Frequently Asked questions
Refuting Pro-MLM promoter talking points
Rebuttal To: People join MLMs (or "business opportunities") just to get a discount on the products, not because they are trying to make money.
The behavior has to follow the actions, otherwise the statement above would be logically flawed and invalid if correlating actions don't flow from it.
What sense is it to say you signed up to get the product, but the way to get the product is to sign up (circular reason). That begs the question of what is the real motivation to sign up.
Why go through the hurdles, long contracts, stipulations and heavy obligations of being signed up in a MLM pyramid just for the product?
MLMs have a high turnover each year about 60-80%. Throughout numerous interviews, when people that quit were asked if they are still trying the product, they all said say no.
If they claimed they love the product so much, at the bare minimum they must had signed up so the reward of being in an MLM would cover just the cost of the product itself. The high turnover rates show that bare the minimum goal was not achieved.
Are people in love with MLM products so much, they don't mind stockpiling them in their attics, basement and garages to meet commission quotas by always purchasing in excess?
If they say MLMs are buyers clubs like Costco, then question why Costco members have much greater retention rates than MLMs. MLM always use false equivalence.
MLMs indoctrinate in their motivation events that recruits will be rich or better off with dedication in their program, and to never settle for a J.O.B (Just over broke), so saying they are in it just for the product is inconsistent. It doesn't jive with what they are taught. Try to find even one MLM that doesn't entice people using the notion of riches
People that say they were in it just for the product is because they don't want to admit they were duped! There are doing a disservice by not exposing the fraud to preserve their own ego
Rebuttal To: What we are is direct selling!
No, MLMs are not direct selling because that would mean they're selling products directly to end users. MLMs are really selling a "business opportunity" to have others sell a "business opportunity" in an endless chain with top weighted "commission" through "internal consumption (not retail sales)." The term direct selling has become convoluted by MLMs. MLM is predominately an internal money transfer. Any legitimate retail sales in MLMs would be insignificant because their pay structure incentivize recruiting for profit over retailing. Real direct selling companies do not make money from their employees but rather sales in to users, who are not part of company.
When seeking a sales opportunity, question what a potential employer mean when they say "direct selling" or "affiliate marketing.
Rebuttal To: We don't recruit. We are a mentorship
MLMs got smart (slick) and changed a few terms to fool people. They are aware of news and coverage regarding their questionable practices so they changed a few terms to distract people away from that coverage. Changing terms does not a make any real difference or make the practice more legitimately sound. Mentorship is a term to cover up recruiting for a pyramid scheme.
Rebuttal To: Social Security may collapse and you should have alternative investment, I have a business opportunity for you.
Be aware, this is one talking point MLMs use to lure people in, but when logic is used, and you compare and contrast, social security is more stable then the pyramid scheme they are promoting. Below is a summary from Pyramid Scheme Alert (different organization)
• Social Security does not require an ever-growing base of new contributors. It is sustainable.
• The rate at which we each contribute to Social Security is calibrated to be sustainable, and if there’s a big change – in birth or death rates or unemployment – it can be recalibrated.
• Social Security does not employ concealment or deception. It is fully disclosed.
• Social Security is exactly what it claims to be, a mandated, government operated insurance program. It is not a private, individual investment program. It is a national, social insurance system. As in all legitimate insurance, the transfer of money is intentional and financially sound.
Social Security’s sustainability is a matter of mathematically verifiable fact, not opinion. Ponzi schemes, which are not sustainable and which rely on deception, are identifiable. They have traits that separate them from legitimate sales businesses, insurance and investment programs. This is a matter of fact, not opinion.
Rebuttal To: We are not a pyramid. We are the reverse of a pyramid. We are the reverse of a pyramid. We are a DIMARYP!!!
You will hear this in an MLM cult gathering. This statement bears no logic and is self refuting. When they say reverse of a pyramid, they mean you can be on the top of the pyramid (extremely unlikely) but being on the top of the pyramid doesn't change the the ongoing recruiting principle, pay to play, endless chain and top weighted commission principles of an MLM pyramid scheme.
Rebuttal To: There is nothing wrong with the pyramid shape. Aren't all businesses shaped like a pyramid besides MLMs?
This is a red herring fallacy. The issue is not the shape, but rather what constitutes to operations and market demands. True, a NORMAL business would have a CEO at top, lower managers going down and at the end front line workers which looks like a pyramid shaped. However, it is a pyramid on solid foundation unlike MLMs. What is fraudulent and different about multilevel marketing compared to a traditional (legitimately sound) business model is not the pyramid shape but the points shown on bottom.
Retail businesses don’t require you to pay to play which MLM does. For example CVS doesn’t require you to pay monthly fees such as mandatory product purchases like paying $300 per month to keep your job. There is no pressure to spend money on seminars and "educational material"
What sustain a real non-MLM business are customers or sales outside of the organization. Extensive research goes to meeting supply and demand. Non-MLM businesses (normal businesses) compete with others to bring value to customers on a legitimate need. MLMs don’t focus on outside sales apart from their pyramid compensation structure, but rather an endless internal recruitment (money flow from within, from recruits). Outside of MLMs, do companies need to keep hiring endlessly? Any 5 year old operating a lemonade stand would only produce enough in relation to how many people would buy.
