by Robert L. FitzPatrick, Author, PONZINOMICS, the Untold Story of Multi-Level Marketing
For more than 40 years, multi-level marketing (MLM) has enjoyed the support of major US institutions – news media and publishing, Wall Street, universities, Congress, and law enforcement (FTC, SEC, FBI, DOJ). Now, the consequences of that support are widening and worsening. MLM’s ill-gotten money is being used for extremist political ends, e.g., eliminating public schools and Project 2025. If anyone should wonder why so many Americans don’t trust major institutions, no better illustration could be found than multi-level marketing.
That institutional support is now cracking due to non-institutional forces within civil society – writers, bloggers, podcasters, documentary producers, consumer education website publishers, class action attorneys, courageous whistle-blowers and millions of individuals casting off shame and self-blame that MLM inflicts. The truth is becoming undeniable and unavoidable. In the marketplace, the truth has become more valuable than the Lie.
Only one important institution continues to officially uphold the Big Lie that MLM is “legitimate direct selling” and an “income opportunity”. It is law enforcement, specifically, the US Federal Trade Commission (FTC), the agency currently designated to “regulate” MLM. In a recent court deposition that I gave in a case against an MLM, the MLM attorney attempted to discredit me, not with facts, argument or data, but only with the words and policies of the FTC supportive of MLM. The FTC is the last protector and endorser of MLM! How much longer the FTC supports the MLM Big Lie is unknown. The Truth is banging on its door.
Publishing and News Media
After the John Oliver Show on HBO in December 2016 called ALL MLMs pyramid schemes (the show has been viewed 36 million times on YouTube), a sea change has occurred within the media toward MLM. Gone are the fictional “success” stories. Critics and whistle-blowers are no longer challenged to “prove” MLM is a scam or to justify themselves for speaking out. The media’s general posture now is that MLM is, at best, a dirty scam, and at worst, a criminal racket and a destructive cult. In the last year, the book publishing sector ended a 40-year blackout on MLM and is now releasing books exposing MLM as both a pyramid scheme and a cult. Another new book is about to be released in January, On Fire with God, by journalist Josiah Hesse, exposing how MLM has misused and manipulated Christian churches.
I am gratified that my book, Ponzinomics, is quoted and cited as an authoritative source and sometimes referred to as a foundation in all these new books.
Wall Street
About nine MLMs are publicly traded on stock exchanges. They used to be darlings of Wall Street for their “fast growth” and “profitability.” In 2013, hedge fund manager Bill Ackman declared that the bedrock MLM, Herbalife, is a predatory pyramid scheme whose true stock value is zero. Herbalife survived devastating negative exposure only due to another hedge fund buying up Herbalife stock, artificially creating “value”. The “squeeze” maneuver pushed the stock up for a time to $60 a share.
That’s all changed. Herbalife is recently valued in the $6-7 range. Other large MLMs like Nuskin and Usana, are also down 80% and 65%, respectively over the last 5 years. Medifast, another once highflying MLM stock, is down 88%. Tupperware went bankrupt. Avon was broken up and sold off to MLMs in Asia and Latin America.
The last MLM to maintain avid Wall Street support is the heavily disguised MLM scheme, Primerica. In a five-year period, Primerica recruited over 1.6 million people in the US, equivalent to 1 out of every 42 people in America between ages of 25 and 40. Imagine how many were solicited! As happens in all MLMs, virtually all those Primerica recruits soon quit after losing money and hope. It’s only a matter of time before Wall Street realizes Primerica is just like all the other MLMs.
Academia/Universities
Though MLM leaves a trail on Main Street of ruined finances, personal tragedies, and displaced careers and education, touching nearly every household, no independent or comprehensive studies of MLM have ever been done by the nation’s universities. To the contrary, since 2016, MLMs poured millions into recruiting university professors, offering them speaking fees, “research” grants and other perks! They are absurdly called “Direct Selling Fellows.” In 2020, the MLM’s PR organization boasted that 247 university professors at 152 colleges were recruited and they had directly spread MLM messaging to 170,000 college students in fields of economics, marketing and ethics (!!). The published academic study related to MLM that is most often cited is based upon support from the MLM’s lobbyist, the Direct Selling Association. It does not examine the pay plan, or the sustainability of the “model,” and it does not document losses, churn rates or costs. It gained notoriety for describing MLM as “charismatic capitalism”!
