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CAI

Consumer Awareness Institute

Non-profit Corporation

  SOME SHOCKING STATISTICS
Comparing Recruiting MLM’s¹ with No-product Pyramid Schemes², and with Gambling³

Reader's comments:

 I was extremely impressed with your article (the 5 Red Flags) and felt compelled to write to you.  . .  Like yourself, I have completed a Ph.D. in Psychology (Organisational), and also have a business background in management consulting. . . .
Out of all the internet sites and reading I did on the subject, your article was by far the most informative and well researched, and it really helped me understand the dangers of MLMs. Thank you!!
–Amantha Imber, 
Melbourne, Australia

DISCLAIMER: These reports are intended purely as a communication of information in accordance with the right of free speech. They do not constitute legal or tax advice. Anyone seeking such advice should consult a competent professional who has some expertise on endless chain or pyramid selling schemes. Readers are specifically advised to obey all applicable laws, whether or not enforced in their area. Neither the Consumer Awareness Institute nor the authors assume any responsibility for the consequences of anyone acting according to the information in these reports.

PLEASE HELP!  I believe this site presents information about MLM/network marketing that is as close to the truth as can be found. It can save you much time, money, and grief, as it has done for many others. And since law enforcement has essentially looked the other way on this type of consumer abuse, it is left to informed consumers to inform and warn their friends and relatives about the potential losses they could suffer from participation in a “recruiting MLM.” So please print and distribute at least 5 copies of the answer cards to those you care about – and ask each of them to share answer cards with 5 people, and each of them with 5 more, etc., etc.  . . .  In this way, you can influence many people for good – through an endless chain of truth-telling.  Click here to see these great answer cards (4 to choose from) that you can print and distribute now –  as well as carry with you for those awkward moments when you are recruited by a well-meaning friend or relative. For more information, click on the appropriate links above.

By Jon M. Taylor, Ph.D., President, Consumer Awareness Institute, and Director, Pyramid Scheme Alert

 IMPORTANT: The estimates below are based on our careful analysis of reports published by the MLM companies themselves. These extraordinary loss rates were derived by removing typical deceptions from the reporting of these MLM’s. Before forming your own conclusions, you are urged to perform your own research and calculations based on actual company data, which  all MLM companies should provide for prospects. This is explained on the page to en titled “How can the odds of success in an MLM program be calculated?”

The odds of profiting by investing in a clearly illegal no-product pyramid scheme** (with all winners re-investing) is – 

Ü 667 times as great as the odds of profiting after enrolling as an Amway/Quixtar “distributor”

Ü 111 times as great as the odds of profiting after enrolling as a Nu Skin “distributor”

Ü 69 times as great as the odds of profiting after enrolling as a Melaleuca “distributor”

The odds of winning from a single spin of the wheel in a game of roulette in Las Vegas*** is –

Ü 286 times as great as the odds of profiting after enrolling as an Amway/Quixtar “distributor”

Ü 48 times as great as the odds of profiting after enrolling as a Nu Skin “distributor”

Ü 22 times as great as the odds of profiting after enrolling as a Melaleuca “distributor”

Similarly, the odds of winning with a single bet on snake eyes in a game of craps in Las Vegas are far greater than the odds of profiting from any of these MLM programs.

CONCLUSION: Contrary to popular belief, the worst pyramid schemes are product-based – or recruiting MLMs*, such as the ones listed above.  One can do far better gambling in Las Vegas. We're not promoting gambling - just fair trade practices, as manifested in legitimate business opportunities (as opposed to phony MLM chain selling schemes, or product-based pyramid schemes).

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¹ A “recruiting MLM” is a multi-level marketing (MLM) program that uses a compensation plan that allocates the majority of its payout to participants to those who recruit a large downline of participants, rather than to front-line sales persons for sales to persons not participating in the scheme. The vast majority of MLM’s are recruiting MLM’s, in which participants must recruit aggressively to profit. Based on available data from the companies themselves, the loss rate for recruiting MLM’s is approximately 99.9%; i.e., 99.9% of participants lose money after subtracting all expenses, including purchases from the company. Read about the “5 Red Flags” in the compensation plan that signal it is a recruiting MLM.

² The odds of profiting from a classic 1-2-4-8 no-product pyramid scheme increases from 6.7% to 12.5% for those who drop out after completion of a pyramid cycle; i.e., without reinvesting in a new pyramid. For references and public records used as bases for these calculations, see the author’s research reports, including “5 Red Flags of a Recruiting MLM, or Product-based Pyramid Scheme,” and “Which Does the Greater Harm?” which is available on the web site listed below.

³ Gambling statistics were obtained from Caesar’s Palace in Las Vegas, April 6, 2001.  

⁴ The estimates are based on our careful analysis of reports published by the MLM companies themselves. These extraordinary loss rates were derived by removing three sources of deception from the reporting of these MLM’s: 
     (1) the practice of not counting ALL who signed on as distributors (agents, consultants, etc.) in the population of recruits who attempted to make the program work for them, but instead counting only those still “active;” i.e.,  deleting all dropouts in the calculation,  
     (2) not subtracting expenses, especially products and services purchases from the company to “do the business,” and 
     (3) assuming legitimate sales of products (to customers not in the  network) that did not occur.

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