Consumer News

MLMs Tap College Campuses for Recruits

MLM and pyramid scheme experts say more must be done to educate and raise student awareness.

Consumer News

MLMs Tap College Campuses for Recruits

herbalife FB image young people

Ultimate Frisbee on the quad: Is there anything more emblematic of college life? But who’s this person who seems to want in on the game and is talking about some way to earn “extra money”?

College students have become a compelling target for Multilevel Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits. companies looking to recruit new distributors. A recent survey at one college found that nearly 40 percent of students polled said they had been approached by a “multi-level business opportunity.” And the professor whose idea it was to conduct the survey says that figure is probably a gross underestimate of the actual presence of MLMs on campus.

Stacie Bosley, an assistant professor of economics at Hamline University in Minnesota who studies MLMs, said even more respond that they have been approached by recruiters when she explains the features of an MLM in presentations to students. “Almost every single person will raise their hand,” she said.

Why should students or college administrators care? Because among the many MLMs out there, there are wolves hiding in sheep’s clothing — that is to say, pyramid schemes disguising themselves as MLMs. And these illegal schemes are bad news — robbing students of money and stripping them of their self-esteem, detaching young people from their family, friends and studies. The primary objective of a pyramid scheme that inevitably leads to the vast majority of distributors losing money is its emphasis on perpetual recruitment. On campus, that means students will be urged to tap everyone they know to invest money in the company through monthly purchases of goods or services until the well runs dry.

Student recruits

It’s not just the swagger of a college kid that makes the demographic so attractive to MLMs seeking recruits. A typical college student’s flexible schedule, social media savvy and broad network of family and friends also make a student the seemingly perfect candidate for an MLM pitch. The promise of extra money for tuition, books and beer helps, too.

“There’s this sense it is tailor made for (college students),” said Bosley, referring to how the MLM model is presented.

The Hamline survey found that 38 percent of students said “yes” to the question: “Have you ever been approached about a multi-level business opportunity?” Nearly a quarter of students who answered yes said the pitch from a company representative was made on campus. Thirty percent said it happened via Facebook.

RELATED: Pyramid scheme? The 7 definitive questions to ask

The survey yielded the names of more than 30 companies recruiting on campus. The companies that got the most mentions (in descending order) were: Mary Kay, Herbalife, Avon, Advocare and Amway. Two of these companies — Herbalife and Amway — have faced accusations of being a pyramid scheme. While Amway was found not to be a pyramid scheme more than 40 years ago, the company agreed in 2012 to pay former distributors $55 million following a class-action lawsuit that alleged it was an illegal scheme. And Herbalife is currently being investigated by the FTC, SEC and several attorneys general amid pyramid scheme allegations.

Mary Kay and Herbalife composite

Bosley, who has personally reviewed MLMs with students who sought her guidance after being approached about business opportunities, said colleges need to do more to educate and raise student awareness about the issue.

RELATED: Has your college student been recruited by a questionable MLM?

Bosley is not alone in her efforts to draw attention to potentially questionable companies recruiting across the nation’s quads and student centers. William Keep, dean of the business school at The College of New Jersey and an expert on pyramid schemes, issued a warning to students and colleagues, in 2013, about the Vemma Nutrition Company whose business structure Keep said resembled those that have been found to be pyramid schemes.

He said college students are particularly vulnerable.

“College-age young people are drawn to the notion of building something of their own (no matter how improbable) as a means of both expressing their independence and possibly shaping their future,” Keep said. But such aspiration at a young age can prove harmful. “Unlike their parents, college students have had little exposure to the MLM message and little basis for understanding the ‘opportunity.’”

The brighter the light, the better

Keep said this makes it all the more important that colleges educate their student body on the facts surrounding MLMs, including that MLMs make money on recruits whether or not they succeed. In the case of Herbalife, for example, while the company in 2012 reported net sales of $4 billion, 88 percent of distributors that year earned nothing from the company.

“In general, the brighter the light shone on MLM campus activities the better,” Keep said.

If you have been propositioned by someone pitching an MLM business opportunity, there are questions that you must ask to avoid getting wrapped up in a potential pyramid scheme. Read’s brochure for more information.

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