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PSA Alerts Congress

March 25, 2005

Pyramid Scheme Alert sent a special report to all members of the House Subcommittee of Commerce, Trade and Consumer Protection. The report statistically documents the devastating financial results of MLM recruitment schemes.

The Congressional Subcommittee members were sent this material after the Utah State Senate rejected efforts by the Direct Selling Association (DSA) to legalize pyramid sales schemes in that state with a new state law promoted by the DSA.

The Direct Selling Association is making a similar lobbying effort with the US Congress. This MLM-industry bill, HR1220, has been referred to the House Committee receiving the Pyramid Scheme Alert's special report. PSA has previously notified the Committee members about the deceptive language in HR1220, its true intent - to legalize pyramid schemes – and its harmful financial effects on consumers. HR1220 is a duplicate of the bill that the Utah Senate rejected. Several states have enacted it.

The special report, entitled "The Myth of MLM Income Opportunity," documents the financial results of five major MLMs and reveals that more than 99% of all active distributors never earn a profit. Many suffer major financial losses. If all distributors are included in the data (MLM companies obscure the loss rate by excluding more than half of all recruits as "inactive"), the loss rate rises to 99.9%. 

The report includes a special supplement on the financial results of Amway/Quixtar and analyzes the relationship of Quixtar's secret "tools" business that inflicts further harm on consumers. NBC Dateline documented Quixtar's deceptive recruitment practices in a hidden-camera report.

In its letter to Congress, Pyramid Scheme Alert noted that most state laws, three federal court rulings and the official policy of the FTC for the last 30 years define recruitment-based sales schemes as illicit pyramid schemes or unfair and deceptive trade practice. HR1220 seeks to make such pyramid sales schemes legal and legitimate.

The MLM industry is trying to overturn these laws, court rulings and FTC policy in order to perpetrate deceptive and fraudulent sales schemes that generate huge gains to the organizers at the expenses of nearly all others who are recruited.

This page last updated on 5/1/2005