MLM; ( Multi-Level Marketing) What is It?
It Is Fatally Flawed from Inception!
Like the world of Muslims, illegal immigrants and Gay Marriages, few things engage readers more than a discussion of MLM: Multi-level marketing.
This author has studied MLM both face to face and from the side lines, for 38 yrs. Our firm has spent over 100,000 hours examining interviews, newspaper reports, legal decisions and the like and we now present this data to you. Further, this author admits a bias. Now that we both realize that I am not a totally neutral party, let the exam begin.
It is possible that MLM was started before 1969, but the most public announcement of its existence was when the two founders of Amway successfully recruited “Independent Representatives and thus, the world of pure IRs began. Further, this business model, as researchers would say One of the introduced benefits to the prospective Independent Representative was that this was an ideal way of earning money for the stuck at home housewife or unemployed person since “NO selling was needed.” After all, everyone needed soap and most people liked the idea of earning extra cash-so, why not have a party with good snacks, music, and chatting and the opportunity to have people representing a company that was mature, had other Representatives around the city and very good soap to sell. At most of these parties, relatives would be introduced to this system since the idea was, that relatives would not think they were being sold and relatives needed soap. And why not help relatives earn spare money too. It never seemed odd that each person that “Signed up” was asked to buy a “Kit” that sold at a cost from to 0, depending on where one lived and when one joined. While the attorney general of each state was inevitably called into the picture to review the size of the “Levels”, there were often 12. We had the two founders and their first officers who branched out from their homes. The company needed a home office and distribution, so those individuals were at the top level, or, seen clearer, at the bottom of the “Pyramid.”
All companies that sell products, have to either make the products [requiring raw materials and packaging materials] or buy them from wholesalers.
These products thus have a cost to make and the Amway Company needs a specific margin to pay for their operating expenses and to provide a profit. This is what all companies need to stay in business.
Presuming for sake of discussion, that a box of soap [this author met a “middle level” Representative when he was asked to audit her records] cost the Representative, .00, that cost would provide Amway with its needed profit. Anything above that then began to provide a profit for the new field Representative.
So, the VP, operations, for example, would then “Recruit” 6 people at his or his good friend’s home. Perhaps 12 people came to this “Hello party.” Those 6 people would buy one kit each and from that, the VP would pocket perhaps .00. Amway would net over , since the soap cost .00 to provide Amway its profit. It is presumed the business cards and brochures costs less than .10 total, to provide.
Now we have two partners, a crew of employees to get the soap out the door and the VP with 6 new Representatives.
Next month or so, these 6 new Representatives would have, in their respective neighborhoods, parties to recruit new/more Independent Representatives. Soon, the box of soap costing .00 actually cost Amway .50 because a ton of it was being made at the same time. Years later, this same soap might cost less than .01 when hundreds of tons of it was made at the same time. Since the soap would retail almost the same all the time, its .99 gross margin could support a lot of Representatives.
Within ten years of Amway bringing out their Independent Agents/Representative approach and Recruiting, Princess House, Mary Kay Cosmetics. Tupper Ware and others began to adopt this method of growing their companies.
As is obvious to the reader, this method of “Selling” is called multi-level marketing. From the minute its system was put to use, attorney generals of each state began receiving complaints about Agents/Representatives misleading people or conning them with promises of profits that never materialized.
This author has met Independent Representatives from different MLMs and he was amazed that those from highly regarded professions seemed to be agents in this as well. And insurance companies, real estate offices and others have begun to adopt this system-much to this author’s amazement.
Also, since this world has lots of travelers, this system has begun to spread around the world.
The law, while stating many things, includes a provision where no company may state they are in one business and yet, their actual business is primarily that of recruiting others. This recruiting can be confused with the employment agency business. In the licensed or professional field of employee recruiting, a company is paid a fee to seek and help a company hire, employees for one or more employers. In MLM, the Independent Representative never pays anyone anything from his pocket. The Representative also seeks no one for anyone else-the Representative only seeks more Representatives for his own distribution system which the MLM world calls a “Down line.”
