News and feature articles on “multi-level marketing” are now a distinct genre in the media. I should know. I am frequently interviewed for them. I and several colleagues play a small (about two sentences usually) but essential part in the MLM-genre. In these uplifting stories of success and hope, illustrated by happy faces and cheering crowds, I am the “MLM critic,” spoiling the mood with unexplained “opinions” about deception, fraud, cults and pyramid schemes.
These “MLM” stories are not prompted by investigative research, economic studies or government prosecutions (which have all but ceased in recent years). The news peg, if “news” is even the proper term, is that social media is suddenly and alarmingly swarming with MLM solicitations. Dismayingly, the demographic target for this recent tsunami of recruiting is not the poor or the immigrant, but, apparently, young adult women, educated and middle class. New and fast growing MLMs are tailored to this group, including Rodan & Fields, Stella & Dot, LuLaRoe and, one of the latest, Bellame. These new MLMs exude fun, sexiness, sisterhood, feminism, and an alluring potential for wealth and fulfillment!
Many of the reporters given the MLM-genre story assignment, educated middle-class professionals themselves, must explain a mass mania among their peers which, they tell me, they recognize as a cheesy, too-good-to-be-true scam that they would never join or support any member of their family to join. But they are under time and space restraints. Intuitively and with career savvy they also know their editors will never accept a story showing MLM as a preposterous fraud. The realities of a corrupted FTC and Congress protecting a racket based on charging hundreds or thousands for a non-existent “unlimited income” and “infinite expansion” are literally unpublishable. So, they write the usual fantasy story about personal sales of face creams or leggings as if it is the wave of the future and a breakthrough business model that can rescue the American Dream. A 2009 New York Times article included, as have others, the Direct Selling Association’s mathematically impossible claim that the “median” (half make more, half less) income of all MLMers is $2,400. If it were true, total “commissions” would have to be greater than the industry’s stated total revenue, which is obviously impossible. A calculator, not an expert or a critic, is all that is needed to indisputably prove the number is outrageously false. They printed it anyway and refused to retract it. Why? Perhaps because the actual median income is zero. Far more than half of all MLMers gain nothing at all.
A slight variation on the genre are stories that focus on personal mistrust and disruption that MLMs cause among friends and family. In these, as well as in those that focus on income, the MLM “business model” is treated as legitimate with “risks.” A typical example is a January 2019 piece in the Washington Post, “How MLMs are Hurting Female Friendships.” It is subtitled, “These businesses carry well-known financial risks. But what about the social costs?”
MLM-genre articles contribute to why so many people can no longer distinguish valid journalism from PR, propaganda, fake news and deceptive marketing. Presented as feature news stories, consumer protection pieces, cultural trend alerts or, occasionally, as business news, nearly all the articles could seemingly have been written by the same author. They repeat the talking points concocted by the Direct Selling Association and unwittingly repeated millions of times over by MLM recruiters. They include non-fact-checked profiles of “success” and false or misleading income claims without qualification. They reinforce the message that if you lost money in MLM, that’s just how “business” works sometimes… sucks to be you.
It is my experience that the journalists themselves are not deliberately deceptive. I have talked with many of them before and after the pieces have run. Inevitably they insist their articles are “fair and balanced” (noting that my own negative quote was included). DSA data are defended as valid, even when mathematically impossible because it is a “trade association,” and of course, they remind me that the FTC itself treats MLM as “legitimate.” Many admit they knew nothing about the workings of MLM or its history or its political lobby. They relied on what is accepted as the truth and wrote what their editors were willing to print, demonstrating that the aphorism, a lie repeated often enough becomes the truth and big lies are believed more than small ones, applies to the news media itself.
These MLM-genre stories overwhelmingly leave three interconnected impressions upon readers, which are “colossally” and “infamously” false:(see footnote)*
(1) “MLM” is based on retailing personal and household goods to friends and family, i.e., direct selling. At the same time, MLM is a breakthrough new business model unlike any other, and so powerful it can rescue millions from today’s economic pressures.
(2) There’s a true opportunity for anyone to make extra or a lot of money, full time or part time, in MLM and millions of people are doing it. You could too… if you work hard. The opportunity never diminishes.
(3) Most people don’t even try to do “the business”. Instead, they sign sales contracts and pay fees as “sales contractors” just to buy MLM products at a slightly lower price. Because so few “try,” income disclosures, loss rates and attrition may appear hopelessly negative and often prompt warnings about dire “odds” in MLM.
Takeaway: In an era of hyper-competition for decent jobs, college and credit card debt, unaffordable housing and health care, MLM is one place where hope still abounds and extraordinary income is truly possible. The main requirements, according to successful people, are “hard work” and “belief.”
In actuality, the percent of new recruits gaining even a penny of net profit is, effectively, ZERO. The system is designed to produce that rate of loss. The calculated losses of the 99% are transferred to the company and the top 1% of recruiters as “commissions” and “profits”.
Here, for example, is a recent and typical news story, entitled, How Much Money Do Multilevel Marketers in Charlotte Actually Make Selling You Things on Facebook? The headline already sets up the conclusion: MLM “marketers” do make money. The online publication in Charlotte NC claims 400,000 unique visitors a month, aimed at readers under 40. The article features the usual pleasing graphics of smiling faces, images of togetherness and attractively arranged products. In tone and intent it is offered as factual, informative and helpful. This one like most others includes disclaimers and cites one study showing 99% consumer loss rates.
