Why are MLM companies successful in defrauding millions of victims of tens of billions of dollars every year and in evading actions by law enforcement? A primary reason is the lack of determined action by participants and family members impoverished and confused by these schemes. To understand why MLM victims seldom file formal complaints, read “Answers to frequently asked questions about MLM.” However, with determined effort, you can often recover much if not all of your losses and in the process alert others and law enforcement of the ongoing fraud in MLM. So please – SPEAK UP AND ACT! Below are 15 concrete actions you can take.
1. Get informed.
You are off to a good start reading these materials. Most participants who lose money in MLM’s drop out without knowing what went wrong. They typically blame themselves for not “working the system,” or they may fear consequences to or from their upline or downline. So they don’t file complaints. Also, they often believe that if the program were illegal, it would have been stopped by authorities – who simply don’t have the resources to stop the abuses, and who won’t act without a highly vocal group of complainants. So get informed by reading the MLM CONSUMER GUIDES and MLM RESEARCH posted on this web site. And if you know an MLM victim who is wondering why MLM has not worked for him/her, see if you can’t get them to go through our “12 steps for deprogramming victims of MLM abuse.“
2. File complaints with federal and state authorities, as follows:
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If you want timely action, don’t hold your breath waiting for the Federal Trade Commission to act – even though it has the primary responsibility for protecting fair trade on a national level. (Our Law Enforcement page refers to Nu Skin’s violations of the FTC’s Order for it to stop its misrepresentations. Nu Skin did not comply with the Order, and the FTC did not act significantly.) Part of the problem is the 1979 FTC ruling that Amway was not a pyramid scheme, conditioned on certain “rules” which are almost impossible to police and are generally disregarded. So the FTC has egg on its face on this issue. But if enough people place pressure on the agency to demand action, they have been known to take some constructive steps, as they did in conjunction with eight states to shut down Equinox.
However, for every one product-based pyramid scheme (MLM) the FTC has acted against, there are at least 100 that escape FTC attention. The FTC has become corrupted by cross-fertilization between agency personnel and representatives of the DSA/MLM industry. The latter quickly offer lucrative positions to former FTC personnel to lobby their former agency. And the Bush administration has rewarded Amway for its generous political contributions by appointing MLM supporters to key posts at the FTC. Consequently, the FTC has done very little to prosecute product-based pyramid schemes in the past 5 years. Still, even though other avenues of redress are likely to be more effective than the FTC, official complaints need to be filed with them, so the FTC is denied the excuse that no one is complaining about MLM’s.
If the MLM is a publicly-traded company, the Security and Exchange Commission should know about it. They may do very little, as their resources for pursuing such small claims is limited. But it will make the MLM officials squirm a little.
If you suspect an herbal remedy (classified as a “dietary supplement”) sold by your MLM has caused you or someone you know to suffer ill effect, the FDA wants to know about it. Also, if your MLM makes any claims that its product diagnoses, treats, prevents, or cures any ailments, the FDA needs to know because such claims can only be made of drugs, which the FDA does regulate.
Report any possible labor violations. Even though MLM executives don’t want participants classified as employees, they often treat them as such by exercising undue control, such as not allowing them to sell competing products or to sell at retail outlets or on eBay, etc.. Report possible misclassification of employee as independent contractor, or at least ask for a determination.
Regulators in only a few states have the resources and the will to take action, but typically will do so only when a large number of complaints come in. Fraud inherent in a compensation plan seldom draws attention by itself. However, by all means, file a complaint with your state’s Consumer Protection Agency and/or Attorney General, even if only for the benefit of victims who are likely to be affected later. Feel free to use any of the reports on this site to help you in filing your complaint. Many state regulators are new or may lack fundamental information on the fraud inherent in the compensation plans of “recruiting MLM’s.”
If you believe the MLM is avoiding taxes by promoting the MLM as a tax write-off (though the odds of profiting are far less than gambling), it would be useful for the appropriate tax authorities to know that.
Remember that many if not most MLM’s are members of the BBB. And their bulletin on “multi-level marketing” reads as though it had been written by the DSA (Direct Selling Association, which has become the MLM industry’s lobbying arm). But all companies who recruit aggressively are not going to be happy with a record of unresolved complaints against them. So at the very least get on their list of complaints against an MLM you feel has defrauded you.
If you believe many of his/her constituents have been similarly ripped off, you could encourage an investigation and discourage MLM-friendly legislation promoted by the MLM/DSA cartel. It wouldn’t hurt to also contact your state legislators for the same reason.
The DSA has been known to act on complaints of violations of its so-called “Code of Ethics.” If you think about it, though their MLM members routinely deceive and defraud participants in their programs, the DSA is eager to be accepted as a legitimate organization of legitimate direct sellers. Hold them to their pledge to regulate themselves with their own Code of Ethics.
