[NOTE: Updates incorporated into pages on the web site are not included here.]
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Bloomberg Business Week tells it like it is – and is immediately threatened
The June 27, 2011, issue of Bloomberg Business Week features an article titled “You Too Can Live the Dream.” The online version is titled “Market America’s Dream Machine.” The author, Karl Taro Greenfeld, tells it like it is in this intimate portrayal of the excesses of Market America, another MLM recruitment juggernaut that has been sweeping the U.S. Jon Taylor is quoted on the final page as saying that 99.6% of distributors of such companies wind up losing money. [Actually, if you subtract ALL expenses and remove the TOPPs (top-of-the-pyramid promoters) from the calculation, approximately 99.9% of distributors lose money.]
Over 100 comments have been posted below the article, most of them attacking the magazine and author – or vigorously defending MA and founder JR Ridinger. A handful of commenters dared to agree with the author.
What is interesting about this piece is that MA immediately threatened to “ruin” the author and magazine through lawsuits and made “tons of accusations,” insisting that MA was “not an MLM.” [Yeah – right!] Karl wrote me saying,
“I hate this kind of bullying behavior. I’ve written plenty of stories about plenty of businesses, and not all of them positive. This is the first time any company has reacted like this. The lady doth protest.” (posted July 2011)
Blame it all on Amway!
Here’s a bizarre insight that may color your thinking on the whole political scene. When candidates for political office, whether on the state or national level, are given substantial support by a special interests, such as MLM-supported PACs, it is quite certain they will not be quick to regulate those who contributed heavily to their campaigns. And there could be unintended consequences.
Remember the extremely narrow victory of George W. Bush over Al Gore in the 2000 campaign? Consider the lineup of his political backers. As I recall, his second largest contributor was the Amway family, and he would not likely have won without their backing. He rewarded them by appointing a key legal defender of Amway as head of the Federal Trade Commission, and virtually all prosecution of pyramid schemes – including MLMs – came to a grinding halt – for the eight years of his presidency.
Also, it is not likely that Al Gore would have taken us into the quagmire of Iraq, with all that war has cost us, including the U.S. taking its eye off the real target – Al Quida. So the war in Afghanistan was preempted by the resources plowed into the Iraq war.
And as if that weren’t enough, the conservative Bush anti-regulatory agenda led to a relaxing of enforcement of regulatory scrutiny of the financial markets. This likely would not have been so extreme under Gore. As a result, we had an unnecessarily extreme financial meltdown in 2008, due to highly leveraged derivatives, much of them based on subprime mortgages, and other big bank and Wall Street excesses.
So – blame it all on Amway! (posted October 2011)
Utah hyper-saturated with MLMs
For a variety of reasons, not the least of which is substantial support of political candidates and heavy influence by the DSA, Utah has the dubious distinction of having the highest concentration of MLMs headquartered within its borders. My latest count is over 60 MLMs based in Utah, along what is called the Wasatch Front, mostly in Salt Lake and Utah counties. In fact, in one randomized survey of consumers in Utah County, there were four MLM distributors for every MLM customer who was not part of an MLM network.
In the latest update of Chapter 3 of my ebook titled The Case (for and) against Multi-level Marketing (now Multi-level Marketing Unmasked) is a thorough analysis of market saturation as a key characteristic of MLM, and in fact of all pyramid schemes. You can download the book in sections free of charge. You will find Exhibit 2 (MLM companies in Utah) of Chapter 3 quite fascinating, as it shows graphically the explosion of MLM companies in a small area along the Wasatch Front. (posted October 2011
MLM sometimes gets ugly with bankruptcies, divorces, alienation from friends and families – even murders and suicides.
We were shocked to learn of the October suicide by Don Lapre, whose vitamins were sold by infomercials and an MLM scheme. Only a couple of months before, we learned of the failed suicide attempt by Ellery Bennett, after killing his wife. Bennett had racked up mounting debt from involvement in Liberty League International and later in LGN Prosperity group. That is a total of three murders and three suicides connected with MLM involvement – that I am aware of. Add to that the thousands of bankruptcies, divorces, and loss of friends and family from endless chain recruitment, and you have a business model that is less than sanitary, to say the least. It is the appeals for help from thousands of friends and family members of victims of these schemes from all over the world that keep those of us advocating for consumers dedicated to exposing the evils of MLM fraud. (posted December 2011) [UPDATE: 4 murders and 8 suicides related to MLM participation as of May 2016]
“Book Burning in America: a Tale of Nu Skin”
This article by Joe Alfieri describes how the book Formerly Filthy Rich;My Scandalous Life with a Billionaire Cougar, by Adam Baker, husband #3 of NuSkin founder Sandie Tillotson, was banned from distribution by Barnes and Noble and Amazon.com, after threats from Nu Skin’s attorneys. Quoting the author:
Nu Skin thinks he knows too much, or at the very least says too much, and on this particular Friday afternoon used its team of lawyers to shut down distribution of Formerly Filthy Rich by Barnes & Noble and Amazon. Let me say that another way, in case you missed it: they got the book banned. A figurative burning of a book, but in the world of electronic publishing a burning none the less. A burning worthy of Nazi Germany, or Fahrenheit 451. Book burning and censorship in America, friends.
