In an article by Robert L. FitzPatrick, the president of the Pyramid Scheme Alert and co-author of False Profits: Seeking Financial and Spiritual Deliverance in Multi-level Marketing and Pyramid Schemes, he offers some insight into the lies that multilevel markets generally produce to justify their work ethic. The first lie he lists is that “MLM is a business offering better opportunities for making large sums of money than all other conventional business and professional models.” He then provides historical evidence to show that multilevel markets almost always result in a losing financial proposition. A great example of this is the 1995 case of Excel Communications, a former MLM giant. The company reported to regulators that it had an 86% turnover rate of distributors and 48% drop-out rate among all customers. This ties into how these markets tend to classify their distributors as “active” and “inactive” to obscure these dismal numbers. The payout and investment portfolio records are then only disclosed to the “active members” to keep these discrepancies out of the public eye.
In the same article, FitzPatrick examines the strategies and schemes used to make multi level marketing seem appealing to potential investor recruitments. This is done by numerous forms of fortifying rhetoric and experiences. These types of companies will hold recruitment meetings in lavish destinations with top notch service to the potential investors. They associate the wealth and comfort that they experience during these meetings with what they “can earn” if they become a part of the recruitment process. These meetings are strategically engineered to psychologically fortify the company’s model within the minds of the recruitments and can have an intoxicating effect on the individual. Multi level marketing can present itself to the investor in the most sneaky, methodical ways in order to appeal to the wants and goals of the investor.
Another misconception that arises from this system is that “friends and family are guaranteed to be lifetime customers and support” if an individual chooses to be a distributor for one of these markets. This is another methodical tactic used to recruit more and more individuals which results in the infectious spread of investor recruitments. If one person becomes involved with a multi level marketing opportunity, they are likely to recruit those closest to them; friends and family, to become investors below them in order to meet their recruitment quota. This results in the involvement of more and more people, spreading like a contagious disease from person to person.
Another lie that is listed in FitzPatrick’s article is that multi level marketing presents an opportunity for personal freedom and human growth. FitzPatrick states, “MLM marketing materials reveal that much of the message is fear-driven and based upon deception about income potential. Solicitations frequently include dire predictions about the impending collapse of other forms of distribution, the disintegration or insensitivity of corporate America, and the lack of opportunity in other professions or services. Conventional professions, trades and business are routinely demeaned and ridiculed for not offering ‘unlimited income.’ Employment is cast as wage enslavement for ‘losers.’ MLM is presented as the last best hope for many people. This approach, in addition to being deceptive, frequently has a discouraging effect on people who otherwise would pursue their own unique visions of success and happiness. A sound business opportunity does not have to base its worth on negative predictions and warnings.” This shows the ethical holes involved in manipulating the human brain to build a corporate giant. It is not morally, or ethically sound to take advantage of individuals’ want to achieve success. It is a violation of business ethics and should not be classified as a legal practice in the United States economy.