You dramatically increase your chances of some satisfaction if you do all of the above, simultaneously or in sequence. Then write the company and let him know what you are doing. You could write some of the above, then write the president of the company and tell him/her you plan to write the others if you don’t get satisfaction. But act quickly and firmly; this is not a time to hold back your feelings of outrage for being deceived and defrauded of your time and other resources.
One determined lady did this very successfully. She lost almost $7,000 in a prominent MLM. Detailing all the deceptions used in recruiting her, she wrote the FTC, the BBB and AG office in her state and the state in which the MLM was headquartered, the DSA, and the president of the company, demanding payment in ten days. A check was sent by Federal Express for the full amount by the date specified.
3. Pursue a class action lawsuit.
This is a long process, but it sometimes gets better results in actions against MLM’s than filing complaints with consumer protection agencies. Contact Dr. Jon Taylor (firstname.lastname@example.org) if you need to find an attorney who can help you. Or contact Robert Fitzpatrick of Pyramid Scheme Alert. Both have been contracted by law firms handling MLM/pyramid scheme cases – to assist as consultants and expert witnesses.
4. File a claim with the small claims court in your area.
This could be effective in cases of blatant misrepresentation by MLM promoters – which is common with all types of pyramid schemes, including MLMs. For this type of action, you do not need to hire a lawyer or go through a long and costly trial proceeding. Just state your case before the judge in your nearest Small Claims Court and include as much documentation as you can – promises made and broken, etc. You may be awarded up to $7,500 to recoup losses you can prove. Feel free to use any of the reports on this site to help you make your case. I do not know of this having been tried by MLM victims, so if you have success in a small claims court, please report it to us so we can share your success with others.
5. Help and warn others, as follows:
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Be aware that most statutes are adequate as they stand, assuming they are understood and applied. Even when product-based pyramid schemes manage to avoid prosecution as pyramid schemes, they routinely engage in deceptive marketing practices, which may be easier to prosecute. In any event, you would be doing yourself and other consumers a favor by resisting any moves by unwitting legislators to sponsor DSA legislation to “improve” laws against pyramid schemes, which in any way exempt MLM’s that have legitimate products to offer. Remember, product-based pyramid schemes have been found to have the highest lost rates and to do the most aggregate damage of all the types of pyramid schemes.
Another way you can help prevent losses by friends and family members is to share an important bulletin with them about this site – anyone who may at some time be confronted with a “once in a lifetime” MLM “opportunity.” Copy and paste the bulletin into a message from you, and send it to everyone on your e-mail list of favorite people. Please be sure to add your personal recommendation that they likewise pass it on to friends and family on their e-mail lists – and that they do the same. Use this “Pass-it-on Bulletin from Someone Who Cares.”
Refer them to the many research reports and MLM consumer guides and evaluations that can help them with their decisions. Pull information from the bulletin above (#5b) to send a short message to everyone on your list of friends, family, and other contacts.
Download “Answer Cards” here.
When someone attempts to recruit you or those you care about, refer each of them to this site and to other recommended links. You can use these cards to warn 5 people, asking them each to warn 5 more, and they each 5 more, etc. Aggressively promote an endless chain of truth-telling – as opposed to an MLM’s endless chain of recruitment for gain. You can print copies of the suggested Answer Cards to distribute when people attempt to recruit you into any endless chain “recruiting MLM” program – or whenever the topic comes up. If you or your family are besieged with MLM offers, you might try posting a notice on your doorway and/or on your car’s license plate holder, such as: “We don’t do drugs, porn, or MLM.”
People have written articles or books about their experience with MLM, and some have gotten considerable attention in articles or on investigative TV news programs. Dozens of anti-MLM web sites are now available to the sincere seeker of truthful information to counter the deceptions in sites sponsored by MLM promoters. These anti-MLM sites, combined with the bad aftertaste of MLM participation by ex-distributors, may have had more effect on discouraging MLM abuse than has all of law enforcement put together. This is an excellent example of the benefits stemming from the free flow of information on the web. As an example of a whistleblower’s efforts, read “Nu Skin attempts to discredit its whistleblower,” which refutes charges Nu Skin circulated to news organizations about Dr. Jon Taylor. It includes Taylor’s rigorous one-year test of the Nu Skin program before reporting his experiences.
Attend an MLM opportunity meeting and/or interrupt someone who attempts to recruit you or someone you care about. In Chapter 13 of the eBook Multi-level Marketing Unmasked
you will find some embarrassing questions you can ask that are guaranteed to make MLM promoters squirm. You can also download some answer cards
to pass out to well-meaning family and friends and others who attempt to recruit you.
6. Find a better income option.
Pyramid or chain selling (MLM) is inherently unprofitable except for those at the top of a pyramid or at the beginning of an endless chain of participants. Almost any income opportunity is better. Read 1,357 Ways to Make More Money than in MLM/Network Marketing.