The lawyers argued (at least to B&N, their story to Amazon was quite different, which we’ll address in a moment) that the book was defamatory. It may be, but defamation is best argued before a court of law, where each side presents its case. Adam says he stands by every word he’s written, and is ready to produce witnesses. If that’s the case, then there is no defamation. Nu Skin says burn the book anyway, before anyone gets to read it. Barnes & Noble rolled over and pulled the book from its website quicker than you could say, oh, Sarah Palin. The Joe McGinnis book about Palin, if you’re keeping score, is still available, even if it is defamation, or claimed to be.
The story presented to Amazon by Robert S. Clark of Peer Brown Gee & Loveless of Salt Lake City, said nothing about defamation, but the result was the same. Nu Skin argued that the material in the book was not Adam’s. Baker says that of course it’s his story, and is ready to produce his drafts and copyrights to prove it. No matter, Amazon has pulled the book “pending investigation.”
Earlier in the week Adam’s WordPress blog was shut down, and although he hasn’t gotten word as to why from notoriously slow to respond WordPress, one has to think there’s something of a pattern here.
And here then is the Thumper betrayed Bambi moment, for me, dear reader. I celebrate and proclaim on a continual basis, loudly and very proudly, the freedom we enjoy as Americans, even as I watch good people slandered, lies told, and reputations destroyed in the press on a daily basis because of that freedom. I tell myself it’s the exchange of ideas in a public forum, and that the truth will out in the end, that it’s the price paid for freedom of speech. And that we all enjoy that freedom, that we’re all equal in the marketplace of ideas and free speech. But I am shaken by this story of David and Goliath, by the idea that a woman with over a billion dollars and the company she owns a good deal of can prevent the publication of a book that might do them harm, even if the tale is true. I’m shaken by the story because I can’t imagine it happening in this country, where we supposedly value the truth, unvarnished, and equally distributed. Am I wrong? I’d like to think that David will slay Goliath, because if he doesn’t, then perhaps all is lost, and those mobs on the street in Oakland braying against evil corporations may have more truth in them than even they know.
Interestingly, trophy husband #2 of Sandie Tillotson, a former actor and model, is also writing an expose about his ex-wife and the Nu Skin’s fraudulent program. It should be interesting to see what comes of it. (posted December 2011)
Pyramid insurance article raises eyebrows
An article that reveals disturbing information about the influence of the DSA/MLM lobby (or “cartel,” if you prefer) on state and federal agencies that we as taxpayers support to provide consumer protection appeared in the August 17 issue of Harper’s Magazine under the title “Pyramid Insurance.” The author, Jeff Ernsthausen, researched the campaign contributions to attorneys general of the various states – such as Utah – where key MLMs were located, finding significant donations from MLM companies, obviously to “insure” against their taking action against them. They also found the same funders of campaigns of Congressmen who have oversight responsibility over national consumer protection agencies, such as the FTC.
They interviewed me because of my frustrating experience in testifying against a bill to be voted on by the Utah Legislature in 2006, which would exempt “direct sales” companies from the definition of a pyramid scheme – if the company sold products that could be consumed by anyone, including participants. Attorney General Mark Shurtleff testified for the bill, claiming “it protected against the worst schemes – those that don’t offer any real products.” Of course, I knew from my research that this was not true, that the worst pyramid schemes are product-based, by any measure – loss rates, aggregate losses, and number of victims.
I checked Shurtleff’s campaign contributions, and sure enough, he had received large contributions from MLMs, who were his top supporters. The reporter claims that by now he has received almost a half million dollars from MLM companies. As a Utahn, I am not happy about this corrupting influence in our state, which had its Pyramid Scheme Act gutted by the DSA-initiated bill. Similar legislation has passed in other states as well.