This Representative earns money three ways; he sells kits to new Representatives. He earns money from soap sales to his own customers [of which there are rarely many] and he earns money from the soap sales that HIS Representatives and his Representatives and their Reps sell. And on and on and on. This organizational structure is also called a pyramid. Most pyramids are illegal. It has been shown in court that most pyramids require more people than exist on earth to provide profits to 12th level Representatives. It is for that reason that the Attorney General of most states winds up suing MLM Representatives for violating at the least the law about being in a business whose main business is in recruiting for MLM.
Within MLM, the founders also often sell “Motivation” tapes which are supposed to provoke Independent Agents to “Hang in there” and keep knocking on doors or having more parties to keep the cash flow up.
What are the fallacies, faults and problems within MLM:
First; they are a violation of the recruiting law [one cannot recruit for no one and the Independent Agent is not a business].
Second; the party plan or recruiting program system supposes that one’s friends and relatives will be pleased to earn money in this manner and will of course, support the family agent by buying this soap that is priced two to five times what other retailers charge for equal quality and quantity of soap.
Third; the Independent Representative is obligated to buy a “Kit” that “Normal” business representatives are given free.
Forth; When the energetic Agent prepares to open a retail store, to facilitate sales, the supplying Representative [Up-line Representative, if you will] will inform the Agent that store site sales are not permitted “As it will bring unfair advantage to those Agents who cannot afford to pay for a retail site.” [This occurred to this report’s writer as he experimented and informed a purported Representative that he was going to buy fifty cases of product and sell them from a fixed site [store] to which the Representative said “I will stop supplying you and make sure Amway does not supply you either if you have a retail outlet.”
This author challenged a 6th level Amway Representative twelve years ago, to a sales duel. I claimed that if I could sell his firm’s product my way vs his, and we had only one week to earn our revenue and profits, that I would out sell him two to one. In front of 25 people he was training, he chose not to accept my bet-dual. He would have lost.
Any “college business school taught “method of distribution/sales will outperform an MLM.
He is why:
First, the MLM person “By habit”, will seek out Representatives. He will take two weeks to prepare a presentation at a home, hotel or elsewhere and hope to “Hook” five to ten percent of his audience to become Agents for him and Amway.
Thus, in this example, I would have begun finding retail sites to carry my product for their customers and I would have visited laundry-mats to see if I could sell products and I would have removed the label and introduced this product to local grocery chains at near my cost-just to move it-with retail prices being required after the first month’s sales.
I would keep my profit margin low -15 to 20 % instead of the several hundred percent required the Amway.
I would be able to sell perhaps 1,000 boxes of soap by the end of my second week and my competitor using the party or seminar approach, will have sold perhaps 10 boxes-just those boxes that are in the “Kits” that MLM companies have and require their Agents to sell to new Representatives.
Also, when I talk to Agents who gloat about their down-lines-having perhaps 15 to 25 Agents below them [they can only earn money from their own recruited Agents, not from those above them as in profit sharing that other firms use who are not in MLM] how their actual sales are doing, I find that the average Agent’s down-line is selling perhaps 1 to 2 boxes of product per week. That amount of product would give the Agent a gross of perhaps -50 dollars.
[The profit margin of each box to the Agent who did the recruiting]. Next, I ask the agent “Are you allocating operating costs to your business? When I ask that, they either have no idea what I am talking about or they say “We don’t have operating expenses since we are not a full-time business or, “We don’t operate that way!” Since these Agents have party expenses, transportation to Agents seminars and homes, etc., they have Transportation costs. When I ask about Liability, they claim “No.” When I ask about Advertising expenses, “No.” And the list goes on. No expenses.
My opportunity to conduct an audit of a 6th level Amway Agent came at a unique time. I was in the dating game. It just so happened that on her way to recruit a new Agent, this lady in AZ found me “Desirable” and visa-versa. During our third week dating, I offered to audit her books after listening to her stories and visiting he home and seeing her Amway assets, and methods. She was bothered that her net cash in the bank was much less than she felt it should have been.
