Multi-Level Marketing? It’s A Shady Business

Most of us have been there. An old acquaintance messages you on Facebook, and you’re not sure why. That is, until you read those emoji-laced opening words:

“Hey hun, want to be your own boss while earning money from home? I have the income opportunity for you!”

At first, this sounds fine. What’s the problem? Plenty of people work from home, especially at the moment.

But if the pitch won’t give you the name of the company, promises that their product will change your life, or lures you in with a story of the top boss retiring before he turned 30, they may be trying to recruit you into a multi-level marketing scheme (MLM).

These schemes sell anything you can think of. Makeup and hair products are a popular choice, but there has been rise in baseless “miracle” supplement MLMs and even children’s books MLMs in recent years. Milkshakes, essential oils, leggings- you name it, and there’s probably a scheme shilling it. And they’re big business- the Direct Selling Association, a group that campaigns for MLMs, reported $35.4 billion in MLM retail sales in 2018.

The problems lie within the structure of the MLM business model. Imagine one person hiring two people to distribute a product, and earning a little off what they make. Then those two people hire two more people each, and they earn a little from what those people earn. And so on. Problem is, some say that MLMs are just a slight variation of the illegal pyramid scheme model. During a career change, Tara*, who lives in the US, joined a well-known health and fitness MLM. She was assured that she was not partaking in illegal practices: “… everyone in the company INSISTED that it wasn’t one of those “pyramid schemes.” A business couldn’t exist if it was fundamentally against the law, right?”

So, if the practice can technically be legal, what’s the risk? A 2011 study by the U.S Federal Trade Commission (FTC) looked into the earnings data of 350 MLMs. It found that in each of the MLMs, around 99% of participants lost money. If an MLM recruiter doesn’t meet their sales targets, they may purchase products with their own money, leaving them in the negative. Although she was earning with the MLM, Tara had to factor in the cost of products, fitness wear, taxes, and associated business expenses.

At the end of her first year, she owed the MLM money.

Although this information is readily available online, many MLM recruiters deflect stories like Tara’s with meticulous social media use. And if they’re not using the platforms to sell products, they may be trying to sell the lifestyle. Tara was initially drawn to her MLM of choice by social media boasts: “I was somewhat mesmerized by the images flooding my feed that were showcasing amazing fitness transformations, fun trips to tropical places, and this whole concept of the “boss babe” lifestyle.” Tara was later encouraged to share her own monetary gains on social media, where she sometimes “stretched the truth”. But some MLMs require the complete opposite when necessary. Yasmin*, who also lives in the US, joined an MLM that provided support to another MLM, which focused mainly on health and beauty. She was encouraged to remove all “distractions” to boost her sales. This included not having Wi-Fi, changing how she dressed, and getting rid of social media.

The “tribe” mindset can become all-consuming. Many ex-MLM recruiters report that their job leaked into personal aspects of their lives. Yasmin was instructed to share every life decision with her upline (the person who recruited her into the MLM, and others above her). This included non-work decisions, like dating: “I was single, and I wanted companionship, but they would frown upon anyone who wasn't building the business…  I would have to patch in my upline so they could monitor our conversations, as well as only being allowed to see that person maybe twice a week… They even ask if you have had sex with the person.”

Tara and Yasmin’s experiences are not unique. Fortunately, both women stepped away and were able to put their wellbeing first. But for so many others- mainly women- who are targeted, it can be difficult to leave once you’ve been successfully recruited. This could be for financial reasons, or even due to the cult-like mentality of your team. Make sure to research before signing up to even ordinary sales roles, which can often be MLMs in disguise.

Remember: if it sounds too good to be true, it probably is.

If you are considering joining an MLM, the FTC encourages you to ask yourself the following questions:

Do you want to be a salesperson?
Do you have a solid sales plan?
What are your income goals?
Can you risk time and money?

For further information from the FTC, click here.

*Names have been changed to protect privacy. 

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