If you really want to see an over-the-top endorsement of an MLM by Utah’s attorney general, watch the YouTube video: “Mark Shurtleff speaks at the annual convention for pyramid scheme Usana.” Catch his final closing words and the endorsement of our governor back then – Jon Huntsman, who has also lobbied in China on behalf of MLMs. Be prepared to vomit. (posted September 2012)
Wall street wakes up to MLM misrepresentations
David Einhorn, a respected short seller on Wall Street, raised some questions at an investors’ conference call last May with a spokesman from Herbalife (HLF) about what portions of sales were to customers outside the network. The very fact that he asked the questions seemed to signal he may have been planning to short the stock, and the market reacted with a sharp drop in the stock price of Herbalife.
Not only was Herbalife’s stock affected, but also that of Nu Skin, a similar publicly traded MLM, which saw its stock drop about 30%. Nu Skin’s CFO, Ritch Wood, vigorously defended the company at a May 23 Citigroup conference call. He made reference to the business model of Nu Skin at least 50 times during the call, apparently seeking to quash concerns that Nu Skin is operating a thinly disguised pyramid scheme. He also used terms such as “pre-launch,” “launch,” or “emerging markets” 49 times and “growth” 29 times. (Other high growth companies, such as Google or Facebook, might mention it a dozen times at most). In a later Q2 conference call, Nu Skin’s president, Truman Hunt, echoed the same refrain.
As I carefully explain in my book The Case for and against Multi-level Marketing (Chapter 2-6), Nu Skin’s entry into all those new markets with new products, etc, is not real growth, but what I call “repyramiding.” Since there is no solid customer base (of non-participants), they must be continually entering new markets and/or introducing revolutionary new products to continue their endless chains of recruitment and to prevent market collapse. Their aggressive recruitment in new markets is in fact a desperate effort to replace distributors (the primary buyers) who are continually dropping out,
Both Hunt and Wood claimed over 70% of those who sign up with NuSkin do so just to buy the products. At one point they claimed that only 15% of enrollees have any intention of doing the business. What they did not explain is that only a small percentage of recruits are able to meet the high “pay-to-play” purchase requirements to become an “Executive,” which a Nu Skin distributor must achieve to have any realistic chance of earning a profit, after expenses. . (posted September 2012)
REGULATORY CAPTURE: the FTCs flawed Business Opportunity Rule
This disturbing report documents how the DSA (Direct Selling Association) lobby helped the MLM (multi-level marketing) industry gain an exemption from the FTC Business Opportunity Rule, leaving consumers unprotected from the most unfair and deceptive of business practices – proving the need for a firewall between regulators and those they regulate – and for public officials with the skill and the will to stand up against powerful special interests. (posted December 2012) [NOTE: the 220-page pdf file can be downloaded at – http://www.mlm-thetruth.com/regulatory-capture-ftc-dsamlm-lobby/]
Sample articles about MLMs for Wall Street analysts and short sellers
[NOTE: This report is from just the initial salvo of such articles. A Google search will turn up dozens more]
In addition to the attention given to the money donated to candidates in the elections, short seller David Einhorn (See September issue) and others have raised questions about the viability of MLMs as legitimate direct selling companies. Analysts are paying attention, and in some cases the stock market has reacted with price variations depending on the severity of the attacks by critics.
“The pink pyramid scheme – How Mary Kay cosmetics preys on desperate housewives” The article explains how the ladies in pink become ladies in the red. By Virginia Sole-Smith, Harper’s Magazine, August 2012 issue.
“Nu Skin and the short-sellers,” CNN report about an article by Peter Elkind with Doris Burke, Fortune Magazine, October 2012
The $2 billion multilevel marketer in Utah — with ties to Mitt Romney — says its skin-care and nutritional products can delay aging. But short-sellers and a couple of angry ex-husbands are taking the company on, and they’re not being quiet about it. http://management.fortune.cnn.com/2012/10/26/nu-skin-short-sellers/?source=yahoo_quote
Video from Justice Department “Summit On Consumer Protection Issues” Business Opportunity Scams, reported by C-Span, March 9, 2012
Panelists talked about specific types of financial fraud schemes. Topics included enforcement measures and recommendations for improved consumer protection programs. Lois Greisman, former assistant to (former) chairman-turned-MLM-lobbyist Timothy Muris and later a central figure in the BOR rulemaking, speaks of the Rule’s application to Business Opportunity fraud – like vending machines and envelope stuffing. Seriously! http://www.c-spanvideo.org/program/304838-4
“For Romney, Ties That Bind,” by Joe Nocera, New York Times, October 26, 2012 Romney’s ties to Nu Skin go back to the days when he needed help financing the 2002 Winter Olympics in Salt Lake City. The problems with the FTC are reviewed, as is the exemption from the new Business Opportunity Rule.