I examined her paperwork, compared it to her stated answers and compared that to her history with the company and deduced, ANALYTICALLY, that instead of her netting .00 an hour , she was instead netting .62. She was horror stricken. While she was proud of her wall of cassettes that her up-line Agent had sold her and was assured was recoverable-that the up-line agent would buy them all back at her original cost-she called him and he said “You have misunderstood, we don not buy back cassettes. She could have made a big deal out of his previous lies to her but she decided not too.
She lost her house two months later and filed for bankruptcy.
This author has never found one person who was ANY level Agent for any MLM that netted more than .70 an hour. These agents were, unfortunately, not only not previous or current business students in college, but had never taken one course or read one book in accounting, so they had no idea about how to examine an income statement or balance sheet.
I will agree that, with one trip to any public library, that literature or education could have been surmounted.
Next, the proliferation/invasion of MLM into internet newsgroups world-wide.
This author “Owns” several Yahoo Groups, also known as newsgroups. Mine deal with real estate and business. I have a FAQ [Frequently Asked Questions] that state “No MLM invitations or ‘business’ may be conducted on this group.” I have 25 groups. Each time I create a group, immediately, 25% of the new subscribers are MLM Agents. And they have the audacity to admit it. “Wanted, Agents to open down-lines in A, B and C cities and nations.”
When I ask my peers who have newsgroups on similar or different subjects, we all find that 25% or more of new subscribers are doing the same thing; promoting their MLM group in spite of a prohibition of same. Polite requests to refrain from doing so, are ignored.
Next; new Agents I met.
In the past 12 years, I have met on the phone or in person, many new and mid-level Agents
with Amway, Excel [phone service] and real estate companies. Each and every one is excited when I initially talk to them. “I love it”, “We are making so much money”, etc.
The Excel lady even told me about the long distance phone service MLM she was with. I had not heard of that one. I had a few minutes to spare and asked her the normal questions
I have asked others and that are above in this report “Have you had your finances audited?” How long have you been with them? And so on. If I have the time, by my 3rd question, the armor that they have had to create to “Protect their time and financial investment” begins to wither. By question number 4, I get this “You know, we have been wondering why some of the down-line Agents who were doing so well three months ago, are not answering their phones anymore or are at home when we call to visit them.” OR, “You know, it’s funny, but when we went to buy a new house/car/boat, we found that our income was not as high as we had thought and so, we did not have sufficient discretionary funds to pay for this new toy/house.”
And, almost always “How did you know?” [Regarding their presumed net profit vs what their up-line Agent said it was after their forth month]. The idea that a product or service has to be priced high enough to allow many levels of staff/agents to profit rarely is understood by MLM Agents.
Sometimes, I get a newly wed person who is so excited by her new marriage and almost more excited by the new income she is expecting with her new Amway business. She is also perplexed when her family would not finance the purchase of the “Kit”, so the newly weds had to take the cash out of rent or food money, easily expecting to earn enough to replace that cash. None of them ever do. So, I suggest that they take the soap and sell it to a neighbor who she knows is going to the laundry next Saturday and write off the rest.
What an expensive lesson and what a loss of presumed income. Even a few marriages suffered when the ego of the newly weds was hurt by family members refusing to finance the “Kit” and the newly weds “Divorced” their parents because of it.
Keller-Williams straddles the line when they offer new Agents a fee to recruit other new agents.
This real estate office claims it is purely profit sharing which does not make much sense. With profit sharing, the more Agents there are, the fewer the profits are per Agent.
In some European and Middle East nations, the ethics of MLM makes their operation prohibitive.
The main law that is broken in the US by MLM is the federal law of Deceptive Practices. Plus the law where recruiting is the main objective without having any employers seeking employees.
