Law enforcement agencies seldom require honest and understandable disclosure of essential information to MLM prospects. I have examined the compensation plans of over 400 MLMs and found that virtually all hide the near-zero odds of making a profit, and in fact almost certain loss after subtracting minimal operating expenses and purchases of products necessary to qualify for commissions and advancement.
WARNING: If you are investigating MLM, and you read this page with an open mind, you likely will not be able to look at MLM as a credible business opportunity.
During the FTC v. Amway trial in the 70’s, FTC officials warned that MLM poses “an intolerable potential to deceive” – which proved to be powerfuly prophetic – as this paper proves.
MLM is the direct descendent of classic, no-product pyramid schemes. With expansive pay plans and an endless chain of recruitment, MLM assumes both infinite and virgin markets – neither of which exist. MLM is therefore inherently flawed, uneconomic and fraudulent. In fact, In a 1974 ruling, the FTC found in the very structure of “multi-leveling” or “pyramid selling” (now called multi-level marketing, or MLM) “an intolerable potential to deceive.” Unfortunately, the FTC backed off from that observation in the 1 979 Amway case, which opened a Pandora’s box of pyramid selling. Nonetheless, over 35 years’ experience has proven the 1974 ruling to be correct. It is hard to imagine any business model that is more deceptive than MLM. However, my observation is that even TOPP’s (top-of-the-pyramid participants) are not usually engaging in theft by deception deliberately. They are victims of their own self-deception and must of necessity justify their flawed programs. Below are typical misrepresentations used to lure new recruits into joining an MLM.
After reading somo of these typical misrepesentations used in MLM recruitment, be sure to read the conclusions at the end.
NOTE: This is just a taste of the many misrepresentations used in MLM recruitment. For a list of over 100 misrepresentations, read Chapter 8 of the eBook The Case (for and) against Multi-level Marketing. The chapters can be downloaded in sections – or the whole book can be downloaded free of charge.
After studying the compensation plans of over 400 MLMs, I can say with confidence that virtually all MLMs are dependent on deceptive recruitment of an endless chain of participants as primary (or only) customers. Incentivizing endless chain or infinite recruitment within a finite marketplace, MLM is not only inherently flawed, uneconomic, and fraudulent; but is also extremely viral and predatory – rapidly expanding and deluding the most vulnerable among us. While many or most participants are not deliberately deceiving recruits, they are unwittingly drawn into the complex web of deceptions listed above – since to tell the truth would lead to failure in their recruiting efforts.
The appeal in MLM promotions and the typical MLM reports of earnings of participants are dependent on a host of misrepresentations and deceptive sales practices. To be successful in MLM, one must not only work hard, but one must also –
1. Be deceived
2. Maintain a high level of self-deception
3. Go about deceiving others
4. Maintain denial of the harm done to those recruited into the chain or pyramid of participants.
The degree of deception (and even total amounts in aggregate damages by MLMs as a group) exceeds the deceptions reported in the Bernie Madoff scandal and in the Enron stock scandal (;plus WorldCom and Global Crossing). However, in the case of MLM, participants engage in self-deception as much as in any deliberate misrepresentations. In short, the typical MLM is a composite lie, dependent on an endless chain of recruitment into a pyramid of participants who unwittingly engage in massive theft by deception.
The typical MLM is a composite lie, dependent on unlimited recruitment of a network of endless chains of recruits into pyramids of participants who unwittingly engage in massive theft by deception.
SOURCE: Typical Misrepresentations Used in MLM Recruitment by By Jon M. Taylor, MBA, Ph.D., Consumer Awareness Institute.