“Selling A Better Life,” by Donald Frazier, Forbes Asia, November 25, 2012 In the rough-and-tumble business of direct sales, Malaysia’s Vijay Eswaran Learns from Mistakes and Builds a Movement. This article demonstrates how desperate and vulnerable populations are prime pickings for MLM programs like Qnet. http://www.forbes.com/sites/donaldfrazier/2012/10/24/selling-a-better-life/
Complaint Review: Herbalif. Ripoff Report, Submitted: Wednesday, October 24, 2012, Reported By: Mary — Connecticut USA Powerful account of how manipulative, deceptive, and degrading an MLM like Herbalife can be. http://www.ripoffreport.com/ehome-ioffice-bridge/weightloss-programs/internet-arizona-4F1F 6.htm
“Herbalife Information Disputes Pyramid Allegations,” by G. Hudson, Seeking Alpha (for investors), September 13, 2012 http://seekingalpha.com/article/865761-herbalife-information-disputes-pyramid-allegations
Also from Seeking Alpha –
“An Investor’s Guide to Identifying Pyramid Schemes,” by Bruce Craig, former assistant to Wisconsin AG. Craig cites and analyzes the relevant court decisions that clearly outlaw endless chain financial propositions as “inherently” fraudulent. Craig also notes that several state statutes outlaw “endless chain” income propositions regardless of the presence of some retail sales. (See the statutes of NC, WI, CA, ME, VT, and PR – Chapter 10 in my book.)
Herbalife’s Nutritional Club Sales Will Take Company To The Next Level,” by G. Hudson, Seeking Alpha (for investors), October 10, 2012 file:///C:/Documents%20and%20Settings/Owner/My%20Documents/CAI-MLM/PR-media-CAI-PSA/SeekingAlpha/SeekingAlpha-HerbalifesNutritionalClubs.htm
(posted December 2012)
Ackman vs. Icahn: battle of the hedge fund titans over Herbalife
On December 20, 2012, William Ackman of Pershing Capital Management, shorted Herbalife (HLF) stock to the tune of $1 billion, for 20 million shares. He gave a slide presentation to a Sohn investment conference that lasted almost 3 hours. His short thesis was that Herbalife is a pyramid scheme, and he believes that by making public the facts, the stock price could (and should) drop to zero. Daniel Loeb, who manages the hedge fund Third Point, bet against him by buying 8.9 million shares, for an 8.24% stake in the company. Then the legendary Carl Icahn not only bet against Ackman by going long on the stock, but in a CNBC interview verbally attacking him – which is not surprising, given the a long-standing feud between the two stock market titans.
A spate of articles and blogs have flooded financial web pages on the Ackman vs. Herbalife (and Icahn) duel, which can be found with a Google search. Since many investors discount Ackman’s thesis and are going long on the stock, some expect a “short squeeze” that could cost Ackman hundreds of millions of dollars. But he claims he has the patience to stick with his position until the stock tanks. He may be expecting the FTC to act by shutting down Herbalife, as happened to FHTM recently (with the help of AGs from Kentucky, Illinois, and North Carolina). But without similar cooperation of some states, I doubt that Herbalife would get more than a slap on the wrist from the FTC, consistent with what I wrote in my last update when I referred to my report on “Regulatory Capture” of the FTC by DSA/MLM industry (“”the pyramid lobby”).
I weighed in on the Ackman challenge with an article on the Seeking Alpha web site titled “Ackman was too kind in his Attack on Herbalife,” which brought a volley of 250 comments – both pro and con. You can find it at – http://seekingalpha.com/article/1130981-ackman-was-too-kind-in-his-attack-on-herbalife
It seemed to me that the more informed commenters were very much in agreement with my arguments. I did not have time or inclination to answer all the uninformed, deceptive, and pro-MLM arguments against me. Excellent articles were also submitted to Seeking Alpha by other consumer advocates, such as Bruce Craig and Robert FitzPatrick.
