erroneously claim that their product is a miracle or “helps the body heal itself.” No the MLM products do not do this.
But are MLMs pyramid schemes? I keep going back to what the FTC said in the past:
“Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.”
When I look at the people making the top money in MLM, it is because they have massive organizations of recruits and the money is based on their sales to them. In fact, this is the pitch of every MLM I’ve looked at. It is very common for them to show that if you recruit/enroll 3, who recruit/enroll 3, who recruit/enroll 3, etc. you’ll have an organization of hundreds or thousands of people.
I can’t see any way of interpreting the FTC’s words other than these very high-ranking distributors at MLMs are running illegal pyramid schemes. The MLM company itself attempts to shield itself legally from its distributor’s actions, but that argument is like Napster claiming that they didn’t foster illegal activity when users shared music. MLM companies are in a far worse legal position than Napster was because Napster wasn’t directly paying people for the illegal activity and taking a cut of the profits for themselves.
No one has ever been able to explain to me how MLMs could possibly be legitimate.
Their best efforts point to companies that are still running after a number of years. They make the claim, “If it was illegal it would be shut down.” That is what Fortune Hi-Tech Marketing said… before the FTC shut them down for being a rigged game.
It was true for Vemma and AdvoCare that ran their pyramid schemes for a decade or more before being shut down.
There are thousands of MLM companies and the FTC’s budget is very limited. They have a lot of things to do outside of MLM and one single MLM could tie up millions of dollars of that budget in a court battle. There’s a great explanation on Bloomberg about this: An Insider Explains Why the FTC Can’t Put an End to Pyramid Schemes.
A lack of effective law enforcement does not make something legal. If I become really good at stealing old ladies’ purses in a town that has no policemen, it doesn’t mean it is legal because I haven’t been caught.
No one wants to bring up the fact that Bernie Madoff ran a $50 billion scheme or how Enron was a $100 billion-dollar company. These MLM companies are peons in comparison to those schemes that ran unchecked for years and years. It isn’t surprising that many MLMs would be able to fly under the radar.
As much as they try to fly under the FTC’s radar. It feels like every MLM I’ve covered has gotten sued for being an illegal pyramid scheme. You can see a
If a company is legitimate and has a legitimate product, it doesn’t make business sense to associate themselves with MLMs/pyramid schemes. They could simply pay a good commission that would make people want to join without the recruitment/pyramid scheme aspect. Such a simple change would save a legitimate company from taking on the legal risk that could be a death blow to their business.
Since it doesn’t make sense for a legitimate business to take on this unnecessary risk, it stands to reason that companies that purposely choose to take on this risk do it because they know it is necessary for them… and that they aren’t legitimate businesses.
Why It Is Hard or Impossible to Find a Legitimate MLM?
I’ve thought long and hard about why this would be. Why doesn’t anyone any come up with a good MLM? It isn’t really that hard to do. I’ve written How an MLM Can Show It Isn’t an Illegal Pyramid Scheme. I’m happy to consult with an MLM to make them legit.
I believe that MLMs don’t want advice on how to become legit. I think I know why… legit MLMs can’t compete with the illegitimate ones and be profitable.
To understand why that may be the case you have to know that as Harper’s Magazine says:
“[Mary Kay’s consultants] couldn’t have it all because Mary Kay’s business model (like that of any multilevel-marketing enterprise) is designed primarily to profit from, rather than enrich, its workforce.”
It is reinforced by this article showing that MonaVie’s business model is MLM not juice. The product is juice, but no one buys $40 bottles of juice. The business model is getting people interested in a business opportunity that happens to have an admission fee of buying $40 bottles of juice.
The FTC found this to be true of BurnLounge in its pyramid scheme investigation:
Simply put, products sold by a legitimate MLM should be principally sold to consumers who are not pursuing a business opportunity. For good reason, the law has always taken a skeptical view of paying compensation to someone based on the presumed ‘internal consumption’ or ‘personal consumption’ of recruits who are 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.
One of the more vivid examples of this comes from the BurnLounge case. The activities of the BurnLounge defendants included selling packages of music-related merchandise. Before the FTC brought its enforcement action, anyone who wanted to participate in the business opportunity was also required to buy a package. BurnLounge had monthly revenues of over $475,000 from package sales, but those revenues did not reflect consumer demand for BurnLounge’s merchandise. After the FTC filed suit, charging that BurnLounge made deceptive income representations and paid compensation that was tied to recruitment rather than the sale of merchandise, the court entered a preliminary injunction that radically changed BurnLounge’s operations. Under the preliminary injunction, distributors could still buy BurnLounge products if they liked the merchandise, but they could no longer advance in the business opportunity.
What happened to sales? In only two months, they plummeted from over $475,000 to less than $11,000. As it turned out, at most, only a small minority of sales had been motivated by actual product demand…
MLMs compete fiercely for other MLM distributors. They poach distributors from other MLMs all the time. Almost every MLM makes distributors sign an agreement to not work for another MLM. It doesn’t matter if the product they are selling is unrelated. That’s because the people are the product to an MLM company.
This is where MLMs “race to the bottom.”
There has been very little regulation in the industry, so companies and distributors often get away with all sorts of illegal claims. I’ve written about MonaVie juice and being pushed as cancer medication. The Huffington Post has covered it as well back in 2008. Truth in Advertising categorized thousands of these illegal health claims.
Let’s pretend you want to run a profitable legitimate MLM organization. How do you recruit distributors and handcuff what they say in an environment of other companies running illegal pyramid schemes? You can’t. If everyone is allowed to put a pile of aces up their sleeves in a poker tournament and you play an honest game, you aren’t going to be in the tournament very long.
Imagine if there were no drug testing in the NFL. It would be extraordinarily difficult for a clean linebacker to compete for a job against a group that are extensive steroids users. This is precisely the problem that Major League Baseball players had during the steroid era.
This is where I believe MLMs are. Every new MLM has to come up with a selling point to lure distributors. This selling point has increasingly become more and more misleading. It went from selling food containers (Tupperware) to make-up (Mary Kay), to juice/shakes/pills. The juice/shakes/pill MLMs add (bad) science and (illegal) health claims to make the scheme more compelling. Who knows how much worse the deception will go in competition for distributors?
So that’s my answer for the commenters like the one above who says “I get the impression that people think you are against all direct selling/network marketing companies.”
I am against them, but only because I see systemic fraud (as the FTC has warned about) and the lack of active regulatory body despite the FTC’s best efforts.
This article was originally published on March 20, 2015
I know many people who entered MLM businesses, invested money and time. NO ONE was able to do anything but waste their money and their time. So, I am very wary of anything resembling an MLM business.
I completely agree with you! The product mark ups are not enough to make a sustained living on meaning the only way you can retire with this business is finding and keeping people to build and pay their monthly dues. With those dues and your downlines own hard working money guess what! they buy you a car while they go broke. This is not a good way to do business and there are tons of great products on the market you can buy that are similar to MLM products that won’t cost you an arm! I dislike MLM businesses. They use people to get what they want…and brain wash them with self development. Yes you should be doing self development but, these companies use it to keep you…use you…and YOU get to buy them their Nice cars…
Anytime someone says we are wasting our time I immediately turn you off. You act superior to others who enjoy MLMs and are successful.
Scott whined: “Anytime someone says we are wasting our time I immediately turn you off. You act superior to others who enjoy MLMs and are successful.”
Such knee-jerk denialism attests to the cultish nature of these MLM scams. According to Ramona’s experience, she hasn’t encountered any MLMers who are successful, which is not the least bit surprising given that upwards of 90% of all MLM distributors fail. Pointing that out is simply an expression of reality, not superiority. I wish that it was simply a matter of distributors wasting their own time, but sadly, they try to take down everyone else around them, like crabs in a boiling pot.
I bet you are young and okay with socialism?
[Editor’s Response: I bet you have a short-attention span unable to stick with the actual topic of the discussion.]
Lazy Man, I just discovered you by researching yet another MLM product and wondered where you buy the helmets you must wear to protect your head when you bang it against the wall again and again as you try to reason with MLM zombies? What would be really interesting would be a psychological study on the type of personality who readily buys into these MLM schemes. The weird thing is that the actual PRODUCT name is interchangeable with the schtick that goes along with it. Yet the zombies who buy into the Get Rich Quick thing never seem to realize that. Every one of them insists that their product is better than the one you can easily buy on amazon.com or the drugstore and lists dubious scientific “proof” (honestly, is failing high school chemistry a requirement for becoming a distributor?). The pointless scientific goobledy-gook these MLMs put on their websites is hysterical – lots of big words that go nowhere and mean absolutely nothing. If you aren’t sure if a company is an MLM – then there are a couple of easy tests. 1.The person trying to rope you into their downline insists that the naysayers you may have read/heard about are simply “too lazy to do the hard work” to make the zillion dollars. 2. The person will INSIST on giving/selling you a sample of their damned product even if you clearly and repeatedly say you are not interested, and then continue to follow up and argue with you when you explain that, for instance, as a serious coffee fanatic you do NOT love their nasty instant flavored coffee, or that you got equally nice-smelling, all-organic and relaxing oils for about 1/10th the price on amazon.com. 3. They are very excited about being able to cure whatever chronic condition you might be suffering from and their proof is that they, their friend, or their relative was CURED for the exact same problem by using the supplement that they…oh, just happen to be selling. and 4. They berate you for not being smart enough to get into the business so you, too, can retire early in a mansion and drive a brand-new beemer. But three years later literally every single one of them is no longer selling that. The lucky ones simply turn red and change the subject when you bring it up, and the unlucky ones just explain that while that first one didn’t work out, NOW they are distributors for ___________ (fill in the blank), which is going to make them even MORE money and a great business opportunity you should be even HAPPIER to join them in.
WRB said: “What would be really interesting would be a psychological study on the type of personality who readily buys into these MLM schemes.”
I agree wholeheartedly with that as well as the rest of what you wrote. All I have to draw on is my own experience researching MLMs and engaging in dialog with their supporters, online and in person. I think there are several “types” that get sucked into MLMs.