While I have never seen one, this is of interest:
“A legitimate multi-level marketing opportunity is the value of some business purpose. Ask yourself, “What does the company sell?” An illegal pyramid scheme has no business purpose—rather its emphasis is on getting other people to enlist.
Multilevel marketing (MLM) schemes
[Indiana University Information Services-http://kb.iu.edu/data/afvn.html]
Amway is a multilevel marketing (MLM, also known as network marketing) company founded in 1959 by Jay Van Andel and Rich DeVos. The company’s name is an abbreviation of “American Way.”  Based in Ada, Michigan; personal care products, jewelry, dietary supplements, water purifiers, air purifiers and cosmetics. Wikipedia.
Ja-Ri Corporation was the original multi-level marketing distributorship for Nutrilite nutritional products, founded by Jay Van Andel and Richard DeVos in 1949. Ja-Ri’s name comes from the founders’ first names, Jay and Richard. Friends since childhood, Van Andel and DeVos became business partners in endeavors such as a hamburger stand, air charter service, and a sailing business.
Ja-Ri was incorporated in 1959, and changed its name to “Amway” in 1963.
Regarding legal actions:
In the 1979 In re. Amway Corp. (93 F.T.C. 618) ruling, the Federal Trade Commission found that Amway does not qualify as an illegal pyramid scheme since the main aim of the enterprise is the sale of product and money is paid only for business volume, personal and group. It did, however, order Amway to change several business practices and prohibited the company from misrepresenting the amount of profit, earnings or sales its distributors are likely to achieve. Amway was ordered to accompany any such statements with the actual averages per distributor, pointing out that more than half of the distributors do not make any money, with the average distributor making less than 0 per month. The order was violated with a 1986 ad campaign, resulting in a 0,000 fine
In 1983, Amway pleaded guilty to criminal tax evasion and customs fraud in Canada, resulting in a fine of million CAD, the largest fine ever imposed in that country. The company was fined another million CAD in 1989 to settle a suit brought by Canada’s trade office.. In an 1994 interview, Amway co-founder Rich DeVos stated that this incident had been his greatest “moral or spiritual challenge”, first in “soul searching as to whether they had done anything wrong” and then for pleading guilty for technical reasons, despite believing they were innocent of the charges. DeVos stated he believed that the case had been motivated by “political reasons”.
[To stave off further negative publicity, for now]
In 1999 the founders of the Amway corporation launched a sister (and separate) Internet-based company named Quixtar. The Alticor corporation owns both Amway and Quixtar, plus several other concerns. Quixtar replaced the North American business of Amway in 2001, with Amway operating in the rest of the world. Amway’s internet sales in Europe are conducted via their Amivo website. The Access Business Group was split off to handle manufacturing.
Fourteen Melaleuca distributors have sued their upline and the company on charges that have become all too familiar to followers of MLM lawsuits. The crux of this case rests on claims that the company and its representatives knowingly, fraudulently and persistently misrepresented their distributor retention rate.
Distributor retention is vital to the success of any MLM endeavor, because you have to be able to sponsor new people faster than the old ones quit. In the landmark FTC decision of 1979, Amway testified to a 50% retention rate, which was excellent for the direct sales industry. This means that, in any given year, 50% of the distributor force quits. Anyone wanting to succeed at sponsoring would have to sponsor two for every one they want to keep.
So (according to the complaint), instead of an average attrition rate of only 5.5% per year, as they had been led to believe, the Holtons discovered that the annual dropout rate was really 66% per year — an enormous difference. Kim Holton, who had sponsored people she cared about, was thrown into a serious depression and eventually committed suicide, leaving her husband and son.
PROSTEP LEAD MLM DEAD AFTER 12 YEARS
26 August 2005 — ProStep the lead generation company, dies at hands of the Law. After a recent defeat with the state of Texas over a disputed multi-year franchise tax and sales and use tax payments Prostep is shutting down. Here at the MLM WatchDog we can pretty well determine that means filing bankruptcy to escape the Texas bills due… Ed. Note: We always hate to see MLM Companies die, however there will be some humor if the Name List Brokers are selling the “Experienced Networkers! – Prostep Name List” next week!
