Since the mid-1990’s when the voices of “anti-MLM” started to grow, citizens who were injured, some irreparably, by multi-level marketing (MLM) turned to the US Federal Trade Commission (FTC) for truth, justice and protection. Still today, FTC is treated by anti-MLM as the last best hope. FTC officials are honored guests and speakers at anti-MLM gatherings.
Tragically, the FTC’s 30-year relationship with those aggrieved citizens has been dishonest, disappointing, and dysfunctional. Since the 1980s, as an agency to protect the public against commercial fraud, the FTC has been on a downward, though sometimes uneven, trajectory. It descended through stages of political compromise and pressure, to unethical conflicts of interest, to gross corruption. More recently, FTC seems to have gone over to the dark side — protecting the powerful against the public, a reversal of its role. Consider its recent attack on the 20-year-old, non-profit, Media Matters for America.
Media Matters sheds light on disinformation and destructive propaganda, mostly in conservative mainstream news outlets and on social media. It was attacked with multiple lawsuits in numerous countries by oligarch, Elon Musk, after it publicized examples and patterns of advertisers being matched to pro-Nazi and racist content on Musk’s social media platform. Based on that exposure, some advertisers paused their ads on the platform. In his lawsuits, Elon Musk, the richest person on earth, claimed to be an underdog and a victim. Most of Musk’s lawsuits were dismissed in court as groundless, but only after Media Matters was forced to spend millions defending itself, cut back operations, and reduce staff.
As Media Matters appeared to have survived the Musk attacks, the FTC sprang into action — to help the oligarch. FTC did not sue or even accuse the Media Matters of wrongdoing. It issued a “Civil Investigative Demand” (CID), a compulsory order like a subpoena. This FTC order functioned as an extension of Musk’s suits that swamp Media Matters with legal defense costs and burdensome requirements. The CID forces Media Matters to gather and hand over to the FTC extraordinary volumes of data, history, and records, including financial data, emails and correspondence — to the point that the organization is now reportedly considering disbanding. The FTC is marshaling taxpayer-funded resources and the full authority of government to investigate this small non-profit for possible “anti-trust” violations!
Media Matters sued the FTC to stop the CID as a suppression of free speech. It claimed the FTC was acting in retaliation for Media Matters investigation of Elon Musk’s social media platform. On August 15, a federal judge stopped the FTC investigation while Media Matter’s lawsuit against the FTC proceeds. In temporarily halting the FTC investigation, the federal judge wrote:
“Speech on matters of public concern is the heartland of the First Amendment… Media Matters engaged in quintessential First Amendment activity when it published an online article criticizing Mr. Musk and X. And the Court finds that the FTC’s expansive CID is a retaliatory act.”
Abusive Relationship
Whereas Elon Musk and the FTC now appear as soulmates, the relationship of MLM victims (anti-MLM) to the FTC resembles that of an abused spouse that continuously forgives infidelities and lies, expecting their partner to change some day. In over 30 years, MLM victims have never gotten what they want, ask for and need from the FTC: to bring MLM to a reckoning.
Worse, FTC cheats on the trusting MLM victims. Many FTC officials get into bed with MLM, taking lucrative jobs with MLM companies, the Direct Selling Association or MLM attorney and consulting firms. The most outrageous of these infidelities was when the immediate past chair of the FTC, Jon Leibowitz, had a brazen affair with the MLM, Herbalife. Leibowitz was working for Herbalife as it negotiated a deal with the FTC, communicating with FTC officials who only recently called him their “boss.” When a final deal was made, this former FTC official was named a “senior advisor” to the Herbalife Board of Directors.
The FTC’s investigation and settlement of Herbalife was flagrant, multi-partner philandering by the FTC, under the noses of trusting MLM victims. Whereas the cries of millions of Herbalife victims over a 35-year span had been ignored, a Wall Street billionaire tying to make a lot of money off an Herbalife investigation managed to have his way with the FTC. Then, behind the back of the billionaire, the FTC made a sweetheart deal with Herbalife. The FTC investigation that pleased the billionaire and the FTC settlement that satisfied Herbalife were announced on the same day! Then, all enforcement of the deal was sealed in secrecy. Hundreds of thousands of victims, who waited faithfully at home, were given a few hundred bucks each by the FTC, effectively to keep quiet.
Sweet Promises
Before that scandal, FTC had sweetly promised to make MLM victims happy with a “business opportunity” rule requiring full disclosures of risks and costs by all companies selling “business opportunities.” MLMs constitute nearly all such companies. (The MLM mantra repeated to millions daily is “Let me tell you about an exciting business opportunity!”)