One type is the ruthless exploiter; the kind of person who knows that what they are doing is BS but does it anyway. This probably characterizes all the people who run these MLMs scams (i.e., company executives and a few kingpin distributors and investors) and profit handsomely from them, as well as some of the spokespeople, and some of the middling and low-level hucksters who are trying to scratch out a living as petty con-artists.
The other type, which would likely account for most of the people who get involved in MLMs at the lower levels (i.e., the peons), is characterized by ignorance, with varying degrees of desperation and greed. People who are not capable of seeing through the coercive BS that MLMs use to con people — e.g., all the false/deceptive claims, cult-like persuasion tactics, etc. – or are too desperate or greedy to resist the bait. Many of these people are prototypical sad sacks: impoverished, unskilled, and uneducated with few prospects in the non-MLM workplace; people who are particularly susceptible to fraudulent get-rich schemes and snakeoil products.
II don’t want to seem like I’m blaming the victim too much though. MLMs bear most of the blame for leveraging all sorts of manipulative tactics to hook their prey. Some are so powerful that they work on those who would generally be considered smart people. All it takes is a bit of gullibility and trust to con someone, and MLMs know this well. That’s why MLMs have their recruiters bushwhack “warm” contacts, like friends, family, co-workers, neighbors, clients, and underlings – virtually any relationship where trust, guilt, or power can be leveraged.
If you look at the activities behind the scenes at any typical MLM, you’ll see a packed schedule of recruitment and so-called “training” meetings, which are really nothing more than the opportunity to force the victim into a situation where they can be more easily manipulated. Peer pressure, love-bombing, us-vs-them mentality, stoking greed and delusion, intolerance of dissent – these are the hallmarks of MLM cult meetings. Aside from that they force-feed victims a steady diet of cult-reinforcing audio and video recordings.
What’s really telling is how an MLMer reacts when confronted with damnining facts. A reasonable person – an innocent victim of a con artist – would be able to recognize the truth when it hits them in the face, but those who continue to deny it are most likely scammers, motivated by greed, who know that what they are doing is straight-up exploitation. Either that or they are dumber than a sack of hammers and pretty much beyond hope.
I take it that you are probably against religion too? You certainly aren’t interested in the truth why people get involved in MLMs.
I’ll tell my story. While the one I’m in is also a brokerage-insurance general agency, I got involved because I was teaching school at a place that didn’t pay well. I had two kids and one on the way and my wife didn’t work. I went to an “opportunity” meeting and saw that I would be paid based on the sales of the product sold. And, I could build a brokerage business within the company and override my agents and they could do the same thing 6 levels deep. So, I paid my way. They paid for my license to sell insurance and I earned an extra $1,000 to $1,500 a month one to two nights a week. I didn’t make it to the top. But, I earned a great spare time income that I needed.
People join MLMs because most are easy to get started. They don’t require extensive and expensive college degrees. They can bring in a few dollars to a lot based on the time a person works and sells the products. Some end up overriding others. Just like Trump overrides all his employees. No difference there to have a conniption fit over. Others join because they are sick of their JOBS and want to try something different. Are you that clueless to the great freedom and opportunity America gives people? And, you want to take that away from people?
I’d like to know who really gets hurt. A person tries some vitamins or whatever. If it helps them feel better, great! If it doesn’t, not much different going to a doctor and have to go through several medications until one is found to work. Some people love Thrive and what it has done for them. If it doesn’t help, stop taking it. Make some money. If it works out, great! If it doesn’t, go work at 7-11 or throw newspapers for extra money.
Honestly, why do you people spend so much time attacking MLMs? And, for heaven’s sakes, why are you against people getting together and having fun at their work places in their meetings? Are you a dull-disillusioned CPA or some boring person like that? Go get a life and leave people alone.
I’ve meet hundreds of successful MLM people.
Scott said, “You act superior to others who enjoy MLMs and are successful.”
Anytime someone makes a statement like that I replace MLMs with statements like “illegal pickpocketing” and “illegal poaching of animals.” It’s probably not wrong to act superior to others who enjoy illegal poaching of animals and are successful at it. If you were an animal poacher you can’t look at it objectively. Same goes if you are an MLMer.
Scott said, “I’ve meet [sic] hundreds of successful MLM people.”
Many MLMs gather them in one place a couple times a year. It’s like saying that you’ve met a hundred SciFi stars by going to ComicCon. You don’t typically run across them at the supermarket. I would be much more impressed if you had met the millions who lost money by funneling up money in sales volume for those few “successes.”
Exactly, Vogel. I think one of the other reasons people stay in these schemes as long as they do at the bottom level (which frankly is what- about 99% of them, with MAYBE the top 1% actually make some cash before the bail and start yet another MLM?) is that having invested a certain amount of money, like compulsive gamblers, they simply can’t walk away until they make back the money. Can’t admit their mistake and cut their loses, and are too embarrassed to admit to themselves that they have been duped. I think this makes them even more frantic to “prove” their product is good- even as they toss more and more money into meetings, conventions, kits, etc. In the past three days I have been approached on online forums for a chronic condition I have by three different people: One selling oils, one selling lotion, and another one selling supplements. All of whom approached it by saying, “this really worked for me and I think it could help you….” I actually DO hate MLM because honestly I have never known ANYONE who made money from them, or didn’t hound me about it when they were involved in it.
Right on the money again WRB. Lazy Man has written about this with respect to cognitive dissonance reduction. A hoodwinked victim goes into denial when confronted with reality because they don’t want to admit to themselves that they have been deceiving friends and family or that they were foolish enough to fall hard for a scam. The net result is that they will continue to pour even more money into a losing venture before they finally go broke, have their spouse leave them, get ostracized by friends and family, get fired, etc — basically, when they hit rock bottom. MLMs know that people have this psychological Achilles’s heel and they exploit it ruthlessly.
It really is hard to imagine anyone more annoying or less fun to be around than an MLMer. They are so universally reviled that it’s amazing that anyone could still decide to join an MLM.
BTW, sorry to hear about your chronic condition. I hope you are coping well and wish you all the best. Cheers mate!
Thanks Vogel – I’m doing fine, just with a lifelong incurable chronic condition that makes me miserable from time to time (for the most part I’m okay). There are a lot of people in the world with chronic conditions for which there is very little treatment other than to treat the symptoms, and these people are prime targets for MLMers. I have seen the same products pop up over and over again on different forums for different diseases or conditions- and each time THAT is the condition that is supposedly miraculously cured by whatever snake oil these MLMers are peddling. The same product will have one page linked to lupus, for instance, and then the same product will have another page linked to rheumatoid arthritis, crohn’s disease, etc. Completely unrelated diseases, yet they are all miraculously “cured” by some herbal supplement or essential oil that apparently the top researchers in the world for that condition chose to ignore. When you consider that a lot of the people are unable to work and so are on limited funds- often barely getting by on disability- it makes it even more disgusting that someone would take advantage of them. So yeah- accuse me of hating MLMs- and I will admit that I am not objective about them.
I think it’s perfectly objective to hate MLMs. It would be crazy not to. :)
If MLM were a legitimate business, you could become successful by retailing it to customers. However, as you point out, “When I look at the people making the top money in MLM, it is because they have massive organizations of recruits and the money is based on their sales to them.” Thus, MLM is not a real business. It is a money-making scheme. I wrote a short post on MLM called “The Moral and Ethical Argument Against Multi-Level Marketing.” If you would like to read it, here is the link:
https://christopherjohnlindsay.wordpress.com/2015/09/06/mlm/
I just want to say my take on this. First off I think you have many valid points and thanks for writing this. I have been apart of many mlm companies and of course failed miserably. I do like the idea of mlm but its so hard to market when you come from a corporate background. Is there any legit mlms I really don’t know anymore and have since left mlm altogther. I was even in FHTM before they shut down. The issue has been what Dale Calvert has said…the autoship. Many distributors are just customers so when that autoship comes around and they haven’t made any money it can hurt. Life gets in the way bills,insurance, etc so they can’t pay. The only company I can really vouch for that I really like is Mca even though its direct sales more people have become successful there as a whole than any mlm I know. I just want to say though that mlm has taught me alot though and I don’t regret the time I have been in it. I just wish that people were taught better ways to market products were more affordable and it was more customer driven than recruiting new reps. Just my take as someone that will always love the industry no matter what others may say about it. Thanks for reading.
There are so many issues it is almost important to pin down one. Autoship is just one of them.
In MLM it isn’t about marketing the products, because Why Would Anyone Buy an MLM Product? This is why everyone turns to recruiting other people to make money… which just exasperates the pyramid scheme aspect.
As for MCA, see: https://thisiswhyubroke.wordpress.com/2012/10/18/mca-is-for-idiots/. Doesn’t sound like anything worth vouching for.
I was once involved with some MLMs but I began to realize why I always felt so utterly horrible. Quite a few of them went under and it’s no wonder now. The one company had a forum where you could chat and often I’d ask questions that seem to get people riled up, they’d gang up on me on the forum (like the cult mentality, they were never truly able to suck me into). So, I’d say to the people thinking there are only certain personalities that get sucked in (one person came up with 2) your thinking is very limited. Some people can get involved/sucked in and still figure out for themselves why they have that nagging feeling in the pit of their stomach that it’s wrong, should be illegal etc.
If you had that “nagging feeling in the pit of your stomach”, then I would say you were not completely sucked in. Tempted, hopeful and distracted, maybe, but not actually sucked into becoming an MLM zombie. The ones I am talking about are like the ones who would gang up on you with that cult mentality. What is disturbing to me is how many normal, seemingly intelligent people I have know who have been sucked in. They did eventually get out, because for 99% of the people involved the effort simply is not worth the returns. BUT- those friends had a lot of bridges to mend once they left ZombieLand with the friends they had annoyed.
Granted, I never recruited anyone and focused solely on trying to sell the products. The one company forbade selling their products online though which made things even harder with the advent of selling online (they themselves had that market cornered which is probably why). I kept giving different MLMs with different products a chance (mostly candle companies), that I thought I could sell. I never got into the recruiting aspect because that wasn’t even what I wanted to do, which may be why I never fell completely under their spell. Now I try to save people from signing up with MLMs.
Lazyman said you don’t run into 6 and 7 figured income earners in the super markets. Well, percentage wise same would be true with any line of business where someone gets paid a salary or hourly. Once again, there isn’t anything special about employees over MLMers.
