MLMs Are Consistently Leaving Participants Behind

The multilevel marketing (MLM) industry has a long history of attracting participants with misleading promises – whether regarding the income they can expect to make with the “business opportunity” or how the company’s products can improve their health. And while only a few dozen companies have been prosecuted for operating as pyramid schemes, the inherent hierarchical structures of MLMs have many similarities with those of illegal pyramid schemes, raising additional serious concerns.

A new book I co-edited with Deanna Grant-Smith, a professor of management at the University of the Sunshine Coast in Australia, analyzes MLM schemes, introducing what they are and why they are often associated with harmful outcomes.

“Critical Perspectives on Multilevel Marketing” is the first book to establish academic research on MLM as its own field of study. It brings together scholars, attorneys and consumer protection experts from Australia, Europe and the U.S. to investigate how MLMs operate: not as a retail channel or an income opportunity for its participants but as a business model that profits its owners and a select few participants at the highest levels, while the industry works to delay efforts aimed at effective consumer protection.

With a foreword by TINA.org Executive Director Bonnie Patten and an epilogue by Robert FitzPatrick, author of “Ponzinomics: The Untold Story of Multi-Level Marketing” and founder of Pyramid Scheme Alert, the book draws on independent research to offer key insights into how and why MLM companies are allowed to thrive, even as most participants fail.

Here are some of the topics the book discusses:

MLMs sell dreams, not data; false promises, instead of transparency

MLMs attract and motivate participants telling them they can make money working from home and that if they put in the effort, there is no limit to the level of success they can achieve.

“The harder you work, the more earning potential you have,” Forever Living said on its website, under the heading “HUGE EARNING POTENTIAL,” adding: “We never cap incomes and never limit your ability to earn.”

But the reality is most people who join MLMs make little or no money – regardless of a participant’s level of effort. Instead, they lose money as they invest in products, services, training and other business-related expenses.

What recruits need in order to make an informed decision whether or not to join an MLM isn’t rhetoric about unlimited earning potential but rather hard numbers about the initial and continuous costs of the “business opportunity.” Yet such key information is often concealed from recruits, if it is disclosed at all.

‘Femvertising’ & ‘hunzoning’: how MLMs weaponize the need for female empowerment

Many MLMs target women with gendered messaging, often framing participation as a path to female empowerment including through the use of hashtags like #bossbabe, #girlpower and #mamapreneur. Such narratives are far from liberating or supportive: they exploit female insecurities and maternal guilt in order to profit from women’s unpaid labor, their precarious position in the labor market and their social networks.

MLMs also teach women how to target each other on social media through “hunzoning,” a term that describes how MLM participants contact acquaintances and (former) friends under the guise of friendship for recruitment purposes.

Truth vs. lobbying: how MLMs affect regulation and research

Why are MLMs allowed to operate as they do? MLM regulation and research are heavily influenced by industry lobbying. As a consequence, MLMs have gained legitimacy by presenting themselves as direct selling, aka single-level marketing, a business model that allows participants to earn an income through retailing products or services.

MLMs now operate differently. Participants are both motivated and pressured to spend money on inventory, training and fees, as they seek to recoup their investments through recruiting others and eventual retailing. The data clearly demonstrate: the vast majority never recover their investments, let alone regain the time lost or repair social relationships harmed along the way.

“Critical Perspectives on Multilevel Marketing” provides a historical overview of how industry lobbying, academic partnerships, and consulting and law firms contribute to MLMs’ persistence as an inherently harmful and underregulated model. It traces the history of MLM regulation in the U.S. and explores a painful truth: that efforts to protect consumers have often failed. The book also warns how ambiguous legal definitions have created gray zones that MLMs exploit enabling them to grow with minimal oversight.

What do we need?

The book provides input on how to better protect consumers by: (1) providing concrete, actionable steps for how to educate recruits; (2) closing the regulatory gaps; and (3) establishing the field of Critical MLM Studies for further research on the real costs of the industry, how to protect consumers and the systemic causes of longstanding harm.

Each of these steps would help to counteract the industry’s lobbying power and to start protecting consumers from an industry that presents itself as an income opportunity for all when only a select few benefit.