After publishing a recent “Update” newsletter for Pyramid Scheme Alert, I was sent a correction by one reader to the statement that the FTC had not prosecuted any “MLMs” in the last two years. There had been at least two in early 2018, it was pointed out.
It is true that the characteristics of two prosecuted companies were identical to those of all multi-level marketing companies (endless-chain, pay-to-play, recruiting-mandate, and bottom-to-top-money-transfer). Like all “MLMs,” both appeared to traffic in some type of product or service, cryptocurrency in one and “coaching ” the other. Yet, the FTC did not characterize or identify either one as “MLM.” The term, “multi-level marketing” did not appear in either case. One company was called a “chain referral scheme” and the other was not identified as a representative of any particular type of business at all. The practices, structure, marketing claims, and income promises appear identical to those of all “MLMs” previously prosecuted by the FTC for pyramid fraud, but neither company was charged with operating a “pyramid scheme.” One was charged with “operating a fraudulent scheme that preys on consumers… hoping to earn money while working from home… through their “system” … promising that they will earn sums of money operating their own business… but the vast majority of consumers who pay… never earn substantial income.”
Sound familiar? But the FTC’s Complaints and press statements did not associate the cases with “MLM”. These two prosecutions do not contradict the message of the PSA “Update” that the FTC has fallen silent on “MLM” and has abandoned the American people to pyramid predators. The two cases, in fact, reveal an insidious new policy at the FTC, the use of Orwellian “Newspeak” to protect MLM from prosecution or public inquiry.
“Newspeak” was employed by dictatorial forces in George Orwell’s famous novel, 1984, to control public speech and thought by restricting words. Without words to describe verifiable realties that the government did not want revealed or addressed, people were prevented even from thinking about them or expressing opinions.
In the FTC’s use of “Newspeak”, the government does not want the public to say or even think about the relationship of “MLM” to pyramid schemes. This obvious and verifiable relationship continues to be revealed and expressed in lawsuits, websites, books, blogs, podcasts, social media, movies and television series. The FTC’s goal is to divert this thinking and speech by eliminating the term, “multi-level marketing” from prosecutions of enterprises that meet the definition of “MLM.” The FTC also avoided the term “pyramid scheme” in these two prosecutions, even though the policies, structure and actions of the two scams perfectly met the definition of a “pyramid scheme.”
Why is the FTC doing this? Recent revelations about how many FTC officials have used their public office to gain high-paying jobs with MLMs offer the most compelling answer. The most egregious example was the revelation that the former chairman of the FTC, Jon Leibowitz, went straight to work for the MLM, Herbalife, after leaving his FTC post and helped Herbalife fight the FTC prosecution.
Politically, the FTC is a law enforcement agency answerable to the President of the United States whose policies the FTC will reflect and carry out. Donald Trump himself was deeply and publicly involved in “MLM” as namesake and endorser for the collapsed MLM, Trump Network, and the MLM, ACN. President Trump and his family are now the targets of a class action RICO law suit principally for their high profile role in promoting MLM with false income promises. As president, Donald Trump has also brought into his cabinet, Betsy Devos, a member of the family of the largest and most politically influential of all MLMs, Amway.
But the FTC’s use of “Newspeak” in order to protect MLM predates Donald Trump. After being pressured by public exposure on Wall Street to investigate Herbalife, the FTC finally filed charges against that MLM company. In the prosecution the FTC detailed Herbalife’s design, policies and actions that precisely meet the definition of a pyramid scheme, but the FTC refused to call Herbalife a “pyramid scheme.” The term “pyramid scheme” was eliminated even though it was the central charge of whistle-blowers, short-sellers and investigative journalists. The evidence and facts of a pyramid scheme, as detailed in the official FTC Complaint against Herbalife, were fully recognized by the FTC itself.
Now the FTC is going further. Besides eradicating the terms, “pyramid scheme” and “multi-level marketing” in prosecutions, the FTC has banished one other key word to suppress the truth about MLM. It is the word, “retail.”
In January 2018, the FTC issued a “guideline” document about MLM. In it, the FTC used a new definition of “MLM” in which the word “retail” does not even appear. Revenue gained in the real, open and competitive market – retail – and not mostly from the “salespeople’s” own purchases at fixed pricing and subject to purchase quotas and recruiting-based reward incentives has always been the distinguishing factor in FTC pyramid scheme prosecutions. Now, the word, retail, has disappeared from the definition of MLM used in the “guidance.” The FTC guidance document also makes clear that retail sales receipts, proof of retail selling, are not required by the FTC.
These devious linguistic maneuvers by the FTC serve to confuse the public and to prevent thinking or analysis of “multi-level marketing” as calculated financial traps. It upholds the disguises that the schemes themselves have cultivated of “MLM” as real “direct selling” and a viable “income opportunity.” By eliminating the term, “multi-level marketing,” from prosecutions of schemes that obviously meet that definition, the FTC attempts to persuade the public that any schemes that are prosecuted are not “multi-level marketing” and, if a company is called “multi-level marketing” by the FTC, then it would be, by definition, legal and legitimate. The policy is aimed at suppressing the very thought of prosecuting any company for pyramid scheme fraud that identifies as “multi-level marketing.”
If all this seems hard to believe, it is important to remember the linguistic trickery that the MLM schemes themselves engage in. People who buy MLM sales kits and sign MLM sales contracts are called “customers.” Consumers who join MLMs and do nothing but recruit others to join the “business” are called “distributors” or “direct sellers.” Inventory purchases are called “retail sales.” Payments before costs are deducted are called “income.” Income “averages” are published even when over 90% each year gain zero income. Anyone that does not recruit or keep buying is called “inactive” but the MLMs claim they are not based on recruiting and purchasing is not “mandatory.” Money continuously transferred from new recruits to earlier ones are called “bonuses.” Bonuses are gained only if recruiting is done, but the MLM claims no one is paid “for recruiting.”
Perhaps the greatest language hoax ever devised by “MLM” promoters is the term “multi-level marketing” itself. It was invented by the promoters some time in the 1970s, about 25 years after the “model” was invented. Before that, it was commonly called “pyramid selling” or “the plan.” The term, “multi-level marketing” sounds like “business”, sort of, but what does it mean? The schemes are not “multi-level.” They are “infinite.” The size and length of the chain is “unlimited.” Infinity is normally considered impossible in business and any proposition based on it is considered inherently deceptive, since all markets are obviously finite and all business opportunities must diminsh over time – except in MLM. “MLMs” are also not “marketing” enterprises. To “market” would mean delivering products or services to an external base of customers, a market. In “MLM” schemes, the people on the “infinite” MLM chain are their own market. Virtually all the money moved from bottom-level “distributors” to the few at the top and all in-between is, aggregately, the “distributors'” own money, generated by their own purchases and payments. The term “multi-level marketing” is business-sounding. Yet, as a closed market, without external customers or price-competition and based on a deceptive claim to non-diminishing, “infinite” market, “MLM” cannot be classified even as “business.”
MLM’s expertise in “Newspeak” has now been officially applied at the FTC, which is powefully influenced by “MLM” lobbyists. The agency now is politically directed by a U.S. President with a long and infamous involvement in “MLM.” Little wonder that the term “multi-level marketing” and any association with that term to “pyramid scheme” or “retail” sales are being erased from law enforcement language.