Actually, I didn’t say anything about 6 and 7 income earners Scott. This isn’t worth my time, but I love showing that you are wrong time and time again.
I know about a dozen software engineers, a dozen lawyers, a half dozen doctors, and more than a dozen pharmacists. (And I really don’t know a lot of people, it’s just mostly my circle of college friends and my wife’s circle from a different college) I don’t think any of these nearly 50 people earn less than 6 figures. You can check Salary.com to collaborate the numbers on a national scale that almost all these people are in the range.
My friends are anecdotal, but I think we can agree that 90% or more of people in those professions make 6 or 7 figures. There are other professions that do nearly as well, but we don’t need to get into them.
Of course, they all shop at grocery stores.
To pick what I think would be the smallest group, pharmacists, there are more than 300,000 of them according to the Department of Labor Statistics.
To turn our attention to MLM, we know that 99% of people lose money (as cited in previous comments on this site). I’ve found very few MLMs give real numbers of people who have earned the numbers. Most give vague “<1%" or something similar. However, we have a gem from MonaVie that gives real numbers and seems to line-up with the other Income Disclosure Statements I've looked seen:
http://www.life-training-home.com/DesktopModules/MonaVie/forms/idses-ES.pdf
We have 344 people making more than $53,000 a year. Some 91% of people who executed a “MonaVie Distributor Application” were considered “wholesale customers”, which seems to be excluded from this chart. That means of the 9% this chart measured, more than 50,000 people made were not 6 figure earners. If my math is correct that presumably means that another nearly 500,000 of the unmeasured people also did not earn 6 figures.
The MLM lobbyist group (DSA) has said the past that there are ~15 million people in MLM (I’m not sure the current number). We’ve got roughly 350 in 500,000 or 0.07% (if my math is correct… if it’s wrong, please correct me). If we multiply that out, we have around 10,500 in the United States making 6 or 7 figures in MLM.
It seems that an extremely small number of people overall is making 6 figures… roughly 200 per state per my rough math. It is an astronomically small percentage (again ~0.07%) compared to pharmacists who we can agree are in at least the 90% making 6 figures.
So I feel comfortable in saying that you’d run into a pharmacist, doctor, lawyer, software engineer, a lot easier in a store in your state than you would one of the 200-ish MLM people a state who make 6-7 figures.
If you don’t like this example, please provide me a better one with real numbers of real people (not “less 1%”). I’m happy to work on adjusting the numbers based on your feedback here from proven, verifiable, and unbiased sources. I’m even willing to consider some biased sources.
Hi, very curious about this article that you mentioned, but the link does not work. Could you provide? Here’s the link: http://www.mlmmyth.org/how-an-mlm-can-show-it-isnt-an-illegal-pyramid-scheme/
Appreciate all your comments, very interesting topic!
Hey my site MLMMyth.org was hacked and I had to take it down. I’m moving it to new servers. I’ll see if I can get it up now, but it really isn’t a life priority.
Another way it can be done is what Vemma is doing here: http://www.lazymanandmoney.com/vemma-to-bring-mlm-scams-to-an-end/ (See 51% rule.)
Thanks! Appreciate it. Sorry to hear about the hack. :(
Another tale-tale sign of a committed MLMer is their circle of friends. As the MLMer trods further down the MLM road (to ruin), their existing friends fade from prominence as they make new MLM friends. This is encouraged by MLM execs since the echo chamber it creates helps keep the MLMer in the game.
Sure, the MLMer needs fresh blood on which to feed so they continue to mine their extended network, but only those who join are consider friends now and are worthy of recreational association. And, indeed, that same recreation is now often steeped in MLM-related conversation and activities. Hardly a diversified lifestyle.
My cousin recently joined Tranont and is trying to get me to join as well but I am very skeptical. Have you heard of them or have any opinions on them?
Nope, never heard of them.
Good afternoon everyone,
My name is Ben Jackson. I came across this site because my best friend is relentless in trying to get me to leave my network company. That company is PlanNet Marketing and Inteletravel. Inteletravel is a brick and mortar travel agency, and along with booking travel, yes I grow a team. So I do both. So I guess I am one of the zombies and cult followers that you speak of.
I make good, not great money, but my 2 years in this industry has been nothing but positive from booking a trip were the couple got on a plane for the 1st time, and took their 1st trip to sponsoring a person in the French Caribbean that has grown a team of over 150 since February 2016. I might also add that almost every member of our team uses the travel club they have available to them. That travel club is the Society of Intelligent travelers.
I am not here to argue with anyone, we are all entitled to our opinions. The only thing I will say is by calling people names does not sway them to your side of the debate but makes you look less credible unless you are anti MLM as well. Very similar to Donald Trump.
Lastly, there are definitely bad companies out there, and yes the FTC cannot regulate every company. However, when someone says that all MLM’s are bad, its like saying all white people are racist or all black people are lazy. So when the FTC comes knocking they will see that PlanNet Marketing is the marketing arm of Inteletravel and we have 11000 zombies that have booked over $23,000,000 in travel for Inteletravel since January.
I would say keep your argument fair and open minded.
Thanks for the comment Ben Jackson.
I haven’t heard of Inteletravel or PlanNet, but I trust the analysis of BehindMLM here and let’s just say that it isn’t good for PlanNet.
It’s strange that you’d bring up Donald Trump because he’s actually been a supporter of MLM companies that have attracted the attention of authorities and regulators.
I created this article, because I wanted to make sure that people understand that finding a good MLM seems to be like finding an innocent person in prison… perhaps even harder. For years I’ve openly challenged anyone to name a good one. When they named one, I’d research it and find a dozen red flags in the first 30 minutes. I don’t want to speak for him, but I don’t think Robert FitzPatrick from Pyramid Scheme Alert has found any in 20+ years of research.
So I don’t think it’s generalizing a type of people, I think it’s very different for the reasons I cited in the article. Specifically, it is my opinion they compete for resources (distributors) and it seems they are rewarded for bad behavior in an area with very, very little regulation.
Not all mlm companies are fraud I’m involved with a great company that has a great product (travel). I’ve been on a trip and I haven’t been let down. I haven’t gotten involved with other companies because I don’t believe in their products but you can’t not believe in travel and if the trips are real. I can book them and go any time so no scam there a pyramid scheme is a mlm company with no actual product or service. So even the companies you are trying to call out if they actually have a product or service to sell then they are legitimate. It on the person to believe whether or not the product works. Legitimate companies that aren’t mlm make claims as well hydroxycut says you will lose pure body fat if you take their products. Are they illegal? It’s on the person who is watching the commercial to believe their claims or not and buy their products. Also people buy in and they might think they are working but if you’re not coachable then you can’t win. If you’re trained for a job and then decide that you want to do the job how you want and can’t get it done is it the jobs fault no if other people can follow the system and make it happen then it’s you the individual who is doing something wrong and have to change your strategy. Another way to look at it is if you buy a membership to a gym and go and use all the machines improperly or don’t even go at all is it the gyms fault you are not in shape. You can’t get rich in two months. If you’re good you get paid well in two years if you suck it might take you four years or 5 but you can gain financial freedom it might still be a while before your swimming in the money but if it can cover your bills it can free you from your “job”.
Liard said, “I can book them and go any time so no scam there a pyramid scheme is a mlm company with no actual product or service.”
This is not an accurate definition of pyramid scheme. Fortune Hi-Tech Marketing had DishTV and Vemma had an energy drink. You can’t say that satellite TV and energy drinks don’t exist.
If you are involved in an MLM company that filled your head with false definitions of pyramid schemes, I’m not sure how great they are. In my opinion, if they were great, they would be telling you that making a majority of your money through recruiting/your downline rather than through selling is what makes for a pyramid scheme.
The FTC has further explained that Herbalife wasn’t being run legitimately. Do you claim otherwise?
I’m not really interested in covering hyudroxycut, because MLM isn’t about the products, but the recruiting structure. There is consumer protection from the FTC, but unfortunately it is nearly impossible for them to cover every claim in every advertisement. Consumer protection isn’t about just letting people make false claims and saying, “it is up to people to believe them or not.”
In the job scenario you said above it isn’t the job’s fault. However, if one’s job was to hit 10 holes-in-one in golf in a row to make a few dollars, would you say that it is the person’s fault or the job’s fault. That’s what MLM is. For decades, 99.5% of people at a ton of MLM companies fail. So only 5 people out of 1000 actually make money… and that’s be generous. Is virtually everyone not willing to do their trained jobs? Have they been like this for decades? Or is it that the jobs are virtually impossible?
The gym fulfills its promise 100% of the time of being open and available (give or take a natural disaster). The exponential recruiting of building a downline/pyramid in MLM is not sustainable. It’s like a gym that is only big enough for one person and sells thousands of memberships… and that one person sits at the top and doesn’t leave. It doesn’t matter if you go 50 times a week if they don’t let you in the doors. Is that gym operating legitimately? I don’t believe it is.
The definition that counts to the government is whether a person is paid from the sales of products or service. If a person is paid from the “distributor” fee, then it is an illegal pyramid, much like a chain letter.
So, the way MLM’s stay in business is that they tie a product sale to the distributor fee, but the person only makes money from the sale of the products. The distributor fee goes to the company. If that fee isn’t legit, then the IRS will hammer the company.
One has to ask, are brokers illegal then? What about large corporations? They are pyramids too. The people towards the top make the most money but don’t produce income for the company. It’s the worker bees at the bottom of those brokers and corporations that bring in the money. The checkers at stores and the sales people at their stores. How many people in those corporations that start as a worker bee make it to the high paying top positions? 1%? Not even that!
There is a reason that only about 2% make it to the top I MLM’s. 98% of the people are unable to understand and apply the fact it takes a lot of time and effort to get there. MLM’s often promise it’s easy. But, a legitimate one does not say that because it isn’t easy. 60 to 80 hours a week in the beginning for 3 to 5 years it takes to get to the top. If everyone did just that, everyone would make it to the top, guaranteed!
