The $10,000 challenge to state and federal regulators who tacitly agree that MLM is an unfair and deceptive practice – and therefore violating Section 5 of the FTC Act
Several years ago, I asked Robert Frisby, an FTC official, why pyramid schemes are illegal. He responded that pyramid schemes are illegal because they are considered an unfair and deceptive practice and therefore in violation of Section 5 of the FTC Act. Under Section 5, the FTC is charged to protect consumers against unfair and deceptive acts or practices (UDAP) in the marketplace (Many states have similar UDAP statutes.)
Unfortunately, in 1979 an administrative judge for the FTC ruled that Amway was not a pyramid scheme, assuming certain “retail rules” were applied – which rules have never been enforced. Since the Amway decision, MLMs have avoided being classified as pyramid schemes and have proliferated by the hundreds, causing tens of millions of participants to lose tens of billions of dollars every years..
But regardless of whether regulators can agree on whether or not MLMs are pyramid schemes, it has been proven that MLM as a business model and industry practice is an unfair and deceptive practice and is far most damaging than classic, no-product (cash-based) pyramid schemes. Thorough and compelling evidence for this conclusion is presented in the eBook Multi-level Marketing Unmasked – the Case against Multi-level Marketing as an Unfair and Deceptive Practice – which can be downloaded in whole or in part from this web site.
In 2015, a challenge was issued to federal and state regulators to identify any class of company-sponsored income or business opportunity that is verifiably more unfair and more deceptive -– and more viral and predatory – than MLM.
In the first and second quarters of 2015, letters with this challenge, together with the book and other evidence (some on CDs) were mailed to 23 FTC officials, including the commissioners and top officials at the FTC Bureau of Consumer Protection and FTC Bureau of Economics. The same challenge and supporting evidence was also made available to the Attorneys General of the 50 states. The details of the challenge were clearly spelled out for them., including an offer to pay $10,000 to the favorite charity of any official who could satisfy the challenge. The deadline for meeting the challenge was September 1, 2015.
Not one official met or (to my knowledge) even attempted to meet the challenge. So we believe we are justified in assuming that by their silence these officials accept the the evidence proving the premise that MLM is an unfair and deceptive practice, and should therefore be considered illegal under Section 5 of the FTC Act, as well as under applicable statutes in several states.