The FTC did enact the “business opportunity” rule, but exempted MLMs!
More recently, FTC is tantalizing MLM victims with a new promise, this time an “income disclosure” rule. This would require MLMs to make full and understandable revelations about “income” and losses — like all other enterprises must do when soliciting financial investments from consumers. This promise has been spiced up with a plan to incorporate the “income” rule in a revised “business opportunity” rule that FTC is seductively suggesting would now include MLMs. MLM victims are sternly told to stay home and be patient while the FTC goes on this rule-making trip, which may take years.
The caddish duplicity of this latest promise of an “income rule” is that the FTC has in its possession irrefutable data showing that more than 99% of all MLM participants never gained a net profit. There’s no “income” to disclose!
Correspondingly, the FTC has never found a shred of evidence that anyone, ever, gained a sustainable net profit from the retail selling of MLM products. These two facts — no income and no profitable retailing — mean the FTC knows that MLM “income” is based solely on pyramid recruiting. Such ill-gotten gain is not “income” but a systematic money-transfer. It requires deception and cult persuasion and always causes loss to the 99% at the bottom. Heartbreakingly, the promise of the “income disclosure rule” is yet another example of FTC two-timing the MLM victims.
Failure and Disappointment
As a final disappointment to MLM victims, in 2024, FTC lost its most recent, and one of its very rare, cases against an MLM. The FTC claimed the MLM was a pyramid scheme that falsely promised financial independence and sold dodgy health products. Such MLM cases are usually and easily won. FTC prosecutions of MLMs are extremely rare, yet they do raise hope among the ever-faithful MLM victims. But, time caught up with the FTC. Years of neglect and continued FTC proclamations that “MLM is legitimate direct selling” had penetrated public perception, including the courts. Now, with hundreds of MLMs operating openly and unmolested by the FTC, essentially identical to the one prosecuted, it was the FTC, not the pyramid scheme, that appeared out of bounds. The case dragged on for 5 years! FTC applied its usual, tortured arguments that the MLM model is legal and legitimate. But, incredibly, this one MLM the FTC had inexplicably singled out from among maybe a thousand others that use the same model and sell similar “health” products, is not legal. FTC sought to cite statistics and words — not the MLM “endless chain” model itself; doing that would implicate other MLMs — to show emphasis on recruiting over retailing. The distinction had blurred over the years. The MLM’s use of an (impossible) “endless chain” income proposition — the foundation of its pyramid pay plan — was never contested by the FTC, because the very same proposition is made by all MLMs. The”endless” recruiting chain with escalating bonuses the recruiters is the basis for MLM’s famous promise of “unlimited income.”
FTC disastrously lost the case, dashing any last bits of hope from MLM victims for further pyramid prosecutions, even as rare as they were.
Bad Match from the Start
MLM victims and the FTC were never meant for each other. The FTC is an agency for regulating “trade.” The evidence and the accusation of victims against MLMs is that the MLM model is a pyramid scheme. Pyramid schemes are frauds, not “trade.” Pyramid schemes are inherently deceptive and unfair, meaning that if the model is fraud, then every MLM follows suit. Inherent fraudulence cannot be “regulated.”
Further, even if the FTC might determine that an individual MLM is a pyramid, it cannot bring criminal charges, only civil ones, and the case would not apply to any of the hundreds of other MLMs, even though they operate identically. Damages to consumers from MLMs, over time, are in the hundreds of billions, affecting tens of millions. They cause unspeakable injury to families, lead to bankruptcies, destroy careers, and ruin lives – hardly an offense for modest fines and wrist-slapping. Serious jailtime is the appropriate remedy. This is a job for the FBI and Justice Department.
Since 1979, while knowing there is no MLM “income”, and in the face of documented injuries to tens of millions of consumers, and while never vouching for any single MLM, FTC has maintained that MLM is legitimate and all MLMs are presumed perfectly legal. Based on this, FTC has never conducted a comprehensive examination of MLM. It investigate consumer complaints one MLM at a time, each case taking years.
Paraphrasing the Marx Brothers, the FTC asks MLM victims, “Who are you going to believe? Me (FTC) or your own eyes?” From the outside, anyone can see this FTC/MLM-victim relationship is toxic. Yet, many MLM victims steadfastly defend and excuse the FTC. They chastise and shun friends and family who suggest they walk out the door and reclaim their freedom and power.
—— Robert L. FitzPatrick, Sept. 1, 2025