First of all, everyone can’t make it to the top. guaranteed, because the whole model is built on having people under you. If everyone was on top- who would be on your down line? Also, in a regular business- sure, the top 2% of the business make the most money- but the bottom 98% are not either making no money or actually losing money, which is what ends up happening with the majority of people who go into MLMs thinking they are going to get rich. For the amount of time spent, and then deduct the money spent for demonstration kits, free samples to give out, etc., you would be better off working at Burger King for minimum wage. I have known literally dozens of people who have tried MLMs, and not one of them is still with whichever one they were involved in (and there were many, from Amway to Organo Gold to Juice Plus, and so forth). You make money by building distributors in your downline, and if you live in a small community, eventually you will run out of people to rope into your business. Everyone I know went back to their actual jobs full-time. Not many people can afford to spend 60-80 hours a week for three years with little or not return.
Scott, you made a couple of errors in your assessment of MLM and the income generating process.
You said, “So, the way MLM’s stay in business is that they tie a product sale to the distributor fee, but the person only makes money from the sale of the products. The distributor fee goes to the company. If that fee isn’t legit, then the IRS will hammer the company.”
MLMs stay in business for a number of reasons, and none have to do with a product being tied to the entrance fee. The Amway case in 1979 specifically stated they must be generating no more than 70% of their product sales from distributor purchases, and this has resulted in Vemma and Herbalife recently being found guilty of violating that agreement and having to restructure their compensation plans. Also, it is not the IRS that goes after these companies, but rather the FTC and the FBI.
Scott said, “What about large corporations? They are pyramids too. The people towards the top make the most money but don’t produce income for the company…” “…How many people in those corporations that start as a worker bee make it to the high paying top positions? 1%? Not even that!”
This is a common fallacy that most MLMers use to validate their companies. Corporations are not pyramids schemes, they simply have the shape of a pyramid. The people at the top make most of the money, because they are the reason the business is a business. They cover the overhead, they pay the employees, they market the products, they are the brains of the organization. However, if you look at the distribution of funds…corporate CEO’s do not take home the biggest piece of the pie (in fact they are normally lucky to make a couple pennies on the dollar)…this is where most people forget how businesses work.
Scott said, “There is a reason that only about 2% make it to the top I MLM’s. 98% of the people are unable to understand and apply the fact it takes a lot of time and effort to get there. MLM’s often promise it’s easy. But, a legitimate one does not say that because it isn’t easy. 60 to 80 hours a week in the beginning for 3 to 5 years it takes to get to the top. If everyone did just that, everyone would make it to the top, guaranteed!”
This is just an incorrect and unfounded assessment of how the failure rates are founded in MLM. The reason there are massive failure rates in MLM is, the opportunity to generate income is dependent on the dollars spent of MANY people underneath you. That means the majority are going to lose NO MATTER WHAT. In any other business the employees do not fail like they do in MLM. Everyone takes home a salary, and this salary is agreed upon at the time of hiring.
Scott, anybody who guarantees anything involving money and success is something to immediately be wary of. This is a business 101 red flag. You have no proof that every person who puts 60-80 hours into MLM has earned success, and there is ample evidence out there to discredit this thought. The reason nobody guarantees things in business is, there is no way to tell what the future holds.
I made this comment in a previous post, but if you could afford to work 60-80 hours a week for three years with no real return- you would be wealthy to begin with and obviously not need this “business”. Who is going to pay the rent/mortgage, utilities, buy food, medical expenses, and so forth, if you are putting that much time (60-80 hours a week) into a business that will not pay off for three years?
Just to add onto what LM said,
Liard said, “Not all mlm companies are fraud I’m involved with a great company that has a great product (travel). I’ve been on a trip and I haven’t been let down. I haven’t gotten involved with other companies because I don’t believe in their products but you can’t not believe in travel and if the trips are real.”
This is a very vague statement, because it doesn’t tell us how you make money with the travel products. Are you selling vacations? Are you getting your friends to buy vacation packages, and then getting yours for free and teaching them to get more people involved so they can get free vacations? If the latter is true, then that is a pyramid, and makes your MLM travel company bad. You are in essence getting your friends to buy you vacations, and they are spending more money taking you on vacations through that company than it would for them to simply buy a vacation for you. I had a lengthy discussion with the infamous Tyson Zahner about this, and he too could not prove the legitimacy of his travel MLM.
Liard said, “Another way to look at it is if you buy a membership to a gym and go and use all the machines improperly or don’t even go at all is it the gyms fault you are not in shape. You can’t get rich in two months. If you’re good you get paid well in two years if you suck it might take you four years or 5 but you can gain financial freedom it might still be a while before your swimming in the money but if it can cover your bills it can free you from your “job”.”
Ah, the infamous gym example. There are two major fallacies I think of when people bring up the gym comparison.
1. They don’t promise you success. LM already referenced what they do promise, and it isn’t anything like an MLMs promise. MLMs promise you success within 2-5 years (where they came up with those numbers is a mystery that has yet to be explained), whereas a gym does not guarantee you will be fit and healthy within a certain time frame. In fact, it is just the opposite and they consistently bombard you with personal training opportunities, because they know simply buying a membership isn’t enough.
2. Can everyone who buys a membership to a gym be successful? Absolutely, and this is where the biggest part of the fallacy comes into play. You are not reliant on anyone else for your success in the gym, unlike MLM where you are required to recruit to earn “residual income”. You can, theoretically, be successful in MLM retailing products, but that is not how they are pitched, and they are not designed to emphasize selling. They are designed to make you a loyal customer and self-consume and then teach you how to get your friends and family to also be loyal customers and self-consume. Also, if you go to a gym 10-15 hours a week YOU WILL SEE POSITIVE RESULTS, but if you work MLM 10-15 hours a week you are more than likely to see no results or negative results.
In re: to products like hydroxycut and the FDA- one thing these companies do when shut down by the FDA is reorganize and reissue the product under a different name, which gives them a bit more time before the FDA comes after them again. Same with the erectile dysfunction “treatments”- of course they don’t work, they get shut down, then simply repackage and start all over again. Often the name is similar, and the marketing campaign is almost identical.
I agree with you 100%
I also think one of the reasons why people get caught up in MLM Scams is greed. People see the results of hard working Network Marketers and then assume that it is easy money. Once someone has that mentality it is fairly easy for scammers to take advantage and lure them into any scheme.
Greed? How about a desire to have goals and dreams of a nice home, nice car, spending more time with their family and friends, spending more time with their favorite charities and giving plentiful to them. I don’t see that is inherently greedy if done for the right reasons.
You also mentioned that it takes hard work to make business work, any business work. I was contemplating what it takes to win and be at the top of any business, acting and entertainment, athletes and business owners. When an actor or entertainer like musician receives an award they walk up to the stage taking out from their pocket or purse a paper with a list of people that helped them get where they are. A team of people. Athletes also work very hard but there is a long list of people that helped them get their, a team of people. Same is true in business, even a self employed business.
MLMs all start off with the individual, those that rise to the top don’t do it on or by their own. They have teams of people and not just their own pyramid. They have teachers, family, friends, tax preparers, mentors, book writers, seminar people, corporate office and many more. Those that don’t make it simply don’t understand this or refuse help, refuse their leaders. Whether out of fear or pride, it is counterproductive to being successful at MLMs. Not greed.
MLM doesn’t typically allow people to spend more time with their family. Even the “successful” ones are off traveling and promoting all the time as they’ve often admitted when they aren’t selling the opportunity (like in court documents or when the MLM collapses).
There would much more money to give to charities the MLM organization didn’t overcharge everyone for the products in it. I’m not saying that every MLM does overcharge, but I can’t think of one that I’ve covered that doesn’t.
Athletes and actors don’t thank their recruited hierarchy of people under them. I didn’t see Bernie Madoff thanking his recruited scheme of investors for putting him in jail.
Pretty much every individual has teachers, family, friends, mentors, etc. That’s not unique to MLM. You might as be saying that they have a nose and two ears. It’s the pyramid that is unique. Please stop trying to confuse people with logical fallacies and misdirection.
Scott is hopeless and can’t be helped
It’s not been about helping Scott for quite awhile now. Now it’s just to shine a light on it. It should help the next person see how indefensible it is.
Scott said, “How about a desire to have goals and dreams of a nice home, nice car, spending more time with their family and friends, spending more time with their favorite charities and giving plentiful to them.”
Woah woah woah…You can have all of these thing without MLM, and the people who do have them from MLM made a whole lot of people’s dreams disappear. The average “successful” MLMer is about 1 in 1,000 and those other 999 got further from those dreams you were talking about because of the pyramid structure.
“When an actor or entertainer like musician receives an award they walk up to the stage taking out from their pocket or purse a paper with a list of people that helped them get where they are. A team of people. Athletes also work very hard but there is a long list of people that helped them get their, a team of people. Same is true in business, even a self employed business.”
That team of people that helped a famous star or athlete is completely different from the “team” that is developed in MLM. These stars and athletes did not get successful because they had more and more people below them, and they did not profit directly off of the people who helped develop them.
MLMers profit off of, rather than enrich, their “team” that is below them, AND every tier that gets added makes the possibility of success for the later tiers lower.
This is so wildly wrong of a comparison that only a conman would think it appropriate as a retort.
“MLMs all start off with the individual, those that rise to the top don’t do it on or by their own. They have teams of people and not just their own pyramid.”
So, this is you admitting that you can only be successful in MLM by recruiting and it is a pyramid? This is the same craziness that was displayed by the Youngevity lady who said, “That crazy pyramid thing” or something to that effect when giving a speech about leaving your job to be in Youngevity. You people are all the same, and when you do start to tell the truth it is in context with a bunch of lies as you state here, “They have teachers, family, friends, tax preparers, mentors, book writers, seminar people, corporate office and many more.”
The teachers, mentors, seminar people, book writers (all the same people), are all the conmen and hucksters that created the ruse or continue to perpetuate the ruse so they can keep their money flowing. These people are the least important part of the pyramid (as you put it), and you know it, because they don’t make you any money but rather make you spend it.
“Those that don’t make it simply don’t understand this or refuse help, refuse their leaders. Whether out of fear or pride, it is counterproductive to being successful at MLMs. Not greed.”