THE WORLD’S DUMBEST PYRAMIDERS ARE HANGING THEMSELVES!
22 July 2005- You have to read about these guys standing in front of a judge telling him that Elite Activity is not a pyramid ponzi… In person! Wow, all they had to do was shut down the website and run. Now, there’s a shootout between them and the AG. Good luck!
MORE LAWSUITS EVERY TIME WE LOOK!
21 July 2005- Wow, this is one of the most sue happy couple of years I have seen in the MLM Industry!
Attorney General Warns of Marketing, Pyramid Schemes 11/22/06 4:15 AM … and Charles Counties Attorney General Warns Consumers of Multi-Level Marketing Schemes, Pyramid Cons Maryland Attorney General J. Joseph Curran, Jr., warns Maryland residents to …
Better Business Bureau expels 2 firms Pittsburgh Post-Gazette 6/30/06 12:57 AM … which include the plan’s parent company, American Family Prepaid Legal Corp. of Irvine, Calif., to immediately halt their “illegal” conduct regarding current or future marketing …
Lee’s Summit business owners indicted for false tax returns BizJournals.com 6/30/06 3:48 AM … information. The Aldridges co-own and operate a multimillion-dollar multi-level marketing firm called , which sells American Silver Eagle coins. The company employed about 5,000 sales … Concept Marketing International
UK’s Times Online reports crack down on scams and “matrix” schemes…”FINANCIAL fraudsters prey on the gullible and the vulnerable. But one scam has plumbed new depths” 10/19/2005
Norwich Evening News in the UK lists the top 10 scams in Europe – Click here 10/4/2005
New payment processor that will replace PayPal? Maybe not. See comments on GreenZap.
Buyer Beware on Australian 2-Ups like Liberty League and Coastal Vacations! – see Rod Cook article.
Government Cracks Down On Internet Mall Pyramid Promoters WFMY-TV CBS 2 Greensboro (NC) 5/13/05 10:35 PM … NexGen3000.com, Inc.; Globion, Inc.; Robert J. Charette, Jr.; David A. Charette; Stephen M. Diamond; Christine Wasser; Infinity2, Inc.; and Edward G. Hoyt are barred from participating in any multi-level marketing businesses in the future. All are barred from making false or misleading earnings or income …
USATODAY.com – U.S. cracks down on 200 scam operations 2/22/2005
Federal agencies announced a crackdown Tuesday on about 200 operations that falsely offered lucrative work-at-home and other questionable business opportunities. … U.S. cracks down on 200 scam operations. WASHINGTON (AP) – Make big bucks at home stuffing envelopes …
by Luke Setzer
Multi-Level Marketing (MLM) companies like Amway and Nu Skin are notorious for hyping their “business opportunities” and promising riches to those who “work hard” at “building the business”. However, a closer look reveals a very dark side to the MLM industry, as the following testimonial from a seasoned MLMer will demonstrate:
My wife and I have been involved with the MLM industry for 20 years. We have built many large downlines and have come to the following well-reasoned conclusions.
We’re tired of building big downlines only to see them fade away, companies go out of business, regulatory action, lawsuits, bad press, etc. Distributors are along for a ride in a cart driven by someone else.
Selling a product-based deal is fine, but the idea of marketing a business opportunity to prospects when we know the numbers is not ethical for us. In its purest form, MLM is a viable method of marketing if its focus is on products and not primarily the business. Selling the dream of financial independence with MLM is a mirage for 90+% of distributors. The MLM industry statistics are that on average only 10% of distributors get a commission check each month. Of that 10%, 80% do not make enough to sustain themselves as a full-time income. Industry-wide company statistics show that 90% of distributors drop out of each company within a 1-2 year period. The distributor churn rate is terrible.
Any way you cut it, MLM statistically does not work for 90+% of those involved. And those who make the big bucks are in a more elite group–usually 1/10 of 1% of all distributors.
