{"id":1059,"date":"2019-08-08T10:57:44","date_gmt":"2019-08-08T09:57:44","guid":{"rendered":"https:\/\/blogs.edgehill.ac.uk\/comment\/?p=1059"},"modified":"2019-09-27T13:55:08","modified_gmt":"2019-09-27T12:55:08","slug":"1059","status":"publish","type":"post","link":"https:\/\/blogs.edgehill.ac.uk\/comment\/2019\/08\/08\/1059\/","title":{"rendered":"Multi-level marketing has been likened to a legal pyramid scheme – the backlash against it is growing"},"content":{"rendered":"\n
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\n\n Shutterstock<\/a>\n <\/figcaption><\/figure>\n\n\n\n

M\u00e1ire O Sullivan<\/a>, Edge Hill University<\/a><\/em><\/p>\n\n\n\n

There is a growing rumble of discontent against multi-level marketing (MLM) businesses. As well as a growing backlash from former MLM recruits, regulators are getting involved, too. Unfortunately, however, these businesses that have been likened to legal pyramid schemes are unlikely to disappear altogether.<\/p>\n\n\n\n

Multi-level marketing is the model of selling products through a network of distributors. Distributors buy stock in the company\u2019s product and then sell it on, keeping a cut of the profits. Money is not just made from selling, but also from recruiting new distributors \u2013 if someone signs up under you, you become their \u201cupline\u201d and receive commission from their earnings, too. If your recruits sign up anyone beneath them, you also take a cut of their profits, and so on. <\/p>\n\n\n\n

The difference with illegal pyramid schemes is that there is a product. But critics say<\/a> that many MLMs have a business model that focuses on recruiting \u201cdownline\u201d and getting new distributors to buy the product, rather than on actual sales to consumers, making them akin to pyramid schemes. <\/p>\n\n\n\n

A recent report<\/a> in The Guardian newspaper revealed the \u201ccultish grip\u201d that some of these businesses have on many recruits. They offer people a life-changing financial opportunity, but many lose money \u2013 and their friends \u2013 when they sign up to MLMs. Only the few at the top of the pyramid profit.<\/p>\n\n\n\n

The Guardian focused on beauty sales business, Younique. But you may have seen a number of brands on your social media feed, including Herbalife which sells weight-loss products, Arbonne which sells skincare and many others. In fact, these businesses increasingly rely on social media to grow, both selling their products and recruiting new distributors online. <\/p>\n\n\n\n

Women are the main target. According to the US Direct Selling Association, the trade body for the sector, 73.5% of those involved in MLMs in 2018 were women<\/a>. The European Direct Selling Association suggests 77% are women in the UK<\/a>. <\/p>\n\n\n\n

Young mums, in particular, are inundated with requests to \u201csupport the businesses of their friends\u201d. They are promised an easy way to make money from home, while balancing childcare. Another appeal of MLMs is the community they offer to distributors. Recruits are given coaching on how to make their side hustle a success and get support from others in the network. <\/p>\n\n\n\n

This often results in vulnerable people being targeted by the allure of making easy money, fitting work around your own schedule and entering a supportive community. But some of these companies have an alarmingly cult-like mentality, encouraging distributors to cut negative influences and naysayers from their lives. <\/p>\n\n\n\n

Bearing in mind that only 1% of people turn a profit, those naysayers may have good reason to sound the alarm. And the constant drive for sales can alienate friends and family who don\u2019t want to get involved in the MLM.<\/p>\n\n\n\n

Anti-MLM activism<\/h2>\n\n\n\n

The number of people that have been burned by their experience as an MLM distributor has led to the rise of an anti-MLM movement. The anti-MLM group<\/a> on internet forum Reddit has almost half a million members. It states that: \u201cMulti-level marketing (MLM) schemes are a drain on our society. Its participants either build the pyramid taller, or get squashed by it.\u201d The Facebook group<\/a> \u201cSounds like MLM but ok\u201d has more than 100,000 members and a podcast to discuss MLMs and what it describes as \u201ctheir poor business structure, obnoxious marketing practices, and all around awful nature\u201d. <\/p>\n\n\n\n

Clothing MLM Lularoe is a particular target for online activists and has been the subject of a recent Vice documentary<\/a>. Lularoe had an initial buy-in cost of a minimum US$5,000 \u2013 an enormous sum in the MLM industry. A litany of subsequent scandals has culminated in the Washington state attorney in the US filing a lawsuit against the company alleging it is a pyramid scheme \u2013 something Lularoe says is completely without merit<\/a>. <\/p>\n\n\n\n