[NOTE: For some great videos and articles about Herbalife and MLM in general, go to – https://www.factsaboutherbalife.com/the-facts/the-herbalife-pyramid-scheme/]
“Don’t confuse us with the facts. Our mind is made up” –600 pages of relevant research ignored by FTC and CFPB
After over two years of collecting, organizing, writing, and revising, I completed my eBook The Case (for and) against Multi-level Marketing (based on analysis of about 500 MLMs and 18 years of research and worldwide feedback) and the companion report Regulatory Capture: The FTC’s Flawed Business Opportunity Rule. I decided it was time to bind and mail these 600 pages of research to top officials of the FTC and the director of the new Consumer Financial Protection Bureau. A nice cover letter expressing my concerns was sent with the books to each of the following:
- Jon Liebowitz, Chairman of the FTC,
- Scott Wilson, the FTC’s Inspector General
- Charles Harwood, the FTC’s new Acting Director of the Bureau of Consumer Protection
- Richard Cordray, Director, Consumer Financial Protection Bureau (CPFB)
Would you care to guess what kind of response I got? A form letter from the FTC Consumer Response Center – which appears to be the same form letter sent to anyone inquiring about an MLM program. I wonder – would 600 pages of research from the DSA (“pyramid lobby”) have gotten the same response? (posted February 2013)[NOTE: In 2015, over 1,000 pages of research, including three books which can be downloaded from my web site, were mailed in hard copy and/or on DVD to 23 top officials at the FTC and to the offices of Attorney General for all 50 states. The FTC response was a couple of form letters, A few states thanked me for the materials and suggested they may find it helpful in the future.].
Why MLM victims don’t complain.
FTC officials have rationalized their inattention to MLM fraud by claiming they get very few complaints from MLM victims, compared to some other scams. This shows a lack of understanding of one of the most insidious aspects of MLM abuse. Only a tiny percentage of victims ever file complaints with law enforcement. Let me explain why.
Several years ago, I decided to bring the losses suffered by Nu Skin victims who had contacted me to the attention of Utah’s Division of Consumer Protection in hopes of helping them recover some of their losses. There were about 20 victims who had lost a total of over $300,000 in the Nu Skin program.
I soon found extreme reluctance on the part of these victims to file a complaint against the company. Some were embarrassed at their “failure” to make the program work for them, as they had been told that there was nothing illegal about the Nu Skin program. After all, they would say, “if they were illegal, they would have been shut down long ago.”
But I soon discovered an even greater factor in their reluctance to complain was fear. Since MLMs depend on endless chains of recruitment, every major victim was of necessity a perpetrator. They had to recruit friends and family to have any hope of covering their monthly “pay-to-play” expenses, to say nothing of their operating expenses. They feared that if they complained, they would suffer consequences from or to those they recruited – who could be their loved ones or best friends. They also feared self-incrimination for having been partly responsible for scamming others.
It should also be noted that the communicators and defenders from the Direct Selling Association and industry leaders have been very successful in “re-branding” MLM as legitimate direct selling – even among legislators, the media, academics, and the general public. They acknowledge a high dropout rate, which they claim is typical in the direct selling industry. They maintain that if MLM companies were illegal (pyramid schemes) they would have been shut down long ago. And MLM company leaders build credibility with endorsements from top athletes, political figures, and entertainers. So an MLM victim has to be resolute enough to go against all that to cry “foul.” (You can read more on “villians and victims of MLM in Chapter 9 of my eBook.)
MLM may be the cleverest con game of all time. Many of the very people who are out promoting the scam are themselves victims, until they run out of money and drop off the vine. They shrink from filing complaints, and since in law enforcement, the squeaky wheel gets the grease, nothing gets done. No complaints, no law enforcement. No law enforcement, no complaints. It’s a vicious cycle. And so the game goes on.
Again, because of the focus on Herbalife, if you or someone you know has lost money – or otherwise been a victim of Herbalife, we want to hear from you. Contact me at – email@example.com (posted February 2013)
Don’t count the FTC out. It actually shut down FHTM [and later – Vemma]
In what was a surprise to many, the FTC announced the following on January 28, 2013:
FHTM Promoted Itself as a Path to Financial Independence, but Most People Made Little or No Money
At the request of the Federal Trade Commission and the states of Illinois, Kentucky, and North Carolina, a federal court has halted an allegedly illegal pyramid scheme pending trial. The FTC and the state attorneys general seek to stop the allegedly illegal practices of the Fortune Hi-Tech Marketing (FHTM) operation, which claimed consumers would make substantial income by joining the scheme. The operation affected more than 100,000 consumers throughout the United States, including Puerto Rico, and Canada. In some areas, including Chicago, the scheme targeted Spanish-speaking consumers.