We found that we could not ethically sell the MLM dream of financial independence for all. It is impossible. For me to get ,000+ a month, I have to build this on the backs of all the users, consumers, and little people–the ones who buy their 0 a month of whatever and don’t get a check. This money flows upline to distributors and back to the company from people who don’t make their monthly qualifications.
In MLMs, you do not own your own business, you do not own the product, and you are not in control of your destiny. The company holds all the strings–product supply, computer tracking, commissions, collections, customer service, order fulfillment, publicity, compliance, public relations, comp plan, everything. All you own is a position in a long line of distributors. You do not control the product you sell, the comp plan, what the company does or does not do, the money that is paid . . . distributors own nothing other than the opportunity to sign more distributors and manage the existing downline. You are at the mercy of the company, upline, downline, media, and government.
This is why we’re doing our own thing–developing our own products (books, information products), marketing, and selling. We started this four years ago. We’ve got no one to answer to except us. We’ve got control. We direct market to customers, find more new customers, nurture that relationship, and make more sales. The most important thing we’ve got is our customer list and that relationship and goodwill.
I would like to recommend that you check out the following links. These pages will explain more:
What’s Wrong With Multi-Level Marketing
What’s Wrong With MLM–FAQs
The Zero Sum Theory
MLMer Tom “Big Al” Schreiter on MLM
MLM Watch: A Skeptical Guide to Multilevel Marketing
The Network Marketing Game
Dr. Jon Taylor, who did the Network Marketing Payout Distribution Study
MLM or Pyramid Scheme?
Cagey Consumer MLM and Financial Scams Exposed
False Profits Analysis of Network and Multi-Level Marketing (MLM)
How do MLMs manage to recruit and retain enthusiastic distributors, even when those distributors lose money year after year? A close examination of the mind control systems of cults reveals disturbing similarities between MLMs and cults.
This web site supplies a generic checklist for identifying cults:
Let’s go through the list and comment:
Based on this analysis, I think the notion that MLMs have cultish tendencies has merit. I’ll be the first to admit that excellence in any endeavor requires a passionate dedication. But that dedication is usually internal rather than external. When external “authorities” begin overwriting people’s identities with their own scripting, to the detriment of the people getting scripted, that’s when the problems begin. I think that happens most of the time with MLMs given the dismal statistics of MLM failures. When rigorous studies reveal gambling to be less risky than MLM, it is time to bail out of MLM.
Anti-MLM and Anti-Amway Webring – Sites containing informational material regarding the MLM industry, especially Amway. Cagey Consumer: Multi-level marketing – Analysis and debunking of Multi-Level Marketing as an industry as well as scrutiny of a number of specific MLMs and complaints generated about them. An Employment Scam in the Financial Services Industry – Describes an employment scam that finance grads and those considering financial, insurance and securities sales should be aware of. What to do if you’ve been scammed; links to similar sites. False Profits – About the book, an exposé and analysis of the multi-level marketing (MLM) industry FTC Sues Nationwide Internet Scam – Press release about FTC lawsuit against StreamLine business opportunity. The God of the Bible versus the god of Multi-Level Marketing – Christian site calling the teachings of Amway Motivational Organizations “a Satanic distortion of Biblical truth.” The Hype of It – True story of a PartyLite Gifts consultant’s trek to the top followed by the use of the 10 day clause by the company to terminate her contract. The Mirage of Multilevel Marketing – Article by Stephen Barrett, M.D., on bogus health products. MLM Survivor – News, lawsuits, personal experiences, and information. MLM Survivors Club – A discussion group for people who’ve survived MLM. Multilevel Marketing Plans – Tips from the Federal Trade Commission regarding MLMs. Personal Experience: Mary Kay Cosmetics – Associate recounts her negative experience with the company. PinkLightHouse.com – Ex-Mary Kay consultants offers news, stories, testimonials and forum on negative experiences with the company. ield – Exposes, studies and aims to prevent illegal pyramid schemes. Site includes news, alerts, resources, legal information, updates and consumer information about a number of companies and MLMs operating suspected pyramid schemes. Skeptic’s Dictionary: multi-level marketing – Encyclopedia-type article about multi-level marketing. The Truth About Marketing Plans – Information on evaluating network marketing plans. What’s Wrong With Multi-Level Marketing? – Business analysis of 4 major systemic problems with MLM: 1) Market Saturation, 2) Pyramid Structure, 3) Morality and Ethics, and 4) Relationship Costs WorldWide Scam Network, The – Parodies of and information about the multi-level marketing scams, frauds, and rip-offs.
