MULTI-LEVEL MARKETING UNMASKED
[formerly The Case against Multi-level Marketing - an Unfair and Deceptive Practice]
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, plus two special supplemental reports –COMPLAINTS TO THE FTC ABOUT MLMS and REGULATORY CAPTURE: The FTC's Flawed Business Opportunity Rule. Links to download are at the bottom of this page - which you may want to read first.
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-yourself MLM Evaluation."
PREFACE and SUMMARY of Findings.
The purpose of the book is explained, followed by letters of endorsement by leading experts on the subject. What follows is a brief summary of what was found from the most extensive research ever done by a qualified independent expert.
INTRODUCTION: MLM's APPEAL – and QUESTIONS TO BE ANSWERED
This e-book is intended to meet the need for a thorough analysis of the business model called “multi-level marketing” (MLM – a.k.a. “network marketing”) and its embodiment in the emergence of thousands of MLM programs (MLMs) since the ill-fated 1979 FTC ruling that Amway was legal ("not a pyramid"), assuming certain "retail rules" were followed. Worldwide, tens of thousands of prospects are approached daily with promises of substantial income and independence from joining one of these MLMs. Other powerful appeals include feelings of camaraderie with others in a network of participants. And some are led to believe than MLM offers part-time or seasonal work. However, recent research sheds light on the true financial and personal impact on participants, which is far from what is promised by promoters.
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 most frequently asked questions which are 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. 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. And learn why he resolved to share his findings with regulators, the media, attorneys, academia, consumer advocates – as well as with victims and potential victims.
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 – classic, no-product pyramid schemes or product-based pyramid schemes (MLMs)?
- 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. The four causative and defining characteristics separating MLMs from all other businesses have been corroborated in analyses of the compensation plans of over 500 MLMs and average income data in over 50 MLMs, where such data is available. The chapter also 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 as an inherently unfair and deceptive practice.
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 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 seemingly inevitable outcome.
Chapter 4: PRODUCTS and PRICES – questionable MLM product claims – and overpriced products
- Do the “pills, potions, and lotions” sold by many MLMs 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 MLMs compare with small businesses and franchises?
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 information from tax studies and compelling evidence from 50 MLMs of the extraordinarily high loss rate experienced by MLM participants. (Be sure to read Appendix 7E.)
Powerful charts and exhibit tables demonstrate MLMs abysmal numbers – and compare them with small businessses, legitimate direct selling, no-product pyramid schemes, and gambling. Implications of MLM losses as tax write-offs and MLM company stocks are explored. The need for adequate disclosure of average income is also discussed.
Chapter 8: MLM - A LITANY OF MISREPRESENTATIONS
At least 110 typical misrepresentations are used to promote and defend MLM. A list of deceptive arguments are debunked one by one by Dr. Taylor.
When studying MLM, ask this question over and over: Is MLM fair and honest – or unfair and deceptive? If the latter, then MLM is breaking both federal and state laws.
Download Chapters 3-8 (150-page pdf file, including prefatory pages, chapter appendices, and conclusions for the book.)
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 or what 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 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 by MLMs, 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?
- How effective have MLM lobbyists been at curtailing regulatory efforts?
- What can and should be done to protect consumers?
Chapter 12: is MLM a MORAL and ETHICAL business?
The short 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?
- What can law enforcement, the media, and educators do to warn and protect consumers against MLM abuses?
Download Chapters 9-13 and final conclusions for the book. (218-page pdf file, including prefatory pages, chapter appendices, and conclusions for the book.)
Download the ENTIRE BOOK (448 page pdf file)
Special supplemental reports:
COMPLAINTS TO FTC ABOUT MLMs
Complaints filed against MLMs, no-product pyramid schemes, Ponzi schemes, and pay-to-play chain letters received in 2013 by the Federal Trade Commission are reformatted for easy reading, and followed (in Part III) by relevant observations and some surprising findings.
Download COMPLAINTS TO FTC ABOUT MLMs (364-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.
Download REGULATORY CAPTURE report. (216-page pdf file)
As these books and reports are 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.