“Pyramid schemes are more like icebergs,” said C. Steven Baker, Director of the FTC’s Midwest Region. “At any point most people must and will be underwater financially. These defendants were promising people that if they worked hard they could make lots of money. But it was a rigged game, and the vast majority of people lost money.”
According to the complaint filed by the FTC and the state attorneys general, the defendants falsely claimed consumers would earn significant income for selling the products and services of companies such as Dish Network, Frontpoint Home Security, and various cell phone providers, and for selling FHTM’s line of health and beauty products. Despite FHTM’s claims, nearly all consumers who signed up with the scheme lost more money than they ever made. To the extent that consumers could make any income, however, it was mainly for recruiting other consumers, and FHTM’s compensation plan ensured that most consumers made little or no money, the complaint alleged.
“This is the beginning of the end for one of the most prolific pyramid schemes operating in North America,” Kentucky Attorney General Jack Conway said. “This is a classic pyramid scheme in every sense of the word. The vast majority of people, more than 90 percent, who bought in to FHTM lost their money.”
The announcement goes on to describe a litany of abuses that those of us following MLMs find not so unique, and in fact could apply to hundreds of MLMs we have analyzed. But some MLMs are more blatant in their misrepresentations and less skillful at covering their fraudulent practices.
It is also significant that three states cooperated in the shutdown of FHTM, which likely would not have happened without them. Perhaps it is to the states that we need to direct our appeal for better regulation of the MLM industry. (posted Feb 2013)[NOTE: In 2015 the FTC also shut down Vemma, which drew criticism for recruiting college students with the message that they could gain a lifetime of residual income without to all the trouble and expense of completing college. Even though Herbalife and over 1,000 other MLMs are using the same flawed and fraudulent business model, it is my opinion that FTC officials lack the skill, the will, or the resources to shut down a major MLM like Herbalife if the face of their (and the DSA’s) army of attorneys and lobbyists.]
MLM’s appeal to a lottery mentality
A lottery can be a hugely profitable fundraiser. Kelly Cripe, a spokeswoman for the Texas Lottery Commission, told CBS News on March 30 that nationwide sales for the Mega Millions drawing totaled more than $839 million. Officials projected an additional $618.5 million in sales ahead of the drawing that Friday, however, for a projected total sales figure of more than $1.46 billion.
From recent news reports of Powerball lottery entrants and winners, one gets the impression that tens of millions of ticket holders ignore the fact that the odds of winning the jackpot were only about one in 176 million. So why do people bother to enter the drawing with such low odds? Apparently they ignore the odds with the vain hope that they could be the winner. I call this the “lottery mentality.” It is the same appeal that attracts people into MLM programs even when at least some of them know that the odds of their profiting are worse than many games of chance at gambling casinos. See “Comparing MLM success rates with no-product pyramid schemes and gambling.”
What baffles me is why only one person who wins a Powerball lottery should be the recipient of so much money. Would not more good come from awarding $100,000 each to 1,000 winners than $100 million to one person. Again, this is analogous to MLM in that the bulk of the commissions paid by the MLMs goes to a handful of people at the top of their respective pyramids. If most commissions were distributed to the thousands of persons selling the product to real customers (non-participants in the scheme), the intense effort to recruit a downline would not be there, and the founders and TOPPs (top-of-the-pyramid promoters) would not get obscenely rich. (posted May 2013)
International Coalition of Consumer Advocates (ICCA) petitions the ftc to protect consumers against unfair and deceptive practices in the MLM industry
An ad hoc group of dedicated consumer advocates, has formed to combat widespread fraud stemming from the inherently flawed MLM business model. A summary of their petition follows:
The signers of this Petition ask the Federal Trade Commission and other federal and state governmental agencies to investigate the Multi-Level Marketing (MLM) industry and take action to protect people. The MLM industry has proven incapable of regulating itself, is rife with fraudulent and deceptive earnings claims and has caused – and will continue to cause – untold financial harm and social disruption to people who are seeking a legitimate business opportunity. It is not enough to prosecute a few MLM companies after they have had years to deceive hundreds of thousands of participants out of hundreds of millions of dollars, most of which will never be recovered. There should be laws and regulations that require full disclosure of material facts by MLM companies and their high level distributors, and which prohibit MLM compensation plans that reward unlimited recruiting of new distributors over personally retailing products to non-participants.
The full petition, written by Douglas M. Brooks, an attorney with wide experience in MLM cases, can be found at http://mlmpetition.com/. Readers who share our concerns are asked to support this movement by signing the petition online. You may also file a complaint on the web site. (posted November 2013)