The main theme of this content is identifying whether a Multi Level Marketing (MLM) business is legitimate or a pyramid scheme is complex. For those unaware, a pyramid scheme is a fraudulent money-making system.
Hence, if someone approaches you with long-term promises of making money by simply selling stuff, you should avoid them. These contractors/distributors may request that you sell cosmetic products, home goods, spices, yoga mats, insurance, etc.
6 Controversial MLM Schemes To Stay Away From
Some things may appear simple to sell, but they may not provide a clear image of how much they generate. That ambiguity has caused several large corporations to reveal themselves to be frauds. Many persons involved have been financially ruined as a result of it.
In a hierarchy, the so-called uplines have sucked the profits, leaving nothing for the downline masses. There are several such examples that we will present in this essay.
MLM Businesses That Have A History Of Controversy
Remember that not all MLM programs are evil when you read through the list. Yet, knowing the poor ones will save you a lot of time and work in the future.
Without further ado, let’s swiftly go through the list of businesses with a history of turning out to be “frauds.”
There was a period when everyone wanted to join Amway or had already done so. That was until 2010 when it was hit with a $54 million lawsuit for dishonest business practices. Amway has been in business since 1959. The company began with a small FMCG product unit in Michigan, USA. It shifted over time between direct selling and MLM, dominating the latter practice.
The questions surrounding its operating principle began to raise suspicions. Increased downline recruits resulted in inflated product prices. In other words, commissions paid to upline members played a significant role in the increase in product pricing.
The company’s downlines and uplines significantly impacted people. They used to entice them to become sellers rather than customers. In 2010, it was hit with a lawsuit due to it. Then, in 2020, the same thing happened, except this time, the complaint was filed in California.
Amway also suffered outside of the United States. Various international arms accused Amway of having a shady and unsustainable business model.
Amway recently published an article on their website that went into great detail about not being a scam. The fact that it claims not to be is reason enough to conclude Amway is nothing more than a pyramid scheme.
Primerica was founded in 1977 and primarily provided financial services and investments. In other words, Primerica sold life insurance. It was in good form, as evidenced by its growth trajectory. Forbes, for example, included it on its list of the most trusted corporations in 2015. It also aided in the settlement of 92% of death claims totaling $8 billion.
Nonetheless, its primary business model was the MLM model. This means that for every person they met, they sold their insurance and put them on the recruiting radar. As a result, the upline-downline connectivity in Primerica was highly deteriorating.
The recruits of the downlines benefit the uplines. While the downlines were under tremendous pressure to bring in more recruits or “grow the downline.” The downlines introduce Primerica’s services under the guise of life insurance. However, when they find an opportunity, they bring out the “opportunity” to join the Primerica MLM enterprise.
People became frustrated with harsh working circumstances, leading to many lawsuits. As a result, if a Primerica agent approaches you with an “opportunity,” you should decline it. It may not seem like a pyramid scheme; however, working with them is not worth losing your mental health.
This fitness-centric company came into existence in 1998 in the US. Presently, its headquarters are in California, United States. Lottery statistics is the primary problem of this brand that came to notice recently. The business of this brand is influencing others to lose weight.
Here the members can use the exclusive fitness products and supplements and help others to enter the business. However, in the process, the participants can lose the primary motive for joining Beachbody. This is what happened with a lady who struggled hard to run her household. She became a healthy and fit individual after joining the Beachbody fitness program.
This incident motivated her to become a coach under Beachbody to influence several others. Obtaining new joiners is not an easy task. It cost her around $135 a month. Soon, she came under pressure to sell the supplements and the program kits, forgetting her real cause of staying fit.
Such instances are common for most of the consultants in this MLM company. Hence, the team members do not agree to stay for more than 24 months due to huge expenses and no fruitful results.
The name Neora came under the denylist of the MLM companies after FTC filed a suit against it. The famous brand brought allegations against Neora about illegal business structure.
Moreover, it made a public statement that the company made false claims about the financial independence of recruits. It did not follow the rules of a Pyramid scheme and placed a higher premium on making new recruitments. Thus, Neora never prioritized sales and concentrated more on bringing people only.
Moreover, this hampered the overall interests of most individuals as they failed to make profits as promised. The training video of the company also stated that the only key to success is “Recruit.” Hence, joining such an organization can be detrimental to the public interest.
AdvoCare, an entity running on Pyramid Scheme, also came under the unqualified list of FTC. The company promised $150 million to settle the allegation charges against them by FTC in 2019. This marked the beginning of an unfavorable scenario.
According to the allegation, the company showed inflated profits, thus misleading the recruits’ finances. Here also, the FTC observed that the company was not following an MLM structure. Instead, they gave immense importance to only fresh recruits, making sales a secondary action.
The upfront costs included the value of the expensive merchandise. Thus, there was no doubt that the company carried out business on a Pyramid scheme and reflected false figures to influence recruitment.
Herbalife is one of the most prominent members of the MLM industry. However, they often came to the headlines due to unfavorable events. FTC’s allegation came against this MLM company too.
The complaint included that the company followed an illegal policy for influencing recruits. Herbalife wanted to pay $200 million to settle this case and promised to carry the business on a modest model. The company was also required to pay several penalties, including civil and criminal cases.
The total payment for the penalties amounted to $123 million. The statement from the company officials, however, claims that it is now over with the disputable cases. So, people can join the organization and earn profusely by following the norms. The time can now only tell what the participants decide after going through such misleading facts.
Controversies are common regarding several companies attached to the MLM industry. Often, they tend to deviate from the original business pattern of MLM and shift to the Pyramid approach. This can hamper the industry’s overall growth and reflect a wrong picture of the company.
As a result, you should be aware before investing your money or time in these ventures. Of course, they promise you a dream life after joining the scheme. However, most times, the consultants fail in their activities and cannot fulfill the objective.
You should thoroughly check the reports regarding the policies and schemes before choosing any MLM company. This guide will help you decide which entity to avoid before you plunge into the networking business.
Take the next step only when you are sure about the company’s status and goodwill in the market. Study the payment structure well to understand the policies. Thus, no one will be able to defraud you after you put so much labor into the business.
Protecting individual interests is the foremost responsibility of every recruit.