No, wrong, BS! The people that don’t make it are the 99+% because the system is rigged and essentially impossible to be successful. This same canned MLM speech is just stupid drivel that every MLMer says to perpetuate an endless cycle of brainwashing and manipulation.
For the record, is this the same Scott that posted 200+ comments on the other thread?
Author: Lazy Man
Comment:
MLM doesn’t typically allow people to spend more time with their family. Even the “successful” ones are off traveling and promoting all the time as they’ve often admitted when they aren’t selling the opportunity (like in court documents or when the MLM collapses).
Scott: when a corporation collapses we call it bankrupt, downsizing if they are restructuring, bought out. But you call the inability to sell enough products with the marketing system “pyramid collapsing.” Do we call your preferred marketing collapsing “TV collapsing?” Or “billboard collapsing?” Or whatever?
Lazy: “There would much more money to give to charities the MLM organization didn’t overcharge everyone for the products in it. I’m not saying that every MLM does overcharge, but I can’t think of one that I’ve covered that doesn’t.”
Scott: Speculative. Depends on the product and whether there is enough product. My point anyway was about the individual’s ability to give to charities like rich people are able to give. And don’t say middle America or the poor give. I used to collect and count tithing money at church. Very few actually give a full 10% tithe let alone offerings above that. The reason people gave for not giving was job income is too low. No money left at the end of the month. You are making things up with this one.
Lazy: Athletes and actors don’t thank their recruited hierarchy of people under them. I didn’t see Bernie Madoff thanking his recruited scheme of investors for putting him in jail.
You don’t get it. Even in one of your legit businesses the owner, actor, musician, etc has a team of people that receive commissions or salaries off the money made by the actor, musician or the leadership of the business owner. If the record company of a musician doesn’t make enough money, the team for that musician collapses and the musician finds a job. After the TV show “Cheers” ended, Kirsty Alley was found in a class for getting a property causulty insurance license. Her team couldn’t produce their product well enough anymore.
Lazy: Pretty much every individual has teachers, family, friends, mentors, etc. That’s not unique to MLM. You might as be saying that they have a nose and two ears. It’s the pyramid that is unique. Please stop trying to confuse people with logical fallacies and misdirection.
Scott: It is you that reasons illogically. Your hatred for MLMs misdirected people and tries to destroy opportunity for those who lack talent and ability to make it out of minimum wage jobs. There is nothing wrong with recruiting agents for a company and paying them commissions. Nor is there anything wrong spreading the wealth around when agreed upon by the participants. Capitalism is not immoral. What is immoral is what you do.
G: Woah woah woah…You can have all of these thing without MLM…
Scott: what is wrong having it with MLM? Participants know the score when they join. No one forces them to do anything like you are in a job. Your derangement mentality over this issue is totalitarianism. Let people live and have liberty and freedom.
Scott, did you read Geoff’s next point, “The average “successful” MLMer is about 1 in 1,000 and those other 999 got further from those dreams you were talking about because of the pyramid structure.”
Why push 999 people further from their dreams? Participants don’t generally that score. I haven’t seen it clearly disclosed and signed for.
They aren’t physically forced, but they are mislead and lied to which leads to the same result.
People don’t deserve to have the freedom of defrauding others just like they don’t have the freedom to rob their houses.
Scott said, “what is wrong having it with MLM? Participants know the score when they join. No one forces them to do anything like you are in a job. Your derangement mentality over this issue is totalitarianism. Let people live and have liberty and freedom.”
First of all, they do force people to do stuff in MLM, that is a flat out lie. They force people to buy a certain amount of product each month, or they do not qualify for bonuses. They coerce people to attend weekly, monthly, and quarterly seminars out of fear that they may fail without those meetings. MLMers force you to focus on recruiting rather than selling the product, because the pyramid structure is more reliable for generating them income as distributors are more likely to be repeat consumers than retail customers.
Scott, here is the definition of totalitarianism: is a political system in which the state recognizes no limits to its authority and strives to regulate every aspect of public and private life wherever feasible.
In no way was my response even closely related to this philosophy! You are throwing out nonsense and inflammatory responses that make no sense! I have never tried to regulate a market let alone a person’s life, but I’ll tell you who does…MLMERS! They want control over your time, your information (no internet no news), your environment, and your thought processes…THAT IS TOTALITARIANISM!
And there lies your false fact. People are not mislead into anything. The commission schedule is laid out for a new person. The moving up the ladder of success is laid out for the new person. Of course this is all foreign to you because when you apply for a job, there is nothing mentioned about moving up the ladder. Nothing is mentioned what it takes to move up the pay scale either. That’s because the boss doesn’t know if he/she can give raises from year to year until the profits come in. Thus, the employees are at the mercy and enslavement if their boss. With MLM, pay and promotion is based on the effort of the individual distributor. No politics. Don’t have to wait for someone to die, get fired or sick.
To say we are mislead. I have agents who make no money. But I haven’t mislead them. I was clear they need to do two things. Get to kitchen tables and sell. Find entrepreneur minded people who want to override. I teach and show them how to do it. I do some of it with them. But, they won’t pick up the phone and set appointments. It’s called fear. I’ve never mislead them.
Not true. Virtually all large companies and many very small ones (for instance, the vet hospital where my daughter worked, which only employed about a dozen people) have a very definite schedule of when you will get a raise and what percent that raise will be. How much actual “product” does your company sell? Personally, the only MLM company I know that actually has a great product is Mary Kay- and I’m sure people will argue with me about that. But I have actually sought out someone who sells it,and have never had her try to sign me up in her downline. I have had more than a dozen friends involved in many different MLMs over the years, and every single one of them starts out enthusiastic saying EXACTLY THE SAME BS, regardless of the company or “product”. None of them are involved after two years, and virtually all of them ended up losing money when you factor in meetings, conventions, auto-shipping of sales kits, etc. that they are convinced they must attend/have in order to be successful. These are not lazy people who “don’t want to work”, and they have all gone on to support themselves with traditional jobs which actually pay. I don’t know how many times it has to be said, if your success in an MLM depends on how many people you have downline, how much of your income comes from selling them sales and starter kits as opposed to actually having repeat customers buying the product, either from you or your downline, then it’s basically a pyramid scheme and unless you are one of the people at the top dependent on those downlines continuing for your own success- this is basically a pyramid scheme. Set up so it’s legal, sure, but still unethical in my opinion.
“People don’t deserve to have the freedom of defrauding others just like they don’t have the freedom to rob their houses.”
Prove fraud. Prove someone was robbed? That’s like me proving a Prudential Agent is robbing someone with a whole life policy. I know they can do better with term and invest the difference. But it’s not fraud since the client signed the contract. I maintain the client isn’t told the rules with the cash value and therefore fraud. The courts disagree. The client signed a binding contract.
With MLM, the clients and recruits know what they are doing. They know. There is no fraud unless the recruiter says they are giving a person a “job.” That would be fraudulent. We don’t do that.
“We don’t do that” says it all. Just because someone has worked out the details with lawyers so that you just skate on the edge of “legal” doesn’t mean that ultimately it is ethical.
Scott wrote, “Prove fraud. Prove someone was robbed?”
Hmm, let’s go with the ZeekRewards MLM… here’s a little link from justice.gov with a headline of, “Former ZeekRewards CEO Is Convicted Of Federal Charges For Operating $900 Million Internet Ponzi Scheme.”
Geoff: First of all, they do force people to do stuff in MLM, that is a flat out lie. They force people to buy a certain amount of product each month, or they do not qualify for bonuses. They coerce people to attend weekly, monthly, and quarterly seminars out of fear that they may fail without those meetings. MLMers force you to focus on recruiting rather than selling the product, because the pyramid structure is more reliable for generating them income as distributors are more likely to be repeat consumers than retail customers.
And there is your error in rational thinking. No one is coerced. The system for success is laid out to the recruit. It involves attending meetings and trainings. When the meetings are taught by the leader no charge is asked for. If there are costs associated with a training meeting a fee may or may not be charged. As far as third party trainers that charge a lot of money no one is coerced or forced to go. I will tell you that the $100,000 and $1,000,000 a year earners do attend as many of those trainings as possible. What I find funny is that it’s okay to spend $100,000 to $300,000 at a college with no guarantee of work. Then being in debt for 15 years and paying enormous interest.
But, no one is coerced or forced to do anything. The system is set up and those that want the top will do what it takes.
Scott, here is the definition of totalitarianism: is a political system in which the state recognizes no limits to its authority and strives to regulate every aspect of public and private life wherever feasible.
Scott: that is the political definition. But, you are hoping for the totalitarian thumb pressed by the FTC to shut down a large part of the economy. Not only that, there is no reason to do so. So what if prices are high. I was quoted $6,500 to repair my car from the dealer. My regular mechanic will do the same work for under $1,000. Yet, the dealer service department is full of cars they are working on. If people like the product they will pay for it. That is their choice.
Okay, good to know this is the same deluded Primerica Scott from before. Now I know what I am dealing with, and clearly you aren’t done repeating your stupid programmed psychobabble. The fact that you ran from one thread to this thread speaks volumes, and all of your points have been refuted.
Scott said, “And there is your error in rational thinking. No one is coerced. The system for success is laid out to the recruit.”
Clearly you don’t know the definition of coerced…but MLMs as a whole utilize a lot of coercion through authority, manipulation, and fear. They utilize jargon and strong language to make recruits pressured to buy more products within their company.
Primerica is obviously different, because they have a different method of generating revenue through mostly one time purchases of insurance. However, there is still coercion as there is pressure to build a “team” of insurance agents…so don’t BS around like you don’t pressure insurance agents.
Scott said, “As far as third party trainers that charge a lot of money no one is coerced or forced to go. I will tell you that the $100,000 and $1,000,000 a year earners do attend as many of those trainings as possible.”
THAT IS COERCION! RIGHT THERE! First of all, why are $100,000 to $1,000,000 still going to trainings? That makes no sense, and is probably a crock of horse manure…but even if they are, they are doing it to manipulate the minds of their downline. They are utilizing their authority as successful insurance agents to ensure their downline follows their agenda…that is coercion!
Scott said, “What I find funny is that it’s okay to spend $100,000 to $300,000 at a college with no guarantee of work. Then being in debt for 15 years and paying enormous interest.”
