People who free themselves from “MLM” painfully discover an intertwining web of fake income promises, pretenses to “direct selling” and cruel manipulations to induce false hope and constant purchasing. Yet, there is one more layer of deception they often do not unpeel. As a result, some fall headlong into other MLMs. Their direct experience remains “fenced in”, as if it were only personal or never happened. Officially, it is only an “anecdote.” Meanwhile, MLM moves right along, unfazed.
The delusion that remains intact, and which invalidates the experience of millions of people each year, concerns how it is that MLM is able to keep operating despite the obvious financial entrapment and the undisputed record of massive consumer losses. The conventional story is that MLM’s legitimacy hangs by a fine line of the law or the inadequacy of law. News media routinely say MLM operates at the border of legality. As part of the story, it is said that a 1979 decision by a “federal judge” on Amway prevents the government from shutting down any more than a few “rogue” MLMs every few years. Supporting that story, the FTC, even when it prosecutes one of these MLMs, always reaffirms that “multi-level marketing is legitimate.”
An aspect of this constantly repeated story is that determining MLM illegality is said to be a highly complex and technical matter, beyond the comprehension of ordinary people. It requires “macro-economists”, years of investigation and resources exceeding those of the FTC or any state AG. Local police are said to be completely unqualified and unequipped. It is also routinely noted, without question, that FTC prosecution of MLMs is only a civil matter. Running an MLM that is determined to be a “pyramid scheme” – though millions of people were harmed – is not a crime. No one ever goes to jail. The costs of the FTC prosecuting large MLMs, therefore, are often determined as not worth the benefits and probably futile. So, on and on it goes. Buyer beware.
Conclusions drawn from this widely accepted narrative are that the government’s hands are tied; MLM legality is settled law; the few prosecutions that do occur represent the MLMs that egregiously crossed that line – imperceptible to ordinary people – between fraud and “legitimate MLM.” The hundreds of other MLMs are presumed to be operating safely inside the gray border, free to recruit, make fantastical income promises, and legally claim to be “direct selling.” Inexplicably, those “legitimate” MLMs produce exactly the same loss rates among their recruits as did the “rogue” MLMs that were shut down.
Crypto, Snake Oil, Pyramids and Cults
These popular beliefs about how MLM is able to keep enrolling millions are maintained even as MLMs are found to be running crypto-currency frauds and pyramid sales schemes, selling dangerously false health remedies, and in a recent exposé, operating a sex-slave cult. All over the internet, consumers report being brainwashed, misled and swindled by MLMs in many countries. In China MLMs have sparked riots. Back here in the USA, one MLM being prosecuted by the FTC as a pyramid scheme – and claiming to represent hundreds of others – has counter-sued the FTC, charging that the agency no longer has the power to prosecute MLMs, based on a directive signed by President Donald Trump (who was himself the most famous promoter of MLM).
Is it true that these outrageous abuses, scams and deceptions are actually legal? Is it the case that the few MLMs that are ever prosecuted represent the “bad apples” while the others operate inside an invisible line of legality? How is it that ponzi fraudsters on Wall Street go to jail, while MLM pyramid scheme fraudsters just get harmless fines and reprimands? Is the government doing all it can but is hopelessly hamstrung by complex laws and tricky maneuverings of MLM attorneys? Is prosecuting MLM beyond the resources of the government? And is deciphering MLM fraud really a matter of complexity rivaling the Federal Reserve’s management of inflation, curreny values and interest rates?
The answer to those basic questions can be dispiriting. Facing them requires yet another level of revelation beyond recognizing the inherent deception and brutal manipulations behind MLM’s promises, smiles and claims. After enduring the disillusionment and waste of time, money and emotion on MLM, many people are simply unwilling to go further. Better to hold on to the general view that MLM is legitimate, even though they failed at it. Better to hold that the FTC and state authorities are doing the best they can. In universities and consultancies, the official view is that MLM has somehow escaped investigation and prosecution due to twists and turns of law. It is unfortunate, they proclaim, but MLM has found a way to operate what seems to be a “legal” pyramid scheme. Too bad about those billions in losses, divorces, alienation of friends and family, bankruptcies, even suicides among the “losers” who thought MLM was their pathway to the American Dream, but that’s just the way it is.
Read at Your Own Risk
The upcoming book, Ponzinomics,The Untold Story of Multi-Level Marketing and How Direct Selling Became an American Swindle, delves deeply into these questions. Its conclusions, which some may find disheartening, even shocking, strip away this phony narrative of government helplessness and legal “complexity” that leaves the public vulnerable. Quoting from the manuscript,
Yet, just as dissection of MLM’s defining elements reveals a calculated swindle, the record of government toward MLM lays bare the nasty reality of a political fix. MLM is sustained not by law or markets but by Ponzinomics, a delusion belief system that relies upon – requires – government complicity. President Trump’s direct and personal role as MLM’s namesake endorser and his ceremonial anointment of Betsy DeVos from the Amway family to the Presidential Cabinet only made official what has been going on for 40 years, under Democrats and Republicans.
Ponzinomics shows how the famous 1979 Amway decision was not an exalted and final legal ruling at all. It was made by an Administrative Law Judge, not even part of the federal judiciary. The FTC was free to reject it. Legally, it does not bind the FTC in future actions and has no inherent application for other MLM cases. The FTC’s decision to accept the ruling – which ignored the data and research of FTC investigators – was likely driven by the politics of the day, not facts or law. Amway’s two owners had insinuated themselves into the highest levels of the National Republican Party and the U. S. Chamber of Commerce. They were major financial backers of the Michigan Congressman who, fatefully after Watergate, had become President of the United States, just when the FTC was prosecuting Amway. They held private meetings in the White House with the President and discussed the prosecution. One of the Amway founders was the chief fundraiser for the 1980 presidency of Ronald Reagan, who returned the favor with no MLM prosecutions during his 8-year term and by personally attending and speaking at a huge Amway rally in 1982 where he famously proclaimed about Amway, “You really are capitalism in America.”
The story of political collusion and corruption with MLM continues through each administration and in fact has grown stronger and more bi-partisan, as Ponzinomics chronicles with documented names and events.
With this government support, MLM has moved from scam to an imbedded and delusionary belief system. It has taken on the powers and tools of cultism, a cult of capitalism, absurdly promising financial freedom, self-employment and entrepreneurship and claiming it is the recruits’ last best hope for the American Dream.
The process of exposing the MLM phenomenon is like pulling a loose thread that leads to unraveling an entire garment of treasured beliefs and long-held assumptions. For this reason, the Foreword to Ponzinomics is entitled, “Read at Your Own Risk.”