Are all MLM Companies Scams – A close look exposes the truth

Are all MLM Companies Scams – A close look exposes the truth

I have joined Multi-Level Marketing Companies in the past. I can honestly say it is not for me. The presentations I was exposed to really sounded great. I wanted to do it. However, I found out in each case I am just not cut out for what it demands. You may have questions on exactly what MLM (Multi-Level Marketing or Network Marketing) actually

Are All MLM Companies Scams? A close Look Exposes The Truth

is and is not. You may be someone like me that asks are all MLM Companies Scams?  A close look exposes the truth.

There is so many money making scams on the internet and Multi-Level Marketing is a business model that is everywhere. It is good to do your due diligence and find out the truth for yourself.

It is true that some MLM Companies may come very close to being scams in my opinion. Some may, in fact, be scams. It is best to do your homework before getting into one.

Are MLM Companies good?


The statistics according to Robert Fitzpatrick, show that most people (99%) who get into multi level marketing do not make any money. They are not “good” in fact, in my opinion, they are bad, really really bad as only the ones at the top make any money.

Robert FitzPatrick is an expert in examining and revealing deception and fraud in bogus home-based businesses. He is an author, teacher and internationally recognized authority in multi-level marketing schemes and pyramid sales fraud. He is a catalyst and leader in the international effort to end theare all mlm companies scams - a close look exposes the truth pervasive fraud in the multi-level marketing business

They may be out to scam you out of your money.  However, are they? At first glance, if 99% of people who join lose money or just do not make any money, then I would think most people should not join one.

Even though at first glance if 99% of people who join an MLM Company do not make any money and the majority of people should not join one, that does not mean it is necessarily a scam.

I find that there are scams out there because a lot of people looking to make extra income online want an easy way to do it without putting in the work required. They want to “get rich quick“.

However, whatever way you go about making money, it is never without work. Some MLM companies do have some things in common with scammers in that they “sell” you on the idea of how easy it is to get rich if you just join them.

They may use the same tactics like how great the product is and it will sell itself, or that you can make a lot of money really quick in fact you can “get rich quick“.

The MLM companies that use these tactics may not be a “scam” company but may, in fact, use scam-like tactics to get you to sign up as their goal is to recruit new members.

In August of 2016, the FTC International Monthly reported that “Herbalife International of America and two affiliated companies have agreed to fully restructure their U.S. business operations and pay $200 million to compensate consumers to settle FTC charges. The FTC alleged that the companies deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products. But the truth, as alleged in the FTC complaint, is that the overwhelming majority of distributors who pursue the business opportunity earn little or no money. The FTC also charged thatAre all MLM Companies scams - A close look exposes the truth the multi-level marketing company’s compensation structure was unfair because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product, causing substantial economic injury to many of its distributors.”

I would say please do your research. There are those who are cut out for what it takes to become successful in MLM. The fact is that most who join do not have what it takes to make it to the top 1%.

Are MLM Companies Legal?


If you go to the FTC website, you will find that “not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are MLM-2 Are all MLM Companies scams? - A close look exposes the truth illegal, and the vast majority of participants lose money.”

If you read the quote above closely, you may have caught “it MAY be a legitimate multilevel marketing plan.” It is either a legitimate multilevel marketing plan or a Pyramid scheme.

To break it down, according to the FTC, there is a product and the money you make is based on sales of the product to the public not how many recruits you acquire.

MLM or Network Marketing VS Pyramid Scheme


The difference between MLM and a Pyramid Scheme can be very hazy. Robert Fitzpatrick is considered a leading expert on Pyramid Schemes states in an interview by CNBC states :

The math is a distortion, a manipulation of what they call exponential expansion. Exponential expansion is two times two times two times two. And almost all of these schemes tell you that you can make money by just recruiting three or four, five, let’s say, five. Then you let the five do their five. That gives you 25. That’s the exponential expansion. That’s the trick of the whole thing. What they don’t show you is that you can only do that 13 cycles. And you would exceed the population of the earth. So it can’t work. But even as long as it works, the vast majority are always in the bottom positions, which have not yet and never will, in most cases, extend the chain so that they can get their money. And so it always dooms the vast majority and it can never keep going, so it’s unsustainable. “

There is the problem for these so called legitimate MLM’s of “saturation”. MLM’s absurd claim to “perpetual growth” has always been a lie according to Rob.

These companies where your income is based on recruitment rather than product sales are pyramid schemes plainAre all MLM Companies scams? - a close look exposes the truth and simple.

