The Case against MULTI-LEVEL MARKETING: an Unfair and Deceptive Practice

[formerly The Case (for and) against Multi-level Marketing]

The complete guide to understanding the flaws – and proving and countering the effects – of MLMs (multi-level marketing schemes). The most frequently asked questions are answered by a highly qualified independent analyst and expert witness, based on 20 years research on over 500 MLMs, plus 30 years experience in the field of home business opportunities.

Depending on one's interest, the book can be downloaded in sections, as described below. Or  you can download the ENTIRE BOOK (about 420 pages), plus a special supplemental report REGULATORY CAPTURE: The FTC's Flawed Business Opportunity Rule  (216-page pdf file)

Opinions abound. This book answers the need for research-based information - an ultimate resource for legislatures, regulators, attorneys, the media - and consumers considering MLM as possible income opportunity.

If you are considering participating in an MLM program, and have not already done so, be sure to get their compensation plan and run it through the "5-step do-it-youself MLM Evaluation."

Download Introduction and Chapters 1 & 2 MLM as a flawed business model (94-page pdf file, including appendices)

INTRODUCTION: purpose and plan for the book

This e-book is intended to meet the need for a thorough analysis of the bsiness model called “multi-level marketing” (MLM – a.k.a. “network marketing”) and its embodiment in the emergence of thousands of MLM programs (MLMs). Worldwide, tens of thousands of prospects are approached daily with promises of income and independence from joining one of these MLMs. Recent research is reported that sheds light on the financial and personal impact on participants.

The introduction explains the significance of the 1979 Amway decision, which opened the floodgates for the proliferation of MLMs, or product-based pyramid selling schemes. The many questions answered in the book are listed. The research used, experts consulted, and underlying assumptions by the author or other experts are also discussed.

Chapter 1: MLM under the MICROSCOPE – why and how the research for this book was undertaken, and why the author can speak with authority on the subject

Read why Dr. Jon Taylor is ideally prepared with the education, sales/entrepreneurial experience, and research background to write this book. And find out how he was able to identify four characteristics which clearly define and differentiate what he calls “product-based pyramid schemes” from legitimate direct selling or business opportunities.


Chapter 2: MLM DEFINITIONS and LEGITIMACY – what MLM is – and is not

What is multi-level marketing, or MLM, and how is it defined by regulators - as well as by defenders? Why is an accurate, research-based definition of MLM needed that includes the underlying flaws in the business model?
What are the harmful effects of recruitment-driven MLMs? Which do the most harm – no-product pyramid schemes or product-based pyramid schemes?
Have legitimate business opportunities grown out of the underlying MLM business model? Or is MLM inherently flawed, uneconomic, and deceptive, as critics claim? If so, how can MLMs be distinguished from legitimate direct selling or other home business opportunities?
Also discussed is what a “good MLM” might look like and whether or not all MLMs are merely product-based pyramid schemes. And finally, an accurate, research-based, and consumer-friendly definition of MLM is presented – and a hypothesis for testing the legitimacy of MLMs as now practiced.

This is the most thorough independent analysis ever done on MLM as a business model and on consequent industry practices. And it includes some powerful illustrations that can be extremely helpful in understanding the underlying issues.

If you read this chapter with an open mind, you will likely come to see MLM in a different light. After reading, please feel free to submit your comments on the Contact page.

Download Chapters 3-8  How MLM is unfair and deceptive (144-page pdf file, including appendices)


Chapter 3: MARKET SATURATION and COLLAPSE – how established MLMs skirt two major flaws in their systems

What is the impossible math of endless chains?
How did chain letters and pyramid schemes serve as the precedence to MLMs?
What is the difference between total saturation and market saturation – and why does it matter?
What is the difference between total collapse and continuing collapse – and why does that matter?
What remarkable findings came out of a survey of households in a heavily saturated market for MLMs?
How have MLMs managed to endure and to stave off market collapse?
What are the effects of unlimited MLM recruitment?

Reading this chapter with its powerful illustrations will help you understand market saturation and collapse of MLMs, or product-based pyramid schemes – and how MLMs get around this inevitable outcome.

