MLM is Legal!!!
Pink Truth Critics and other pro-MLM zealots often cite the “legality” of MLM in support of their arguments. But it’s legal! If there was anything wrong with it, our government would have shut them down! There is a difference between illegal pyramid schemes and MLM, which is legal!
There is a lot riding on this legality claim. If MLM is legal, then success in Mary Kay is all due to hard work and following the system, just like legal businesses. Failure in MLM is therefore just a normal part of business, where there are market forces at work, or (more likely) the fault of those who lose. (They didn’t work hard enough, didn’t follow the system, quit too soon, etc.)
Governments in the U.S. (federal, state, local) almost completely avoid legal action against MLMs. The FTC’s action against Herbalife back in 2016 seemed like such a big deal because they were FINALLY taking action, but it ended up being mostly meaningless.
Look at the top 15 MLMs by revenue in 2021:
Just these 15 companies add up to over $58 billion!!! And the numbers get bigger each year.
Are there laws that make MLM illegal? No. So occasionally the government will go after an MLM here or there, but it’s not enough to really put a dent in the business model. Overall, our government allows these companies to exist, and doesn’t refer to them as pyramid schemes. In many ways, our government gives them legitimacy because it plays the game of calling them MLMs or network marketing companies and pretending that this is a legitimate business.
Our government simply doesn’t protect consumers against MLM and chooses to not take legal action against these companies. They operate with almost no oversight.
Unfortunately, many consumers believe that inaction by our government means that MLM is fine. But whether or not there are laws that allow MLM to exist, and whether or not the government ever goes after an MLM… that doesn’t change the fact that MLM inflicts financial harm on consumers. Nearly everyone loses money.
Visit the
The FTC describes product-based pyramid schemes this way:
Often in a pyramid scheme, you’ll be encouraged or even required to buy a certain amount of product at regular intervals, even if you already have more inventory than you can use or sell.
https://consumer.ftc.gov/articles/multi-level-marketing-businesses-pyramid-schemes
Sound familiar? The overt pyramid schemes like Vemma (which the FTC actually took down) often require all affiliates to be on auto-ship, buying product every month and recruiting more affiliates to do the same thing. Virtually all Vemma customers were affiliates.
That’s true of most MLMs, but the big players are more subtle about it, requiring a “minumum order level” to stay “active” (i.e., qualify for discounts and commissions). They willfully ignore what happens after products are ordered.
MLMs have been getting away with legalized theft for far too long.
Regarding the list of the largest MLM companies, I think Natura is actually the largest at $10.6B, since they bought out Avon a few years ago.
Mary Kay requires inventory purchases. If you don’t purchase a minimum amount every three months, you go “inactive” and then in a year you get kicked out all together. It doesn’t matter that you may have $30k of inventory in your garage and actively selling that for the year. If you don’t order, you get kicked out. Must be a pyramid scheme.
Exactly.
The FTC also took down Jewelway & Advocare. Jewelway was put out of business altogether, while Advocare had to change its business model (no more MLM) in order to stay in business.
Legal and ethical/moral are two entirely separate issues, and I, for one, don’t always trust our government’s judgement on what’s right/wrong. It certainly doesn’t have much of a track record for protecting people from harm, particularly when that conflicts with corporate profit levels.
MLMs always want to whine that what they’re doing is legal. But they’re also often enmeshed with evangelical Christianity. Imagine the clutching of pearls and gnashing of teeth if we used the same “but it’s legal” argument about anything anti-biblical. Oh, wait. I don’t have to imagine–it plays out daily on the news.
Question.
When most of PT was in MK you didn’t have the internet like you do today. At this point with some of these people who read this website or similar threads like say on Facebook or Reddit.. I’m just like if you still join knowing what happens I am stating to have no sympathy.. is that bad?
I don’t think it’s a lack of sympathy or empathy. I believe it’s more of, “I warned you what would happen and you still didn’t listen.”
It’s akin to your mom or dad telling you that doing X isn’t a good idea – everything from sticking that bobby pin into the outlet, building the plywood bicycle ramp, or teasing the neighbor’s chicken. But you went out there and did it anyway! And guess what? There were consequences! You got zapped pretty hard, you wrecked on your bike (and so did your buddies before you figured out how better to support the ramp), and that chicken chased you all around the yard. Your parents have no sympathy for you, yet they still love you and your stupid self.
People still don’t do the research they should. It doesn’t excuse the lies used to get them in.
Plus, people are being recruited by people they trust. There’s a whole extra element of deception and manipulation there.
I remember back around 1990, my late sister wanted to get this “free” black leather backpack that a cigarette brand was “giving away” with quite a lot of UPC labels from their cigarette packs, so she smoked her head off and spent even more on smokes than she had been. She also got her friends who smoked to switch brands and give her the UPCs. She finally got enough for the backpack, but I’m sure she spent several times on smokes than whatever the cost of a leather backpack was at the time.
All totally legal, but legal != good or moral.
Yeah, I got my “free” Marlboro beach towel and shirt back in the early 90s. I was so proud of them.