Traditional retail businesses generally have no more than 4 levels of commission for example front line sales, branch, division and regional. With every higher level, the percentage of commission decreases. The larger portion of commission is to front line sales. This is contrasted in MLMs where the top distributors (first ones in) get paid the vast majority of the "commission" and the majority at the bottom receives very little. Also, MLMs promotes an unlimited chain of recruits which assumes an unlimited market which doesn’t exist.
MLMs can not give fixed salaries and benefits to their recruits otherwise they will go broke, since the majority of revenue comes from what their recruits (distributors) contribute from their own pockets. What substantial demand in the free market outside from internal purchases within the pyramid can support a fixed salary and benefits? Sure, there maybe extremely few fixed salary positions from MLMs however those are not considered their recruits and do not represent the vast majority and nature of their operations of how they con people.
- Money flows from the top down in a real business. In pyramid schemes money flows from the bottom to up, well primary to the very top.
Rebuttal To: If MLMs are schemes then how did we last so long? We have been in business for many years.
This reference is from THE CASE (FOR AND) AGAINST MULTI-LEVEL MARKETING: The Complete Guide to Understanding the Flaws – and Proving and Countering the Effects – of Endless Chain “Opportunity” Recruitment, or Product-based Pyramid Schemes By Jon M. Taylor, MBA, Ph.D.
When pyramid promoters introduced product purchases as the means for financing the scheme, then labeled multi-level or network marketing, some found ways to avoid ultimate collapse. First, in recruitment campaigns, MLMs used a hard-sell approach to focus attention on the quality and unique nature of the products, and away from the endless chain of recruitment of participants as primary (or only) customers.
As a second strategy, major MLMs introduce new product lines or divisions, enter new demographic markets or countries, or change the name of the company and introduce the package as a whole new company with a “different” product or service emphasis – as Amway did when it morphed into “Quixtar” in the United States, while keeping the “Amway” name and brand in overseas markets. Nu Skin shifted it’s recruiting to Asia to the point that about 85% of its revenues came from Asia. Later, Nu Skin developed new product divisions, such as Interior Design Nutritionals (IDN), Big Planet (internet services), Pharmanex, and Photo-Max – through which it could cycle whole new rounds of recruitment. This is a process I call “re-pyramiding.”
Third, MLMs engage in aggressive and unlimited recruitment campaigns and use the DSA to influence public opinion to accept and define their recruitment schemes as legitimate direct selling opportunities..
And fourth, there is a revolving door of recruits, particularly near the bottom, where newly recruited participants replace those who quit. Thus, in MLM there is a continuous collapse of the base of the pyramid, involving the churning of exiting and newly recruited participants. This allows those at or near the top to maintain their positions at the top and their high income levels.
Why are MLMs bad if they are legitimate publicity trade companies?
Being a publicly traded company does not deem a company ethical. For example, isn't Monsanto a publicly traded company with its controversy? Wasn't one the most notorious pyramid schemers of all time the chairman of NASDAQ, Bernie Madoff?
Stock prices and fluctuations are often disconnected to their operations. For example, The price of Herbalife (an MLM) stocks went up after a large amount was bought by Carl Icahn in a trade war with Bill Ackman. A part of stock value is quantity purchased driving up prices. Does that have anything to do with business ethics of Herbalife?
Rebuttal To: Network marketing or MLM is like buying a franchise
In a magical world if franchises actually operated like MLMs then they would be in every single area possible, in every corner, without any regards for the supply and demand for a product in a given market. They wouldn't be focused on earning profit from end user customers, but rather focus on recruiting other people to open other franchises. Through the endless chain of recruits and mandatory internal product purchases along with "education material" purchases, money would be be funneled by the name of commission to the first ones that opened up the franchise, and the rest would lose out. Good thing franchises don't actually operate this way.
It is important to mention unlike franchises, MLMs are not required to disclose important information such as average earnings, loss rates and saturation when they solicit. This is from lobbying efforts
Rebuttal To: Joining our MLM or "business opportunity" is like joining a buyers club like Costco!
When you do the analysis comparing the cost of similar products of MLM companies to those that are retailed, you will find that the cost of products sold by MLMs is astronomically higher because MLM products are not meant to compete in the free market. MLMs compensate those at the top at the expense of the bottom by the means of laundering of the product. You will obviously get better value shopping at Costco than being in an MLM pyramid.
MLMs impose a mandatory buying quota to be qualified for program ranks and compensation. Does Costco obligate you to buy a surplus load of protein shakes, vitamin pills or etc to store in your attic?
The Costco contract is simple. Compare that to contracts of MLMs that are hundreds of pages long. MLM contracts have tremendously more stipulations.