Not even going to go down this stupid rabbit hole. Needless to say this point has been brought up before, and is a completely erroneous and wrong deflection from the subject matter.
Scott said, “But, no one is coerced or forced to do anything. The system is set up and those that want the top will do what it takes.”
I don’t get how you don’t see how dumb this is…literally 3x in your post you proved that there is coercion utilizing a “system” by means of authority. This is completely daft!
Scott said, “But, you are hoping for the totalitarian thumb pressed by the FTC to shut down a large part of the economy.”
Well aren’t you egocentrical…MLM is not a large part of the economy and it is also a money sink to 99+% of people involved as well as a giant waste of time! Let’s go to the numbers though…according to Qurora (https://www.quora.com/How-much-of-the-USAs-GDP-comes-from-MLM) MLM makes up about .26% of the US’s GDP…that’s a nothing. Walmart alone makes 10x that amount!
Scott said, “I was quoted $6,500 to repair my car from the dealer. My regular mechanic will do the same work for under $1,000. Yet, the dealer service department is full of cars they are working on. If people like the product they will pay for it.”
Again, a completely unrelated comparison that makes no sense to the subject matter. The dealer didn’t offer to make you rich by bringing your car in for repairs then telling your friends to bring their cars to them for repairs and also have them taught how to bring their cars for repairs. This is more asinine crap that has trickled over from the previous thread.
So what? If you don’t follow the current regulations then you pay. A handful out of thousands isn’t a ringing endorsement for your fight.
It’s interesting to note that in 1940, 92% of 30 year olds made more than their parents. The American Dream! It’s about 50% now. When this happens people tend to take less risks. So, now with Trump being President Elect we see the stock market go up. People see the possibility to take risks again. And, because of this, more people will stop listening to the dull-disillusioned crybaby whiners like this site has. Freedom and the American Dream are what MLMs are about for the true risk takers! Liberty and freedom is what this site is against.
It’s not a handful according to this Bloomberg article and the FTC chairwoman’s words. Also Truth in Advertising found, “that 97 percent of DSA member companies selling nutritional supplements have distributors marketing their products with illegal health claims.”
You realize that with Obama the stock market went on a nearly unprecedented run of 8 years, right?
I’m not against liberty and freedom. Once again, you show that you don’t actually read my articles.
Ha ha! OMG, I love this so much. “Crybaby whiners..” so great. Because as I read the answer from lazyman first, all I could think of is how butt hurt and defensive MLM robots get when you try to use actual logic and documentation with them. *sigh* Must be wonderful being a total cliche and not having to actually think about anything independently, just conveniently and endlessly regurgitate the same old MLM BS that literally EVERY SINGLE PERSON currently involved with an MLM says. Honestly- do you NEVER EVER visit other MLM websites? Do you not see that all of your canned BS is exactly the same canned BS every other MLM uses? Do you not know that if you dig into an MLM “star” more times than not you will find they have been associated with other failed MLMs in the past and have simply regrouped under a new name, new “product”, new business license? Such a happy cheerful little bubble the MLM robots live in, until they finally (and might I say, very very quietly) fade into the sunset because they simply can’t throw away any more money on meetings, conventions,sales kits to entice people into their downlines, etc. I have had sooo many friends do MLMs, and not a single one EVER wants to talk about it after a year or two. Again- these are not “Cry baby whiners”, these are respected people in my community who have gone on to run successful, traditional businesses (as contractors, carpenters, book keepers, to name a few) and are in fact EMBARRASSED to admit they got taken in by the whole MLM scam.
Truthfully- I only argue with MLM people when I’m really bored and need some amusement, because I accept the fact that there is literally nothing I can say to get you to veer from that MLM pre-digested BS that you spout. Good luck, and enjoy your millions. :)
Not for his first two years. Only after Republicans got control of the Congress did the market move up. But, for a long time now it’s been stalled. Now that Trump is coming in the market is going up again.
Anytime you want the government to regulate marketing methods that is an attack on Liberty and freedom. I’m not against regulations for false claims. But when it affects first amendment rights I am against it. Such as Hillary’s “false news” laws she wants in place. How stupid can anyone be!
Scott, don’t you get tired of being wrong?
Here’s a chart of the S&P 500 from January 20, 2009, (when Obama was sworn in) until today: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1481058000000&chddm=496179&chls=IntervalBasedLine&q=INDEXSP:.INX&ntsp=1&ei=MUFLWJGvNNerjAGvza2wCQ. You can see that the market went up in 2009 and 2010. The S&P went from 900 to 2200 during Obama’s administration. We’ll see what happens in Trump’s, we can all agree that the market has exceptionally successful during Obama’s time.
You realize that “false news” can often be considered defamation when a person is involved. That’s not legal to the best of my knowledge.
I usually pick one statement out that is false or shows ignorance. The rest is therefore not legit.
So, when a business has financial troubles, filed bankruptcy and regroups, even sometimes under a different name, that’s okay. But if it’s a MLM then it isn’t? See the level if stupidity in your arguments? It’s like Obama going after the Russians for the Demorats stupidity for losing the election.
I see no problem for a person to go to another company to work if the one they were at closes their doors. It just shows again that it isn’t the business itself or the marketing itself that is a problem. It shows that it takes hard work and the right knowledge to make the business work. Most won’t take the time to learn or the effort to be successful. Same thing in every line of work.
What I don’t understand is why you people can’t grasp the concept of being an independent contractor through a commission structure. If you did, you would know the main reason why so many don’t earn a lot of money in a MLM. Alright, I’ll help you out. As a true independent contractor we have no quotas nor can the companies require attendance at training and team building meetings. If we could, two things would happen. First, fewer people would join. Second, those that do would make more money. A lot more. But, what we like is that there is no coercion going on. No one if forced to do anything. And for most, they cannot overcome their reasons for not producing. Whether it’s fear of failure or just their laziness most don’t succeed. But, that is their full 100% free choice.
Scott wrote, “I usually pick one statement out that is false or shows ignorance. The rest is therefore not legit.
So, when a business has financial troubles, filed bankruptcy and regroups, even sometimes under a different name, that’s okay. But if it’s a MLM then it isn’t? See the level if stupidity in your arguments?”
You can simply look at the result… but you have to examine WHY. It’s not that MLMs go out of business. That would be like trying to justify Hitler’s actions because he has two eyes like Mother Teresa. Hey Mother Teresa is good with here two eyes, so clearly Hitler is. (And yes, I’m sorry to go into Hitler territory in the internet discussion, but it’s useful to show that you aren’t comparing the important parts that need comparing.)
Scott wrote, “What I don’t understand is why you people can’t grasp the concept of being an independent contractor through a commission structure.”
We aren’t talking about independent contractors through a commission structure. I have some articles on Uber if you are interested in that kind of thing. This discussion is about MLM and the endless chain recruiting involved in it.
What is false?
[Editor’s Response: By definition “fake news” is false.]
If that’s the case then the 1st amendment is dead. We know there has been tons of false news on Trump and from you on MLMs.
[Editor’s Response: I’ve challenged anyone to cite any false news from me on MLMs. I’m happy to fix it. So far, no one has taken me up on the cite anything. Scott, you want to try?]
Should you be silenced by the government?
[Editor’s Response: How is the government silencing freedom of speech? The FTC protects consumers from fraud, which is a very different conversation.]
The market has barely moved up. It’s been stagnant for years. Now, with Trump winning the market goes up again.
[Editor’s Response: So are you admitting that you lied about the point that didn’t go up when Obama was elected President? You seem to be trying to change the subject to another time now.
Of course, you should mention that since 2013 the US markets have greatly outperformed Europe and emerging markets. You seriously have nothing to complain to with regard to the US markets. They’ve been incredible compared to almost any other time in history.]
An MLM goes out of business when it cannot sell enough product to keep its doors open.
[Editor’s Response: MLMs actually go out of business when they can’t sell “get rich opportunity” and people jump ship. The FTC cited it here with regards to BurnLounge. The sales of Vemma dropped greatly when the FTC got them to agree to no longer pyramid.]
A MLM is a corporation. The MLM commission based structure is the marketing method.
[Editor’s Response: This is true. This marketing method has repeatedly been considered a pyramid by independent analysts.]
If the products can sell at a price people can afford making a profit for the corporation and the owners including shareholders if on the market exchanges, the corporation will stay in business.
[Editor’s Response: A drug dealer can sell product for profit and will stay in business as well. Bernie Madoff and Enron stayed in business for years and years making profit.]
Amway has been around since the 1940’s. We’ve been around since 1977.
[Editor’s Response: Herbalife had been around for more than 30 years as well… it didn’t help them when the FTC found that their business was fundamentally illegitimate. Amway paid $150 million to make a lawsuit go away in Europe. Legitimate businesses operating legitimately doesn’t offer to pay $150 million dollars to make problems go away.]
I don’t understanding why it’s good for a non-commission based company goes bankrupt but not a MLM. You obviously have issues.
[Editor’s Response: Why are you talking about commission-based companies or non-commission-based companies. We aren’t talking about them at all. We are talking about MLMs and non-MLMs, which are entirely different things.]
Scott, I responded to your comments in-line.
I’d like to add this from Jeff Bell, CEO of the MLM, LegalShield. Even MLM CEOs are pointing out the “systemic issue” of MLMs.
A new bill before Congress called the Anti-Pyramid Promotional Scheme Act of 2016 or H.R. 5230 threatens to open the door to more MLM exploitation. Don’t be fooled by the bill’s benign title — it’s bad for everyone except MLM profiteers.
http://thehill.com/blogs/pundits-blog/healthcare/309033-ftc-right-congress-wrong-on-herbalife
Here’s some good reading on HR 5230: https://www.truthinadvertising.org/pyramid/.
Essentially the idea is make product-based pyramid schemes legal.
“When done through ethical business practices, such as Mary Kay and Avon, direct sales can be a path to financial independence for thousands of workers. When it is done unethically, it can taint the public’s perception of an industry that has provided millions of Americans with their first shot at an entrepreneurial venture.”
That was from the article. So, the FTC doesn’t want to do away from MLMs nor do those that watchdog over MLMs except your pathetic site. Maybe you can learn from these people :-)
It’s plain for all to see, Scott, that you are the “taint”.