Chapter 4: PRODUCTS and PRICES – questionable MLM product claims– and overpriced products

Do the “pills, potions, and lotions” typically sold by MLM companies meet the claims of promoters?
What product characteristics are ideal for MLM programs?
Are MLM’s prices competitive with standard retail outlets?
Are MLM products merely disguised investments in a product-based pyramid scheme?
Are sales primarily to non-participating customers – or to participants in the network?
How are new recruits induced to subscribe to monthly purchases?

Having read this chapter, you will see MLM products in a new light – but perhaps not as MLM promoters would like you to see them.

Chapter 5: RECRUITING a DOWNLINE – why the emphasis on selling in company communications, but on recruitment in practice - and what it costs to recruit a downline

What drives MLM, and why is it so viral as a business model?
Do MLM compensation plans provide rewards primarily for selling or for recruitment?

How is company payout allocated among distributors? Who gets the lion’s share?

How would one describe the life of a serious MLM recruiter? And how does it impact on his family and other relationships?

What are the costs of a successful MLM recruitment campaign?

This chapter will help you understand the personal toll on individuals and families from active participation in a recruitment-driven MLM.

Chapter 6: ATTRITION RATES of MLM participants – why few recruits stay, and why it matters

Why is attrition rate a key issue in MLM? What evidence do we have of high attrition rates in MLMs?
How do failure (or dropout) rates for small businesses and franchises compare with MLM?
Reading this chapter will put to rest the argument of defenders that attrition rates in MLM are similar to those in other small businesses.


Chapter 7: MLM's ABYSMAL NUMBERS

Is MLM profitable? Or is it a clever money trap?
Just do the math. The numbers don't lie.
In this chapter you will find the most extensive and thoroughly researched analysis ever done of the profitability (or lack thereof) of MLM as an industry and the viability of MLM as a business model. Included is compelling evidence of the extraordinarily high loss rate experienced by MLM participants. Powerful charts and tables in exhibits demonstrate MLMs abysmal numbers – and compare them with small businessses, legitimate direct selling, no-product pyramid schemes, and gambling.

Chapter 8: MLM - a LITANYof MISREPRESENTATIONS

Is MLM fair and honest – or unfair and deceptive?
How many misrepresentations are used to promote and defend MLM? (You will be surprised.)
In this chapter you will find the most extensive and thoroughly researched analysis ever done of the profitability (or lack thereof) of MLM as an industry and the viability of MLM as a business model. Included is compelling evidence of the extraordinarily high loss rate experienced by MLM participants. (Be sure to read Appendix 7E)

Download Chapters 9-13 Legal, regulatory and ethical issues - and actions needed (189-page pdf file, including appendices)

Chapter 9: VILLAINS and VICTIMS

Who or what is responsible for MLM abuses?
Who are victimized by MLM?
What is the impact of MLM on individuals and families? On the business community? On society at large?

From reading this chapter, you will know who to blame for MLM abuses, and who are its victims.

Chapter 10: Is MLM LEGAL?

When is an MLM a fraudulent business opportunity?
Are some MLMs legal – and others not? Or are all MLMs technically illegal?
What are the most significant legal precedents for MLM cases?
From reading this chapter, you will be able to make sense of a basically simple set of issues; i. e., the fundamental flaws in MLM – and industry efforts to legitimize MLM and to "complexify" these issues through misrepresentations and obfuscation.
The information in Appendix 10E shows how varied are state laws related to MLM, and how many statutes are routinely broken, based on information in prior chapters.


Chapter 11: Where is LAW ENFORCEMENT in all this?

If MLMs are technically illegal, why don’t regulators act against them?
Does politics play a role, and if so, how?
What can be done to protect consumers?


Chapter 12: is MLM a MORAL and ETHICAL business?

The answer to this question may surprise you – but maybe not.

Chapter 13: ACTIONS needed

What can MLM victims do to recover losses?
How can families deprogram loved ones who come under the spell of MLM promoters?
What actions can be taken to protect oneself and one’s family, and to warn others of MLM fraud?
Download Appendix 13B separately, which includes some provocative "Answer Cards" you can use when anyone tries to recruit you into an MLM program. (separate 2-page pdf)

Download special supplemental report (216-page pdf file)

REGULATORY CAPTURE: The FTC’s Flawed Business Opportunity Rule

This 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.



As this book is continually being updated and revised, your feedback is welcome! Please forward your Comments and any relevant data or information to add to the author’s base of information and research.


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