Does Costco want to dictate your lifestyle with a cult like control? MLMs dictate what products you ought to buy and commit to and how to spend your time being influenced by your upline. The MLM pyramid scheme thought process is your lifestyle.
Why the large drop out rates of MLMs compared to the high retention rates of Costco members?
Rebuttal To: Multi-Level marketing are not pyramid schemes because they are legal.
First of all MLMs are pyramid schemes with money laundered through products. How they are different from illegal pyramid schemes is the fact that illegal pyramid schemes are straight money based with no product. Being legal just not change the top weighted money transfer principle. It is important to mention, as shown in studies, the lost rates are ironically higher in legal MLM pyramids as opposed to illegal straight money based pyramid schemes. Legal MLMs have a lost rate of 99.7% which is greater then the 90% lost rate of illegal pyramid schemes, as per Jon M Taylor (PHD).
MLMs are very aggressive with lobbying and have political connections which enables them to operate. The 1979 Amway court ruling set the precedent for MLMs to enable their fraud to this day. Prior to 1979, prominent MLMs were shut down. Without the 1979 court ruling, MLMs would not prevalently exist to this day.
Another example of lobbying below from one company, Herbalife. The chart is from opensecrets.org. Notice the lobbying went up during the "Trade War" with Bill Ackman when Herbalife was under scrutiny.
Rebuttal To: When you go to Ebay you will notice MLM products being sold online. That is legitimate way distributors earn income.
That is simply from MLM distributors or former distributors trying to clear the bulk inventory from their garages or attics. Think of it as a store going out of business with a desperation to get rid of inventory by implementing huge discounts. Are they profiting and flourishing?
Sure from all that hype there is a small demand out there and some people are buying them, but are distributors selling those products really profiting in desperation to pay off that credit card debt?
The MLM compensation plan is set up that the primary way to profit is to recruit more distributors. Not much could be made from selling the product directly to end users in the grand scheme of things. Do the math of the amount money and time an MLM recruit spends to attend "trainings", going to events, buying "training" material, investing time to learn the "training material", spending on surplus MLM products, hosting events to recruits others, and compare all of that to the little profit being made selling online.
Often, MLM distributors go behind the backs of their upline and ignore their contracts to sell products independently online in an attempt pay to off debt.
Rebuttals of MLM misrepresentations from Jon M.Taylors Book (5 Red Flags)
More Rebuttals of MLM misrepresentations from Jon M.Taylor
Other questions about MLMs
If there a way to calculate the how much someone lost in an MLM?
Sure, one can add up how much in a dollar amount one has lose from an MLM itself but one can't think of the total loses as a definitive dollar amount. What about opportunity cost such as people dropping out of college to pursue a pyramid scheme, while being duped? What about all that time wasted; could you put a value on that? Could you put a value on lost relationships and connections? Could you put a value on ones mental health from being in a cult with need to deprogram from all of it! If you doubt this the effects of cult indoctrination, please talk to Steve Hassan from Freedom of Mind, a counselor and cult expert. MLMs can't be seen purely as a financial trap, but it is also a cult. Please see articles under the Informational Tab for further explanation.
In a movement against MLMs, who is should responsible for the damage? What should the reparations be and for who? What is the proper direction in order to effectively pursue the shutdown of the MLM platform as a whole?
The main goal should be to end the multilevel marketing business model. To put a stop to the unlimited endless chain recruitment and commission structure.
In relation for determining culpability, it is obvious those at the very top of MLM pyramids, the top <1% have the data and witness the high turnover rates. Those are the people who knowingly promote a scam. However, it is is difficult to draw a fine line especially for each MLM company on where exactly is the cut off point of ones place in the pyramid to have knowledge that brings forth accountability. Remember MLMs are cults; they are slick and good at hiding information. Due to a lack of where to draw that line, just pursuing the shutdown of the MLM compensation structure should be the direction to move forward. That is the direction to get a mass amount of people on board because no one wants to incriminate their friends or family. Just pursue the shutdown of the MLM business model itself.
In terms of financial reparations, see court cases as a reference
How did MLMs start? What is their origin?
Is the Pyramid Scheme Termination Cause too afraid to even mention specific MLM Companies by name?
Absolutely not! We take an unapologetic stance! Let the readers compare all MLMs like Amway, Primerica, Herbalife, Legal Shield, Cutco, Vemma and etc. to the pyramid scheme shown in this documentary called, BIM (Business In Motion) that just shut down for being a fraud and its founder, Alan Kippax, Arrested and deported from Canada. Let the readers decide for themselves if there is even any difference in principle.
Why are sources on the website cited in APA Format? What is the point?
1/. To give credit to the original authors
2/. As an aid for students doing research papers on topics of business, ethics or anything related to pyramid schemes. Students could save time on mandatory citation required by teachers or professors. All students have to do is copy and paste the already formatted APA citation and just change where it mentions the date retrieved to whatever the current date is. This provides more incentive for students to research this specific type of fraud and spread awareness.