Here are some imbedded deceptions, diversions and omissions in this piece, representing so many others of the MLM-genre:
1. The only individuals interviewed or referred to in the entire article claim to be “successful” in MLM.
One was formerly a non-believer, but is now a convert and happily getting thousands a month. One who is associated with the new MLM, Bellame, says she gets $8,000-15,000 a month, plus a $71,000 bonus. Another, with Rodan & Fields, says she makes $6,000 a month plus “perks like earning vacations, designer watches, jewelry, handbags and laptops.” Yet another from the MLM, Plexus, is a “Senior Ruby Ambassador” claiming to get more than $5,000/month on average from a downline of over 400 people. There is no mention of her downline’s average income because she claims, “About 80% of those people came in for the wholesale price and have no interest working the business. They just love the products”. And then another also with Bellame says she makes $4,000 a month “plus car, cruises and vacations.”
2. The losers – the article cites one source that they could be as many as 99% – have no face, no name, no story. They are lifeless stats.
Some of these MLM-genre pieces may include the voice of a “loser” who may blame the company or claim to have been misled. His or her experience is drowned and dispelled by other inspiring stories of success and overcoming great difficulties or doubts, making it seem that “failure” by anyone else is mostly a personal matter.
3. Color photos show happy, excited young women — hardly the faces of losers and seemingly undaunted by some of the article’s disclaimers and warnings. If they aren’t afraid, why should the reader be? If they see possibility and reason for hope, what’s wrong with you?
4. Income Disclosures of several MLMs are cited that, incomprehensibly, contradict the happy, hopeful message and stories by winners.
Against the stories and the images, these cold data points and stats tend to fade, like privacy statements when downloading apps. The happy successful people, the amazing stories of conversion, success and prosperity and the pleasing images drive the disturbing data from readers’ consciousness. Humans cannot hold two directly opposing and contradictory thoughts at the same.
5. The upsetting income disclosure data, though seemingly negative, are actually blunted and misleading. Reality is worse.
One company, for example, discloses that “44% earned no compensation” and “of those that were paid 60% earned less than $1,000.” Combining those figures shows 78% of participants gained on average less than $20 a week, with the majority of that 78% getting zero, and nearly two-thirds no more than $5 a week. Also, the term “earnings”, is before costs, purchases and fees are deducted.
6. Disclosure data are invalidated by the unchallenged statement that all losses are voluntary.
As one of the featured winners claimed without evidence, in the Charlotte-area article – and as someone always claims in MLM-genre stories – most people in MLM sign up as salespeople, not to make any money or even to sell products, but only to get the products at a discount. They do not even “try” to succeed.
For this amazing claim to make sense, all those people would have decided the “opportunity” was not worth their effort or they had no need for any “extra” money. This is beyond belief. For this group to have been willing to sign “sales contracts” and pay fees just to get discounts, there would have to be a very large number of people paying full retail price. If there isn’t such a “retail” base, why would someone pay to get a discount? In fact, there is no evidence such “retail-paying” people exist and there is no reference to retail customers in MLM-genre articles. For a profitable retail market to exist, there would need to be a large base of retail sellers. In fact, there is no evidence of retail sellers either. If 80% of the “salespeople” aren’t selling, just buying based on “love” of products, who is making the retail sales?
Then there is the matter of retention. If these 80% “love” the product so much, then surely they are also loyal. Yet, the fact is most people in MLM quit buying and never buy again, in less than a year. What happened to the “love”?
7. And, the greatest deception: “Odds” are defeated by “hard work.”
The gist of the MLM-genre stories is that data show difficult “odds” but the winners prove that those odds can be overcome by anyone with “hard work.” This makes MLM appear like any other career opportunities or competitive business ventures. The articles normalize the impossible “endless chain” proposition as viable for all. The absence of an explanation of “endless chains” and its consequences along with the images of happy faces, stories of success and descriptions of the “business” as ordinary “direct selling” make the terrible truth of the “endless chain” invisible to the reader.
In fact, as an “endless chain” recruiting model, MLM is rigged – fixed. The losses are inherent and would occur no matter how many “tried” and “worked hard.” Those at the top always win. Last ones in – always lose. Making money in MLM, as the MLM-genre articles readily acknowledge, depends on how many people are in a person’s downline. This puts the entire model into a math paradigm. For there to be new winners with large downlines, there must be a corresponding and much larger number of new losers at the bottom of those downlines.
MLM’s absurd claim of “unlimited” expansion is unchallenged, even when data show the impossibility. For example, the MLM-genre article used as an example states that the state of North Carolina currently has 446,000 MLMers. That means 10% of all households are currently enrolled! There are only nine, on average, for each MLM to recruit. And that’s not counting all the past losers that quit and won’t join again!
In the absence of any authoritative voices or analysis offering reality and issuing urgent warnings about MLM as a calculated trap, or calling for federal investigation, the MLM-genre articles pass for valid journalism and are trusted. Millions are influenced to join and, after losing time and money and finally quitting, they are left only to conclude they did not beat the odds because they didn’t “work hard.”
* The origin of the term “Big Lie” is attributed to Adolph Hitler who wrote that people “readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods.” He defined Big Lie as a lie so “colossal” that no one would believe that someone “could have the impudence to distort the truth so infamously.”