Metabolife probe launched – Metabolife International, the leading seller of the controversial weight-loss supplement ephedra, is the subject of a criminal investigation by the Justice Department. (August 15, 2002) Bigsmart Pyramid Promoters Settle FTC Charges – Federal Trade Commission press release announces that Darrin Epps and Edward Lamont are barred for life from participating in multi-level marketing schemes. (August 9, 2001) MetroActive: Shaking the Money Tree – by Amy Chen Mills- “From Amway to Equinox, multilevel marketing schemes have won 7 million devotees on the promise of unlimited wealth and freedom. But when the numbers don’t add up, distributors lose more than their dreams.” (October 3, 1996)
AS there are people who are passionate about most every field of endeavor, this paper has shown that there are people. While this paper’s author liked creativity, he abhors unethical behavior. He feels both mad and sad when the corporation takes advantage of the employee.
While I do agree with a few quoted responders, that “While some MLM people are honest, it is unfortunate that the many have made it impossible for the few”. Your author must go beyond this and return to the beginning or introduction to this paper.
We have syllogisms we can use here:
a; If a legal body had unlimited resources, it could examine all the workings of every company and idea to seek out illegal behavior and then, see what percent of the entire workings of MLM were illegal vs illegal. Unfortunately, such 24/7 review sources do not exist. Our protective bodies must do the best they can with what they have.
B; IT was a hypothesis of this paper that the founders of MLM made assumptions; that people would love the party system or the “Just do these simple things” and earn lots of money while others perform for you. The fact is, no business ever has, can or will work that way.
That does not mean that money cannot be invested PASSIVELY and earn for oneself but MLM is not an investment-[if it was, it would be worse], it is a shady world created to look like a business but not have the ethical characteristics of a business.
C: MLM’ers must lie, cheat and steal to earn money. In most cases, it must sell worthless kits to earn any money at all. It harms families, loved ones and acts worse than illegal drugs;
it offers PRODUCTS that are likely of value in and of themselves but such products are offered in a “heinous”, illogical, immoral and distasteful manner.
D; As reviewed earlier, I can take any product or service that MLM has, and outperform
the MLM model! Thus, the marketing model of Multi-level is flawed from the get go.
E. While a human still-born is a very sad event, MLM should have been still-born.
The only unfortunate way to keep such an accident of business creativity alive, is to try to act like it is a business [care about customer’s needs] while in fact, it is only caring about itself.
Finally; more than one previous member of the MLM family in this report said it well:
And I paraphrase: “When you are offered loads of money and the best you can earn DOING ALL YOU ARE told to do, is earn minimum wage OR LESS, the system is terminally flawed.
Members are encouraged or required to live and/or socialize only with other group members. “You must surround yourself with positive people! Negative people say, ‘Be realistic’! Positive people ask, ‘What is possible?’ Most people die from the neck up by the time they’re adults! Stay away from them! They’re dream stealers!”
Members are expected to devote inordinate amounts of time to the group. Spend every waking moment “working the business” regardless of whether it ever makes you any money.
Members’ subservience to the group causes them to cut ties with family and friends, and to give up personal goals and activities that were of interest before joining the group. Listen to some Amway tapes and learn how people have lost valuable relationships with families and friends because Amway became their all-consuming passion. Very sad. It’s as if the MLM company “overwrites” the recruit’s personality with its own scripting regardless of the damage such scripting may cause.
