|
The promise
of “residual income”
Promoters of
MLM/network
marketing tout their “opportunity of a lifetime.”
“Just work a
couple of hours a day to build a downline, and your will collect ‘residual
income’ for the rest of your life.”
“Retire early.
Time freedom will be yours – freedom to do what you want when you want without
having to punch a clock”
Reliable data on income from MLM
has been hard to find
Is there any truth
to these claims? With all of the strong opinions, pro and con, one would hope
that some agency or reporting service would have provided valid data.
In any legitimate
field of business or investments disclosure requirements for significant
investments make data easy to come by. Investors have a plethora of reports to
examine. Franchisers must release detailed disclosure documents. Data for small
and large business are gathered and reported by various agencies and on the
Internet. But until recently, virtually nothing was known about the
profitability (or lack thereof) of MLM participation.
And data that MLM
companies have provided on earnings of participants is misleading, being full of
misrepresentations. As an example, read the REPORT OF VIOLATIONS of the FTC
Order for Nu Skin to stop its misrepresentations. (on our site)
Research to the rescue!
Now we do have
research data on actual incomes of participants in MLM programs. These include:
- In
a Consumer Awareness Institute survey of tax preparers in
Utah, which leads
the nation in per capita participation and sponsorship of “recruiting
MLM’s,” only those at the top of their respective pyramids reported
profits.
- A
household survey in Utah County by Consumer Awareness Institute found four
MLM distributors for every one bona fide customer. (included in the tax
report above)
- An
investigation of the tax returns of the top 200 Amway distributors in
Wisconsin revealed an average income of minus $900.
- An
examination of published reports of incomes of participants in a variety of
“recruiting MLM” programs by Consumer Awareness Institute shows the odds
of winning at gambling in Las Vegas to be far better than the likelihood of
profiting from these MLM’s. See MLM statistics.
- An
examination of several MLM average income reports by Robert Fitzpatrick,
President of Pyramid Scheme Alert, also shows major MLM/Network Marketing
programs to be unprofitable. His report is entitled “The Myth of ‘Income
Opportunity’ in Multi-level Marketing.”
- As
mentioned above, in the REPORT OF VIOLATIONS of the FTC Order for Nu Skin to
stop its misrepresentations, sharp discrepancies were found between what Nu
Skin was reporting to be “actual average incomes” of distributors and
what was the truth.
The conclusions
drawn from these reports are consistent and based on overwhelming evidence –
evidence that does not make MLM appear either honest or profitable. To read
these and other reports, go to the research page of our site at – http://www.mlm-thetruth.com/mlm_research.htm
|
The Direct Selling Assn (DSA)
counters with its own misleading statistics.
When the DSA, which has been largely taken over by
MLM interests, reported its own statistics at the legislative hearings for a
highly deceptive bill it tried to get passed in Utah, it presented some
impressive statistics of participant satisfaction with “direct selling
programs.” The problem is that the DSA was lumping legitimate direct selling
programs with recruiting MLM’s, or product-based pyramid schemes. The
statistics were thus skewed in MLM’s favor – which was no surprise to those
of us who knew what they were doing.
Neil Offen, the DSA
representative, also misrepresented his constituency, saying the DSA represents
“90.000 direct sellers in the State of Utah,” when, in fact, the DSA may
represent 90,000 buyers of MLM products who hope in vain to some day recruit
enough buyers of the program to earn enough in commissions to recover their
initial investment!
To read how the DSA has influenced deceptive
legislation to legitimize the worst pyramid schemes in Utah and elsewhere, read "How
the DSA duped Utah's top law enforcement officials, legislators, and Governor
Huntsman into legalizing product-based pyramid schemes."
Summary statement – as posted on the
evaluation page of our web site:
Extensive research, including tax
data, demonstrates that endless chain MLM schemes that sell primarily to a
downline of recruits are inherently uneconomic; i.e., unprofitable for all
but a few persons at the top of their respective pyramids.
Approximately
99.9% of participants in “recruiting MLM’s” lose money. If such schemes
are promoted as income or "business opportunities," and participants
are urged to invest in (or subscribe to) products based on a whole
set
of misrepresentations, it could be considered simple fraud as
well –
certainly an unfair trade practice.
They also
technically violate statutes against pyramid schemes in many jurisdictions. Yet
finding a culprit is tricky. Most MLM promoters are in denial about the losses
experienced by their recruits (victims) – who seldom demand a refund or file
complaints (due to self-blame and/or fear).
Return
to index of articles
|