Just a few days after Thanksgiving this year, I got an email from a reader who I will call Xander. He noticed his friend network is getting drawn into an MLM called Plexus.
He asked me to write about it, because like many MLMs out there, they aren’t well-covered by the media. Even when they are, such as Nerium, the companies fight hard to push such coverage out of site for those using search engines to find unbiased, reliable information.
I give this explanation for the reader who has probably read a dozen fake reviews by MLM distributors that generally go like this:
“Is [insert MLM product] for real? We have the truth. [Insert a bunch of misleading claims about said MLM product.] Yes [insert MLM product] ‘works.’ Now go buy it from me here! [Or alternatively, join my system to build your MLM here]”
So let’s dig in:
The first thing that I saw about the products was this warning letter from the FDA. A company has to do some very bad things for the FDA to smack them down like this. In this case the warning letter dated 6/30/14 points out:
“Your Fast Relief, ProBio5 and BioCleanse are not generally recognized as safe and effective for the above referenced uses and, therefore, the products are “new drugs” under section 201(p) of the Act [21 U.S.C. § 321(p)]. New drugs may not be legally introduced or delivered for introduction into interstate commerce without prior approval from FDA, as described in section 505(a) of the Act [21 U.S.C. § 355(a)]; see also section 301(d) of the Act [21 U.S.C. § 331(d)]. The FDA approves a new drug on the basis of scientific data submitted by a drug sponsor to demonstrate that the drug is safe and effective.
Furthermore, your Fast Relief, ProBio5 and BioCleanse are offered for conditions that are not amenable to self-diagnosis and treatment by individuals who are not medical practitioners; therefore, adequate directions for use cannot be written so that a layperson can use these drugs safely for their intended purposes. Thus, these drugs are misbranded under section 502(f)(1) of the Act [21 U.S.C. § 352(f)(1)] in that their labeling fails to bear adequate directions for use. The introduction of a misbranded drug into interstate commerce is a violation of section 301(a) of the Act [21 U.S.C. § 331(a)].
The violations cited in this letter are not intended to be an all-inclusive list of violations that exist in connection with your products. You are responsible for investigating and determining the causes of the violations identified above and for preventing their recurrence or the occurrence of other violations. It is your responsibility to ensure that all products marketed by your firm comply with all requirements of federal law and FDA regulations.”
I’ll attempt to translate. Three products were illegally marketed as drugs. They also had inadequate directions for safety. There might be other problems as well, so get your act together.
This is a level worse than what DoTerra received that was about the marketing on their distributor websites. Plexus Worldwide was cited for the claims on their own website, not just their Ambassadors.
To make matters worse for Plexus, The Australian Government says, “Plexus Slim Accelerator capsules and Plexus Slim Accelerator 3 Day Trial pack pose a serious risk to your health and should not be taken.” I have added emphasis on my own.
This has lead to Australia banning the product. That should speak volumes.
Plexus Slim Reviews
I found a great website Plexus Point, that has one of the unbiased reviews that I wanted to write. I’m happy she already did for me. You can read her Plexus Slim Review here. I find it particularly refreshing that she starts off by saying all the glowing Plexus Slim reviews are Plexus ambassadors trying to get you to buy the product. My favorite part overall, was the part where it was banned from Amazon.
The Plexus Slim product review on Plexus’ website itself is especially confusing. A bullet point on the front page says, “Fast and easy.” Presumably this about the weight loss and not the product as the next bullet is, “Saves you time” which covers the supplement taking process. Yet the FAQ says: “A: It is a very subtle yet effective product. Most people begin to recognize benefits approximately 2 weeks after starting the product.” Hmmm, “subtle”, “takes 2 weeks…”
A quick look at Plexus’s website shows that every product has an asterisk beside it. It’s not clear what that goes to, but at the bottom of the page there is text that says, “Disclaimer: These statements have not been evaluated by the Food and Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease.”
We can simply review the FDA notice above about how products have to show their safety and effectiveness and Plexus Slim hasn’t done that.
It is important to understand why MLM testimonials are pointless. It’s also important to understand that there are many psychology tricks employed to make you think MLM products work, when they don’t… and yes that article has been validated by unbiased, unpaid scientists acting as consumer advocates.
We don’t have to look too far to see that Plexus isn’t in compliance with the FTC guidelines of weight loss advertising. I found testimonials that didn’t have any disclosures at all on the page. In the FAQs, I read many “your results will vary” type disclosures, which the FTC points out is not enough.
At nearly a thousand words, I feel this is pretty sufficient information on the products and the advertising of the products. I encourage you to go read the links cited, because in many cases, there’s much, much more information there. If I tried to cut and paste that here, this page would be as long as a book. I don’t think anyone wants that.
What About Plexus Company?
Plexus and Inc. 5000 rankings
I noticed that Plexus’ website was quick to point out that it was Inc. Magazine’s #8 company. It’s no lie, you see it here. The problem is that few understand what that means.
I first encountered this claim in MLM companies in 2010, when I saw it with MonaVie… a company that imploded soon after the claim. I wrote about the ridiculous of the claim here: MonaVie and Inc. Magazine’s 500.
It turns out that methodology for the rankings is not what you might think it is. It relates to growth of revenue… which makes it ideally suited for pyramid schemes which exhibit “pop and drop” growth. Notice how MonaVie imploded soon after getting highlighted for the “pop.”
Furthermore, the revenue itself isn’t independently verified. It includes only privately held companies… which is why when you scroll through all the companies, you immediately think, “I haven’t heard of any of these!”
The methodology back in 2010 only takes companies that submitted their data to Inc. 500/5000. It noted that “A number of companies had growth high enough to make the Inc. 500, the top 500 of the Inc. 5000, but did not complete the revenue verification portion of the application process in time for Inc. magazine’s deadline.” There are companies left out of this list. It wasn’t a priority for them to get a badge from Inc. Magazine, because they were too busy actually doing real work.