The FTC International Monthly also reports that Herbalife must restructure their compensation plan –

 “In addition to imposing a $200 million consumer redress judgment, the settlement mandates a new compensation structure in which success depends on whether participants sell Herbalife products, not on whether they buy products. It requires Herbalife to tie distributor rewards to verifiable retail product sales and stop misleading consumers about potential earnings. More information about the Herbalife settlement is available in the Commission’s public statement and in blogs for consumers and business.”

 As you can see you must be very careful if you are considering joining an MLM company as even well-known companies may be using not so legitimate marketing practices.

If you are thinking about joining an MLM or Network Marketing Company


I am very skeptical when it comes to MLM. However, I have researched and have come to the conclusion that some can and do make it work for them. I do believe that the majority of people who join an MLM do not make any money and more times than not they lose money.

I posed the question “What do you think of Multi-Level Marketing? Is it a scam?” to the community at Wealthy Affiliate (of which I am a member)  and you can read the comments and testimonials here. I was pleased to hear that there are in fact people who do make money in MLM. However, most do not make any money and in fact, lose money.

If you are thinking about joining an MLM I would urge you to do some research into the company before you sign on the dotted line. Make a pact with yourself not to get lured by the hype too quickly. The “Opportunity Meeting is designed to Are all MLM Companies scams - A close look exposes the truth

prey on your emotions.

Always sleep on any decision. While you sleep your mind will process the information and you will most times awake with a new perspective and most times a “gut feeling”. I don’t know about you but when I ignore my gut feeling, I almost always regret it.

Here are some guidelines to think about before “signing up”:

  1. Find out everything you can from your Sponsor about the compensation plan
  2. the compensation structure
  3. your potential expenses
  4. support for claims about how much money you can make
  5. the name and contact information of someone at the company who can answer your questions
  6. How good is the product? Does it overpriced? Are claims supported by independent reviewers?
  7. Does it fit in with your talents, goals, and abilities?

If your profit is made from how many recruits you sign up under you and not product sales to the public, avoid it as it could be a Pyramid Scheme and therefore a scam.

According to the FTC here are the questions you should ask to be safe:

  • What are your annual sales of the product?
  • How much product did you sell to distributors?
  • What percentage of your sales were made to distributors?
  • What were your expenses last year, including money you spent on training and buying products?
  • How much money did you make last year — that is, your income and bonuses, less your expenses?
  • How much time did you spend last year on the business?
  • How long have you been in the business?
  • How many people have you recruited?
  • What percentage of the money you’ve made — income and bonuses less your expenses — came from recruiting other distributors and selling them inventory or other items to get started?

Conclusion


MLM or Network Marketing Companies are everywhere. If you are considering joining one It is very important that you know the difference between a Legit MLM Company and a scam like a Pyramid Scheme.

As with just about anything, there is good and there is bad when it comes to the Network Marketing Companies and even the Legit companies that have been around for a while can use scam techniques by misleading potential recruits.

To be safe, be sure to critique any MLM Company thoroughly before considering joining. Check out the company and how good the product is and everything about the compensation plan.

As 99% of people who join MLM or Network Marketing Companies do not make money and most lose money, take your time and maybe join a company like Wealthy Affiliate University where you can learn everything regarding online marketing and how to build a business for the long term.

I hope  the answer to the question “Are all MLM Companies scams?” A close look exposes the truth has brought to light some interesting insights for you. I hope you make the right decision if you join one. Be careful and know if you are cut out to what it entails.  Most are not cut out for MLM. However, everyone has a passion or something they are interested in. Take your passion and build a business. Get started building your business and get some special bonuses. Just click the button below.

Are all MLM Companies Scams?

 

 

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24 thoughts on “Are all MLM Companies Scams – A close look exposes the truth

  1. I had a short stint with MLM before. I will not name the company here, but it’s suffice to say that they are big.

    Went to a couple of meetings to learn more of their products, and you pointed out something important – “Does it fit in with your talents, goals and abilities?”

    I thought about that many times. I am not good at hard selling and my goal is actually to work from home doing something that I really like. Pushing people to buy MLM products is not my long term business idea.

    Needless to say, I switched over to affiliate marketing 3 months later and I never look back.

    • Hi Cathy,

      Thanks for your comment. I too have joined MLM Companies in the past and I it does not fit me either. The products are always overpriced also.

      If you go on Ebay, you can find so many people selling MLM products that you can pick up for cheaper than from a distributor. This tells me that they are getting rid of inventory not sold.

      I much rather affiliate marketing also. I think everyone should give Wealthy Affiliate a look if they want to learn affiliate marketing.