Now the tide is turning. The first compilation of critical and independent academic inquiries into MLM will soon be published. Entitled, Critical Perspectives on Multilevel Marketing, contributors are from UK, US, Netherlands, Ireland and Australia. The book is being edited by Netherlands-based academic, Claudia Gross and Australian-based Deanna Grant-Smith, and published by UK-based Edward Elgar Publishing, a professional and academic publisher. For this new book, I am providing a non-academic epilogue, entitled, “What to Do About Multi-Level Marketing? An Activist Perspective.”.
US Congress
The last independent voice to address MLM in Congress was the late Senator Walter Mondale in 1973. He introduced a bill that would have, effectively, criminalized MLM. The bill dealt with the challenge of distinguishing MLM from real direct selling, which still existed at that time. Mondale introduced the bill two successive years, but it was stopped within the House of Representatives. Today, with the extinction of personal direct selling, no new bill is needed for prosecution purposes. Existing criminal fraud statutes adequately cover MLM’s grievous offenses.
Yet, in the ensuing years, Congress moved in the opposite direction. Congress has been “captured” by MLM money and lobbyists, a polite way to describe taking legalized bribes. Members have become either MLM cheerleaders or act as if MLM does not exist. Amway’s Betsy DeVos admitted in a Senate Hearing that her family alone poured as much as $200 million into political campaigns. In 2015, a “Direct Selling Caucus” of House members was formed that works directly with the MLM lobby. Previously, it was called the “Amway Caucus.” It currently includes 40 members of the US House of Representatives. In recent years, this caucus promoted bills that would shield MLM from criminal or civil prosecution. So far, none has been passed.
A slight crack in this wall of Congressional silence was revealed recently in a Senate Hearing, unrelated to MLM, on restrictions and price manipulations affecting consumers’ ability to obtain needed medicines. US Senator Cory Booker of New Jersey sought accurate terms to describe the drug company policies. He noted that some members of Congress had called them a “scam.” To clarify that term, Booker noted, blithely, that “multi-level marketing is a scam.” (see minute 01.10 of the presentation at https://www.dailymotion.com/video/x9ji8b4)
Senator Booker’s matter-of-fact reference to MLM to exemplify the term, “scam” – assuming everyone present understood what he meant – indicates the truth about MLM has reached deeply within the halls of Congress.
I and other anti-MLM activists have written and called Senator Booker (1-202-224-3224) asking him to notify the FTC and other law enforcement agencies that “MLM is a scam.” They currently define it as “legitimate direct selling”.
Law and Church
Two other relevant institutions warrant citing, though neither has shown any sign of engaging with the epidemic of MLM fraud sweeping America and exported worldwide. These are the law profession and churches.
Institutionally, the legal profession remains silent and absent. Individual attorneys – not institutions – are active in combatting MLM. Attorney Douglas M. Brooks of Brookline, MA is the most prominent of the private attorneys engaged in these civic efforts. He has led class action suits and aided anti-MLM activists when they are harassed or threatened with lawsuits by MLMs. He has written extensively about MLM legal maneuverings to escape reckoning. More recently he has published, pyramidscheme.law, a unique and reliable resource for consumers and other attorneys. It provides data, distinctions, definitions, and information on relevant court cases, regulatory actions, and statutes. The site offers a valuable list of published literature, podcasts, websites, and documentaries on the phenomenon of MLM.
The late Bruce Craig, during his retirement years after serving as a state regulator, tirelessly sought to engage law schools and major law firms. He informed them of the enormous scale of harm caused by MLM, and he challenged them to address how it could be possible for “endless chain” financial propositions (Ponzi schemes) – the hallmark of MLM – to be “legal.” No institution of law responded.
Though MLM is teaching millions to deceive and prey upon their own families, friends and neighbors, and proclaiming wealth – extreme materialism – as the highest purpose and measurement of life, no church organization has addressed MLM on ethical grounds. The Mormon Church in Utah, the state with the highest concentration of MLM headquarters, is the recipient of millions gained from MLMs as “donations.” Many evangelical Christian churches and others serve as MLM recruiting hotbeds, claiming MLM is an expression of “prosperity theology.”
Others
MLM has corrupted other institutions to disguise or promote itself. Professional sports teams and players have been purchased by MLM perpetrators or paid to promote MLM, especially to students and younger people. Military figures have been paid millions as “motivation speakers” at MLM events, lending their offices and reputations to the fraud. Military spouses and veterans, facing financial distress, are among MLM’s top recruiting targets.
The accumulated neglect and corruption of leaders of America’s major institutions and the reckoning that would ensue if the truth about MLM were fully acknowledged are likely primary reasons for institutional resistance.