Funny that you would call this a “pathetic site”, given that you seem to spend every waking hour on this blog bloviating BS. Now go fetch your shine-box bitch.
And Mary Kay has been shown not to have ethical business practices as covered in Harper’s Magazine. And researchers say that is really no different than Herbalife which the FTC fined historically largely and got them to change their business to become legitimate.
And the FTC has commented specifically about MLM incomes being very modest. Even the DSA agrees. It doesn’t lead to a path of “financial independence” any more than buying a lottery ticket does.
The only BS comes from you. As the article said, MLM are ethical.
The article didn’t say that and the previously cited FTC speech proves otherwise.
FTC will be shut down on this one. President Trump will sign the bill.
Pretty sure they have to get a bunch of other lawmakers to vote it through. It could be tough in the post-Herbalife, post-John Oliver, post-FTC Chairwoman’s comments, post-Truth in Advertising, post-Betting On Zero climate.
I’ve been interested in MLM for nearly 10 years now and it’s in a death spiral in my opinion.
LOL!!! People like you have been saying that for 60 years. There are millions that have never heard of Herbalife or Amway. There is no saturation level in this business. Your own numbers about Primerica prove that point. You are wasting your time.
MLM and the Reality of Saturation
[Editor’s Note: I have moved this comment to a more appropriate area of the site.]
I tripped across this site and find somewhat amusing. Normally, I don’t respond to these sorts of things, but I felt I needed to correct a few inaccurances here.
Vogel seems to be making the claim that he had a hand in bringing down Monavie, Veema (in another thread), and Yevo. I’ve been in this industry for 20 years and am very familiar with many of the major players and the difference companies that have been come and gone.
Monavie was not taken down by the regulators, it was victim to a failing common to binary MLMs. Binaries can, and do, become top heavy and unable to pay out all commissions promised in the compensation plan. When this happens, you either change the plan or you go under. Monavie tried to hang on to their compensation plan too long and sales didn’t keep up with commissions and so they tanked.
[Editor’s Response: No one suggested that MonaVie was taken down by regulators. It sounds like you are stating that MonaVie was an unsustainable pyramid scheme that collapsed. Paying commissions should be easy as they are a percentage of sales… you can’t get into a position of owing more in commissions than sales. It seems to me that MonaVie paid out everything that it owed, but that people simply left for a better compensation plan elsewhere. In short, people weren’t really interested in buying the products, just the business opportunity. I think it’s fair to say that the FTC doesn’t think that’s a legitimate business. And yes, my opinion is that an illegitimate business is a scam.]
Veema did get hit by the regulars, but they pivoted and changed their compensation plan. Such is life. You change your compensation plan and then you move on.
[Editor’s Response: You missed the point that they lost almost all their business and had to resort to begging people to buy their products. Again, when the scheme is taken away, it was shown once again that there is almost zero demand for the products.]
Yevo was a mess as a company from the start. I had some friends involved and I kept hearing the company changing directions every few months. At the end of the day it wasn’t profitable and so they closed up shop and moved on.
[Editor’s Response: I had someone tell me that the FTC told them to change their compensation plan and they made drastic changes. It’s hard to imagine why they weren’t profitable with $5/serving oatmeal. Again, there’s almost zero demand for such crazy-priced products without the scheme. It’s not a surprise they closed up shop.]
Your claims that all MLMs are crooked and have horrible products is absurd. There are bad eggs in every business, there are good eggs, and everything in between. From what I can see of your website and blog here is that you will write an article: “Is XXXX and scam?” for every MLM company in existence. It’s obvious this is your play on words to get google traffic, because your answer to this question is always the same.
[Editor’s Response: From the FTC link above the FTC releasing these guidelines and Truth in Advertising documenting systematic problems, it’s clear that it isn’t, “Ohh, some are good and some are bad.” I suggest that you read the above article and understand what I wrote.
I typically only write articles on particular when readers ask me to or when it’s already a hot news item such as Herbalife. You can’t create a play on word titles to fool Google. People are asking me this question and I’m doing my best to answer them. If you are expecting a different answer than show me one MLM company that has responded publicly to the FTC’s questions and shown how it is legitimate. Give me one.]
When I share with folks, I am up front with them that you can make money and you can also lose money. This is all up to you. If you work hard and do the things I teach you, you can make a nice side income. You think every person has the mentality and skills to succeed at business? Hardly. Many do, but many also don’t. However, if you don’t try, how will you every know if you can do it? If this isn’t your thing, that’s fine too. I tell you this, I don’t need to pester my friend and family and neither do most other people. Maybe this was true in the Amway days before internet, but today people come to me.
[Editor’s Response: It isn’t up to you. It is not a matter of effort, losing money is a mathematical certainty in MLM. Maybe not for everyone, but if you put the 100 hardest working people on an island and gave them MLM to make money, the same percentage would fail as if you put the 100 laziest people on the same island.
It’s strange that people come to you, because almost everyone wants nothing to do with MLM. It got so bad that companies like ViSalus, Vemma, and MonaVie had to market to college kids.]
All just my own opinions of course
Any company that doesn’t bring in enough revenue will go out of business. Not just MLM. And, any other corporation has to look at their payroll versus sales revenue. Layoffs happen when sales are down. Monovea didn’t make changes to their compensation sales force. That’s not a knock on a binary system or any MLM system. It’s only a knock on the corporate leaders.
Scott, no one has argued against “Any company that doesn’t bring in enough revenue will go out of business.”
The problem is that MLM seems to rely on selling the opportunity to make money rather than products. I quote , “They couldn’t have it all because Mary Kay’s business model (like that of any multilevel-marketing enterprise) is designed primarily to profit from, rather than enrich, its workforce.”
Selling 25-ounce bottles of juice at $45 is a laughable business model. You might be able to pull it off as a sale to the rich and famous, but certainly not to the “Average Joe.” MonaVie (what is “Monovea”?) wouldn’t have even gotten off the ground if not for MLM and people buying into the business opportunity.
And I think that’s the point that the FTC is making here. The product has to stand the test of being valued on its own merits without a business opportunity behind it. That’s my interpretation.
It’s not that MonaVie didn’t make changes, what they had brought in a billion dollars in revenue (probably more). It’s just that the revenue clearly wasn’t based on people wanting to buy its products at the price offered… otherwise they’d still be customers and they’d have all those sales. It’s as the FTC described:
So just like in the BurnLounge case, revenue is important, but revenue from actual product sales as opposed to business opportunity sales matters greatly.
In short, all revenue is not considered equal. If a company has a good product at a fair price point, it will bring in revenue. If it’s pyramid, business opportunity revenue, well, I think we know why that fails.
There is also the capitalism point that “whatever the market will bear” some companies sell stock at $25/share while companies in the same category sell at $250,000/share. This limits who is buying the shares or client/owners.
[Editor’s Response: Stock prices per share are not products like juice. Primerica should train their financial service experts a lot better than that. No company charges exclusively $250,000 a share. You seem to be confused with Berkshire Hathaway and not familiar with their class B shares that have been around for more than 20 years. Here’s some reading for you.
MLM tries to avoid “whatever the market will bear” by conflating a pyramid recruiting scheme with a product that could be sold via legit commissioned sales. Many ban their salespeople from selling products on free markets like Craigslist, Amazon, or Ebay.]
$45 a bottle would limit the income level of their customers and their representatives. All they would need to do is adjust their compensation to fit that model. Apparently, they didn’t. But that doesn’t mean the business model is at fault.
[Editor’s Response: I think you fail to understand that the model worked while the recruiting scheme was growing… the “pop” phase of many pyramid schemes. However, once it became clear that more than 99.5% of people were losing money, they weren’t interested in paying to be in the recruiting scheme… the “drop” phase of many pyramid schemes. Of course their business model was at fault or they’d still be selling a billion dollars worth of product today. It’s not like juice was a novelty in 2008 that people don’t care about today.]
Two main areas MLM’s become illegal schemes: don’t have enough real customers to justify their compensation plan. And, representatives being paid from distributor’s fees. Some do and some don’t. To call all MLM’s scams is not true.
[Editor’s Response: The MLMs in this discussion (MonaVie, Vemma, and Yevo) did not publicly declare audited numbers of real customers (ones who are not in the business). We can infer that because no one was interested in paying the prices for their products without the scheme attached, they didn’t have significant numbers of real customers. This isn’t a surprise, because a 2nd grader playing Lemonade Stand knows that $45 lemonade won’t sell in a free market.
I won’t get into other areas, because the FTC explains it better than you did. I’m not sure anyone is calling all MLMs scams. I ask the question and put forth my opinion on the subject.]
Two things that caught my eye that was different about Primerica (then A.L. Williams) was I could work 1 night a week in my busy schedule and in my own earn $1,000/mo.
[Editor’s Response: Please don’t make income claims about Primerica unless they are on Primerica’s official website. The FTC has warns you about this here.]
The 2nd thing was we are in a heavily regulated business and I like that. Gives credibility to the company.
[Editor’s Response: MLM is barely regulated at all. That’s kind of the point of the article. Herbalife certainly wasn’t heavily regulated. And if Primerica is so heavily regulated, you wouldn’t be making the first claim that you just made.]
3rd, no one is going to do it for you. What do I mean by that? If I’m going to earn that part-time income it’s 100% up to me to make it happen. I’m an “independent contractor” exclusive to Primerica. I knew from the beginning what I earn is not Primerica’s responsibility. They set the compensation and pricing and I do the work or not. I earn $1,000 or $0. That’s my free choice.
It’s also my choice to decide if I want more. Do I want the responsibility for supervising other licensed financial service agents? Do I want to override their work? And, do I have the skills, talent, time and availability? Am I willing to develop the knowledge, skills, my talents and make time to build a business? Do I really want to be under the regulator’s microscope (FINRA, SEC, DOI)?
[Editor’s Response: So if I create an illegal gifting circle, it’s cool, right? You’d join it because I set the rules and it would be up to you about whether you make money with it or not. Maybe you should read more about gifting circles. If you want to be a part-time salesman of financial products or whatever, just get a straight commission.]