The Project Manager for Inc. 500/5000 wrote a comment saying that my criticisms were fair.
The point is that the badge is there to try to convince people that it is reputable, but even my article in 2010 pointed out several companies which had won Inc. badges were found to be fraudulent.
If you really want to read about Inc. Magazine and MLM (Plexus’s business model), this is the article for you, Multilevel Mischief.
In summary, Inc. Magazine has not validated Plexus and it has actually condemned MLM.
What About the Business of Plexus?
Before you get into MLM, you should understand the basic problems with the business model. There’s also a great article with more information here. In case you are too lazy to click. Some of the problems include:
- No Moat To Protect Your Business – Anyone can be a Plexus Ambassador. You are literally competing against everyone. If it was a good path to financial freedom everyone would be doing it.
- You Don’t Control Your Business – If the FDA or the FTC shuts down Plexus for the claims they made, you are left holding the bag. If Plexus decides to change pricing, you are left trying to sell even more absurdly priced products. They may claim you are an independent distributor so that they don’t have to pay you benefits such as vacation or health care, but you are beholden to them as any employee would be. In fact, their policies and procedures even has a section on termination.
- No Supply and Demand – There’s no control to pair supply with demand. You won’t see a McDonalds on every block, because there isn’t demand for it. They know enough to not create unnecessary supply that would lead to few sales and them going out of business. The MLM companies don’t care about this. They’ll create as many suppliers as they can, even if there’s no demand for the products. This is why most MLMers find it difficult or impossible to sell their overpriced products. They then turn towards a pyramid scheme model of recruiting people into the business.
At the end of the day, it is really hard to even call MLM a business. The MLM companies like to because starting a business is a great thing that I highly recommend. However, you want to start a GOOD business not a TERRIBLE, FLAWED one.
As Mark Cuban says,
“There are no shortcuts. NONE. With all of this craziness in the stock and financial markets, there will be scams popping up left and right. The less money you have, the more likely someone will come at you with some scheme. The schemes will guarantee returns, use multi level marketing, or be something crazy that is now ‘backed by the US Government’. Please ignore them. Always remember this. If a deal is a great deal, they aren’t going to share it with you.”
That reminds me of the last point. Recruiting people into MLM is a self-defeating purpose. You are creating more salesmen, which compete against you in selling products. Typically they call this “building a team”, but if you study pyramid schemes, it’s also called, “growing my pyramid.”
Is Plexus a Pyramid Scheme?
I’ve read the Plexus compensation plan (PDF) and it looks like one to me in my opinion.
Let’s take the example that they give:
“If you sponsored 3 Ambassadors and everyone in your organization duplicated your efforts, your organization would look like the one below:… [image not included]… This example is just a made-up scenario to show you how the Plexus Points would accumulate if everyone who came into your organization sponsored 3 new Ambassadors. In this example, if you were receiving Plexus Points 7 levels down, you would have a total of 4,893 Plexus Points. If the Plexus Points that month were valued at $3.25, you would earn $15,902.25 from your Plexus Points.”
I didn’t include the image, but I’ve been working on this for hours now and I gave you the direct link to the compensation plan to see it yourself. The image is the usual diagram of a pyramid scheme of 3 people, who recruit 3 people, who recruit people… for seven levels. It shows that if you build a pyramid of 3,279 people, you too can earn $15,902.25.
I presume that is per month, which is a nice annual income of nearly $200,000… for 1 of the 3,279 people in the group.
Of course if those 3279 are “AutoQualified” at $100 Personal Volume, they’ve paid $327,900 for the month or nearly $4 million dollars for that one person to get that $200,000 in annual income. Now the person earning $200,000 a year doesn’t complain, and may even show off his fancy check to say how successful he is. What he did is create a financial loss for the vast majority of people who followed him.
And of course this example is very unrealistic, because it presumes that one person is going to be able to build a pyramid/team of 3279 people. For a medium sized city of 100,000 to be able to do that they’d have to recruit nearly the rest of the United States… 327 million people. It is unrealistic and unsustainable.
But don’t take my word for it. Let’s see what the FTC has to say:
“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… Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public… One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.”
That’s three separate places in the same document that the FTC makes it clear… the majority of the money can’t be made from a downline or it is an illegal pyramid scheme… not a legitimate MLM.
So why is Plexus giving us an example in their compensation where a great amount of money is made from a downline? Why aren’t they giving examples of someone buying 1000 units of product from them and selling them each for a $15 gain to the public (people who are not affiliated with Plexus), and making $15,000 a month that way?
Plexus appears giving an example of someone running a pyramid scheme according to the FTC’s guidelines.
Many distributors say, “How can this be? Law enforcement would shut them down!”
It turns out that the FTC doesn’t have the budget to prosecute all the pyramid schemes out there. Years after USA Today asked if Fortune Hi-Tech Marketing was a pyramid scheme, the FTC was able to shut them down. The company called itself a legitimate MLM for 10 years! Millions of consumers dollars were lost and not recovered in the scam. It took a lot of states Attorney Generals offices, a leading national publication (USA Today), and the FTC to finally get it done.
That’s just one of probably a thousand MLM companies that seem to fit the FTC’s guidelines for being a pyramid scheme.
It’s up to the consumers to be smart and avoid pyramid schemes. It’s also why I’m here to help give you this information. Here’s a video with some more good information on that:
Between the FDA warnings on the product marketing, the testimonials that violate the FTC guidelines, and what appears to be an illegal pyramid scheme (according to my interpretation of the FTC’s guidelines), I think you know where I’m going with this review.
Save your time and money and move on.
Hat tip on this: A Woman Scammed