The leadership induces guilt feelings in members in order to control them. Example: “What? You didn’t make any phone calls today for your business? How are you ever going to get that new Mercedes (or big house, or quitting your job, or whatever other ‘hot button’ you might have).”
The group teaches or implies that its supposedly exalted ends justify means that members would have considered unethical before joining the group (for example: collecting money for bogus charities). Unethical MLM practices include (1) outrageous income claims not achievable by “just anyone” despite their arguments to the contrary, (2) telling people to “fake it till you make it” (heard this one from a Nu Skin Blue Diamond distributor tape), (3) encouraging retail customers to use excessive amounts of product to boost resales (heard this one from another Nu Skin distributor tape).
The group’s leader is not accountable to any authorities (as are, for example, military commanders and ministers, priests, monks, and rabbis of mainstream denominations). MLMers dislike well-educated critical thinkers who can see through their smoke and mirrors, and FTC regulators who expect MLM companies to substantiate their outrageous claims.
The group has a polarized us- versus-them mentality, which causes conflict with the wider society. See above comments on MLMs vs JOBs in corporate America.
The group is elitist, claiming a special, exalted status for itself, its leader(s), and members (for example: the leader is considered the Messiah or an avatar; the group and/or the leader has a special mission to save humanity). MLMers “save humanity” with their product or their business opportunity. The “bad guys” are corporate America and their foisting of JOBs (Just Over Broke) onto the American “sheep”. Never mind that it’s much easier to manage life on a steady JOB income than on a nonexistent or even negative MLM income.
The leadership dictates sometimes in great detail how members should think, act, and feel (for example: members must get permission from leaders to date, change jobs, get married; leaders may prescribe what types of clothes to wear, where to live, how to discipline children, and so forth). For MLMers, the dictates are that “thou shalt market thy product every waking moment when one is not listening to one of thy company tapes or contacting thy friends and family to recruit them into the cause. Should thy fail to do this, thou art the gravest of sinners.”
Mind-numbing techniques (such as meditation, chanting, speaking in tongues, denunciation sessions, debilitating work routines) are used to suppress doubts about the group and its leader(s). Ever been to an MLM “motivational seminar”? It’s not so much “mind numbing” as it is “mind distracting”. Good feelings are whipped up and lifelong dreams stimulated and then linked to the “business opportunity”, as if the latter could materialise the former. Logical flows of cause and effect based on rigorous research are replaced with highly emotional but intellectually flawed mental linkages to keep the MLM recruit hooked.
Questioning, doubt, and dissent are discouraged or even punished. In MLM, the answer is YES! YES! YES!
The group is preoccupied with making money. In MLM, the answer is YES! YES! YES!
The group is preoccupied with bringing in new members. In MLM, the answer is YES! YES! YES!
The group is focused on a living leader to whom members seem to display excessively zealous, unquestioning commitment. In MLM, sometimes it’s a leader, sometimes it’s the company itself. More often it’s a charismatic individual, whether that’s the company founder or an upline.8/19/04 11:59 AM … “Gifting Club” – “Elite Activities” through recruitment of participants, as opposed to a multilevel marketing scheme, where money is made through the sale of a product or service. Staci Schneider, …Multilevel marketing plans, also known as network or matrix marketing, are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you will receive commissions for both your own sales and those of other people you recruit to join the distributors. Multilevel marketing plans usually promise to pay commissions through two or more levels of recruits, known as the distributor’s downline. While some MLM schemes are supposedly legitimate, if a plan offers to pay commissions for recruiting new distributors, it likely is illegal. Most states outlaw this practice, which is known as pyramiding. State laws against pyramiding say that a multilevel marketing plan should pay commissions only for retail sales of goods or services, not for recruiting new distributors. Pyramiding is prohibited because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. When a plan collapses, most people, except perhaps those at the very top of the pyramid, lose their money.Original Source: Los Angeles Times, April 27, 1999.”
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