I’ll use the gym analogy as I’ve been working out in a gym for 40 years. I’ve seen thousands of well-intentioned people to get fit come for 2 or 3 months and then give up. Some for 2 or 3 days and give up. People really don’t know if they like working out in a gym until they “try” it. Over 30 years in Primerica, the same is true. Fortunately, for $99, a person can “try” it for the cost of a gym membership and get either nothing out of it or something out of it. Most will blow that $99 on something else anyways. And, I don’t get paid anything from it. It costs the company nothing in training expenses.
[Editor’s Response: If you’ve been in Primerica for 30 years you should know better. You should know that A MLM Scam Is NOT Like A Gym Membership. Have you notified Primerica and the FTC that you’ve been using this deceptive claim? Have they officially approved of it on their publicly available websites?]
I really don’t see your over the top hatred for a business system you don’t want to be a part of anyways. Reminds me of Trump Derangement Syndrome?
[Editor’s Response: MLM isn’t a business system. Why don’t you have a hatred for all of “Herbalife’s VICTIMS” and similar fraud]
Scott said, “There is also the capitalism point that “whatever the market will bear” some companies sell stock at $25/share while companies in the same category sell at $250,000/share. This limits who is buying the shares or client/owners. $45 a bottle would limit the income level of their customers and their representatives. All they would need to do is adjust their compensation to fit that model.”
There is absolutely no correlation to this subject and true capitalism. MLM is a closed-market swindle (as put by David Brear) designed to extract money from potential hopefuls based on a set of lies and deceit.
Your stock market analogy is exactly what makes MLMs not function correctly. The value of a particular stock, by and large, is depicted by the strength of the company and the desire for the shares (excluding publicly traded MLMs which is a total paradox). While this is an overly simplistic explanation, it does enough to justify why MLMs are not real businesses. It would not matter if they charged $45.00 or $0.45 per bottle of their juice. The bottom line is, they are not competitive in the market place and were sold through fake medical claims and a dream of endless riches. These juices did not sell on their own merits, and they did not sell in a proper capitalistic market.
Scott said, “Two main areas MLM’s become illegal schemes: don’t have enough real customers to justify their compensation plan. And, representatives being paid from distributor’s fees. Some do and some don’t. To call all MLM’s scams is not true.”
Really Scott…you have made this claim many times, and yet you still have not shown ONE MLM including PRIMERICA that proves this statement is true. NOT ONE! Do you know the definition of insanity? (Rhetorical question)
Scott said, “Two things that caught my eye that was different about Primerica (then A.L. Williams) was I could work 1 night a week in my busy schedule and in my own earn $1,000/mo. The 2nd thing was we are in a heavily regulated business and I like that. Gives credibility to the company. 3rd, no one is going to do it for you. What do I mean by that? If I’m going to earn that part-time income it’s 100% up to me to make it happen. I’m an “independent contractor” exclusive to Primerica. I knew from the beginning what I earn is not Primerica’s responsibility. They set the compensation and pricing and I do the work or not. I earn $1,000 or $0. That’s my free choice.”
Well…let’s start with the most obvious thing. Scott started with two things, which then turned into three things, all of which do not justify MLM. If you wanted a one day a week part time gig, then you could’ve done many other things, including…trading stocks and could still make your $1,000 a month or lose everything.
Oh, and Bernie Madoff ran a ponzi based on stock investing as well as many others, and I would consider that “Highly regulated”. This point is asinine.
Scott said, “I’ll use the gym analogy as I’ve been working out in a gym for 40 years. I’ve seen thousands of well-intentioned people to get fit come for 2 or 3 months and then give up. Some for 2 or 3 days and give up. People really don’t know if they like working out in a gym until they “try” it.”
Ugh, not the gym analogy again…It’s bad enough that this is continuously regurgitated by other MLMers, but Scott you have TRIED THIS BEFORE! It’s a false equivocation, and will not work on this thread. Why, oh why, do people keep thinking this is some legitimate comparison? Gym success is not based on you getting other people to join the gym, but rather based on you continuously working at it. There is no lottery, there is no 99% guaranteed failure rate, and everyone has an ACTUAL equal opportunity to be successful.
Scott said, “Fortunately, for $99, a person can “try” it for the cost of a gym membership and get either nothing out of it or something out of it. Most will blow that $99 on something else anyways.”
Wow Scott we finally got some honesty. Most people will blow the $99.00, so why not blow it on MLM right? That’s the most sound logic I’ve heard yet!
Scott said, “It costs the company nothing in training expenses. I really don’t see your over the top hatred for a business system you don’t want to be a part of anyways. Reminds me of Trump Derangement Syndrome ?”
You really don’t see it? REALLY??? After hundreds upon hundreds of posts (not an exaggeration), you still can’t understand it? At what point can someone be cut off from posting?
For the record, Trump just helped your industry out tremendously, so it is probably better if you support him and not trash him.
Scott said: “Two main areas MLM’s become illegal schemes: don’t have enough real customers to justify their compensation plan. And, representatives being paid from distributor’s fees. Some do and some don’t. To call all MLM’s scams is not true.”
Not even close to accurate. You didn’t even mention the word “recruiting”, which is a central feature of MLM pyramid schemes. Furthermore, it’s not an issue of having “enough retail customers”; it’s whether the majority of revenue is generated from within the network (i.e., from distributors) or outside the network (true retail customers). Better than bloviating opinions off the top of your head would be citing actual sources, like the government agencies that are tasked with regulating such matters.
https://www.ftc.gov/tips-advice/business-center/guidance/multilevel-marketing
http://www.michigan.gov/ag/0,4534,7-164-17337_20942-208400–,00.html
http://articles.chicagotribune.com/2013-02-10/business/ct-biz-0210-herbalife-20130210_1_pyramid-schemes-mlm-companies-multilevel-marketer
https://www.sec.gov/investor/alerts/ia_pyramid.htm
I have yet to see an MLM in history that didn’t place inordinate emphasis on recruiting, or one that produced any data to show that the bulk of their revenue is not derived from within the network, which one would expect they would do given that it would exonerate the MLM from suspicion. Furthermore, every income disclosure statement I have seen confirms that failure is the outcome well more than 90% of the time. Also, the FTC (an overburdened and underfunded regulatory agency) have fined/shut down many MLMs that had consistently claimed to be legitimate (just as you do), when in fact they were not. So, in light of all that, it would not be unreasonable to say that all MLMs are scams. At the very least, we should be able to agree that some/many are.
Scott said: “Two things that caught my eye that was different about Primerica…no one is going to do it for you. What do I mean by that? If I’m going to earn that part-time income it’s 100% up to me to make it happen. I’m an “independent contractor” exclusive to Primerica. I knew from the beginning what I earn is not Primerica’s responsibility. They set the compensation and pricing and I do the work or not. I earn $1,000 or $0. That’s my free choice.”
That doesn’t make Prmerica different from any other MLM in history. That’s the exact same claim they all make – i.e., “it’s up to you how much you earn”. But it’s clearly BS, since the business models necessitate that the overwhelming majority of participants will be losers. Failure is baked into the business model due to the high overhead of paying out pyramid commissions. This eats up a huge amount of gross profit, and it translates to overpriced products and grossly underpaid participants. Success is often predetermined through sweetheart deals granted to certain favored kingpin distributors (typically the ones willing to tell the most egregious lies). It is far from a fair and open system even in the best case scenarios.
Scott said: “I’ll use the gym analogy…”
I really wish you wouldn’t. Your analogies are consistently worthless and misleading. People aren’t so stupid that they need to have every issue framed in some overly-simplistic stick-figure analogy.
Scott said: “I’ve seen thousands of well-intentioned people to get fit come for 2 or 3 months and then give up. Some for 2 or 3 days and give up. People really don’t know if they like working out in a gym until they “try” it. Over 30 years in Primerica, the same is true. Fortunately, for $99, a person can “try” it for the cost of a gym membership and get either nothing out of it or something out of it. Most will blow that $99 on something else anyways. And, I don’t get paid anything from it. It costs the company nothing in training expenses”.”
Yet again, your analogy is vapid. Gyms are not selling fitness per se or results. They are merely selling access to equipment and facilities. However, if one consistently uses the facility/equipment, they will inevitably get results. The same is not true of MLM where it is the system itself that is at fault. Unlike exercise, daily effort at MLM yields failure in the vast majority of cases, because it’s not a matter of effort – failure is a mathematical near-certainty. Their income disclosure statements confirm it.
Scott said: “I really don’t see your over the top hatred for a business system you don’t want to be a part of anyways. Reminds me of Trump Derangement Syndrome?”
Yet another stupid analogy (and one that’s needlessly politicized). It’s not a matter of hatred. It’s about the existence of widespread criticism of MLM from reputable sources based on verifiable facts. It’s not like we’re outliers in being critical of MLM based on the facts at hand. Rather it is you who is the outlier based on your defensiveness and knee-jerk denials.
And it’s also not an issue of whether “we” do or do not want to be part of the MLM industry. It’s about arming consumers with factual information that MLM companies consistently try to hide or deny, and in doing so, further implicate their guilt.
Thank you for writing this article. I recently got pulled back into an MLMS, and got myself into debt trying to keep up with the incentives. I wrote about it on my blog and many of the distributors are livid that I shared my negative experience with my readers. Sucks for them. I don’t want anyone else to get pulled in like I did.
Not sure why I can’t comment on the post from today- but in re: to your comment about knowing a lot of people who make 6 figures, you cited doctors, lawyers and pharmacists. I would like to point out that there are a lot of other people who make six figures. My husband is a small contractor (employs two people besides himself). He makes six figures. Plumbers, electricians. Some administrative educators. Bookkeepers, accountants. Graphic artists. Therapists. The list goes on and on of “small” people who make over 6 figures. I live in a very small town and I could easily fill a room with people who make over 6 figures- NONE of whom are involved in MLM. I also know a lot of people who were involved in MLMs at one point in their lives. Not one single person is still involved in their particular MLM, and not one of them wants to talk about it or even acknowledge they had done of them. Not one of them is a lazy person who isn’t willing to work hard. Every one of them has gone on to work in a traditional business- generally self-employed, and has been successful. All of them have friends and family who don’t run the other way when they see them coming anymore.
WRB, please