  2. Cynthia,
    Digging into your article you provided a very educational side by side explanation which explained the difference between MLM’s and pyramid schemes. It is true that not all MLM’s are scams.

    I’ve always believed that a pyramid scheme is thought of as a company whose business/compensation model is structured so that anyone more than 1 level above you makes money solely based on the efforts that you do in either recruiting an individual, (he/she having to pay a membership fee to join) or else gets the cash off of the product that you sold to someone else. Most importantly with that sale or recruitment you personally would have gotten nothing by way of $ for the transaction. I know of companies where you could benefit from the efforts of a person in your down-line 12 levels below as at the same time you did nothing. That is obscenely wrong in my opinion.

    Pyramid schemes in fact not only here in the U.S. but in many other countries worldwide are illegal. It’s just that there are so many of them online, it’s difficult for law enforcement to track them all down and prosecute the real offenders.

    MLM’s themselves that are legally set up simply are not for everyone as it require patience and a lot of work, plus whatever the product is to be promoted which eventually would allow a person to benefit financially.

    I heard about the Herbalife scam and in fact discussed in an article myself. The Feds should have come down even harder on the top-ranking officials in that bogus company. 200 million is a lot but it should have been higher considering all the people who got scammed off of that company’s bogus products and promotional set-up.

    Thank you for taking the time to explain the difference between the two. It’s up to individuals themselves in fully understanding what they would be getting into regarding a legit MLM company.

    Jeff

    • Hi Jeff,

      Thanks so much for your comment. I am hopeful that anyone who is thinking about getting into an MLM Company really takes their time before committing to any MLM Company.

      You are right they are in a lot of different countries and they are all over the internet everywhere and it does make it so difficult for law enforcement to do anything about it.

  3. Well I’d say that the setup on MLM systems are definitely scam related due to the pyramid setups. The problem is they always find a way around this somehow and have that ‘fine print’ thing going!
    Most people who take on MLM, about 90% I believe, don’t make money they only end up losing it!

    • Hi Chris,

      Thanks so much for your comment. You are absolutely right about the set up of MLM. They can be set up so only the top people make money.

      It is a fact that most people who get into MLM do not make money. I do not like MLM systems and hope anyone who is thinking about one be careful. Read the fine print!

  4. Great article! I joined an MLM a couple years ago and, like you, found that I was not cut out for it. The demands were too much for me. It was a 24/7 activity. I was told to read all the books, listen to all the audios, buy all the products, go to all the seminars/conferences, call my mentor daily, and talk to everyone wherever I go. I was more stressed over all this compared to my 9 to 5 job. I was always thinking about pleasing my mentor and team. It got to be too much. My family and friends were sick of hearing me talk about it. I was sick of talking about it and stressing over it.

    I don’t think the MLM company I joined was a scam and I knew my team really cared about me succeeding, but I don’t believe MLM is for everyone. They were created for the average person to have their own business, but that still doesn’t mean it’s for everyone.

    Thank you for sharing this information. I think it’s good for people to be aware of MLMs and know that they aren’t all scams.

    Weston

    • Hi Weston,

      Thanks so much for your comment. It is easy to get excited and join an MLM without researching as they make it sound so good. Like you said, it can be stressful. I think it takes a certain type of person to make an MLM work. There are so many variables too. I learned that the hard way too! I am just not cut out for them either.

      However, even though not all MLM’s are scams, the attrition rate is so high because most who join end up losing the money they invested or getting discouraged and just dropping out. 

      I don’t think MLM’s are for most people because the chance is high that they will end up losing money in the end.

  5. This is great information on identifying scams. Thank you for the help and direction, Cynthia. These schemes can cause huge problems for people who truly want to make a living on the internet.

    • Hi Brittaney,
      Thanks for your comment. Yes, there are so many MLM companies that are really pyramid schemes and others that are ok. However, most people lose money so I stay away. I already know that that type of Business model is not for me. It is sad that so many people end up losing money with MLM’s.

  6. Thank you for this informative article. It is amazing how many of these programs are not operating on good grounds. It is bad enough that we are charged sometimes for even clicking on a button and next thing you know you are signed up for something or some program without realizing it. Yes, I’m sure there are good decent companies that are operating well and on good moral standards. There are ways to research these entities to prevent such events. Cynthia, thank you for shedding some light into what I have always believed to be true.

    • Hi Xavier,
      Thanks for your comment and you are welcome! I want to really help those who are considering an MLM to really take their time and do the research. If research is done, then you will be safer if you do join. It’s not for everyone. So many lose money.

  7. Great and in-depth article you have written and you are right, not all MLM companies are scams, but many many are and the ones that are not scams are very difficult to make money with.
    Though the “big” MLM companies do have great training – it is not for everyone, and in today’s world of internet Affiliate Marketing and Digital Marketing are much more viable avenue…and you don’t have to ‘burn’ your friends’ list!
    I too have been burnt once too many times with MLM companies, some big reputable ones, and some other “new shiny young stars” which did not shine so much!
    There is no doubt that Wealthy Affiliate offers the ideal program for anyone who wants to really become an independent online marketeer!

    • Hi, Orion,
      Thanks for your comment, and you have hit the nail on the head! Wealthy Affiliate is the option for anyone who wants to build an online business and create true passive income.
      I too have been burned with MLM’s a couple of times. As I said before, most people lose money with this type of business model.

  8. I’ve done a few of those! When I decided to stop for good I realized a) if I could truly sell, I wouldn’t be in an MLM. I’d be selling mansions of Porsches. b) You are paying to work for them c) they keep you busy with meetings and euphoric rah-rah-rah participation.

    And what’s worse, a cookie-cutter training is provided for start ups modeled on cult indoctrination. Can’t recall where the link is right now, but a friend and I were doing studies on cults a while back and we read about this.

    I would recommend Wealthy Affiliate any day.
    You have control of your business, to build and tend as you wish.

    • Hi Dianne,
      Thanks for your comment. I have done a couple also. I just did not like trying to recruit and be pressured and pressuring all your friends and family.
      You are right, they operate as if they are a cult. I fully see how that is true!
      You are recommending the right program with you recommend Wealthy Affiliate. Wealthy Affiliate is the real deal and you have so many mentors. The Wealthy Affiliate Platform is unlike any other.

  9. You have a lot of good information here Cynthia, years ago I got caught with Herbalife International of America, and like so many did not make any money but I sure spent a lot. There was always upsells to it, purchase this and that to get more customers, get this to make your business do better, join this webinar to do better. On and on and no money.
    So since then, I have stayed away from anything remotely to do with MLM, if you don’t get in at the top you lose out no matter how hard you try.
    Kim

    • Hi Kim,
      Thanks for your comment. I am familiar with Herbalife and know a few people who had a similar experience. I didn’t join that MLM but have joined different ones over the years and each time I have lost money. Too many people lose money when trying MLM’s. I don’t like MLM’s even a little bit!
      However, when I found Wealthy Affiliate, I realized that I could be successful.

  10. Cynthia,
    You’re doing a great service by warning people about the dangers that MLM s can pose on your hard earned money, not to mention the strain on friendships as you feel constant pressure to recruit people. I had short stint with a well known MLM, but it was long enough to know this would never be a good fit for me. Also, most people never recover the initial investment they make in purchasing “the package” that is supposed to get them started on the road to riches. I hope more people read your post and stay away from MLMs.

    • Hi Thabo,
      Thanks so much for your comment. Like you, too many have been caught up with MLM’s. I hope I can steer some away from losing money with MLM’s. Most MLM’s depend on a turnover to keep it going as most people lose money.

  11. I have tried several MLM companies in the past. I did very well with one of them. Most all of what I made were from products that I sold. I probably would have gone much farther with that particular company, but I had a personal disagreement with my sponsor (who had also been a friend). She became angry and told everyone up the line that I was doing things that I simply was not. I was basically fired. I didn’t try again for over 20 years.

    I didn’t make any money off the last venture, but I didn’t make any, either. In fact, I still use the products and I pay the yearly fee so that I can get the discount. Who knows? Maybe I will try again later. I think the difference in the two companies is that the first was a household name and the second is just beginning to make a name for itself.

    I enjoyed your article and appreciated ow well researched it was.

    • Hi Anita,
      Thanks for your comment. I am glad to hear that you made some money with an MLM. It must have good products. It is too bad that someone was not fair to you and you were fired. That is very unpleasant. I am sorry that happened to you. However, you don’t have to worry about any of that when you are in total control of your own business. I like the fact that Wealthy Affiliate gives everyone that ability.

  12. Thanks for posting this great information about MLM. I have found myself getting involved with an MLM before and tried really hard to sell the products finding that the company only seemed to be interested in getting recruits. I always seemed to have a problem talking people into getting into the business and did not do well in this aspect. What I did find is each month I had a purchase a certain amount of product in order to be eligible for commission. After a few months of buying product with no return on my investment I decided it was not for me.

    • Hi Dena,
      Thanks for your comment. I have also found that MLM is not for me. I always lost money. It’s not for most people. The products are always overpriced too.

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