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Multi-Level Marketing Businesses and Pyramid Schemes – Why MLMs are scams

Multi-level marketing businesses (MLMs) and pyramid schemes have gained a reputation for being scams, but then why do thousands and thousands of people fall for…

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Multi-level marketing businesses (MLMs) and pyramid schemes have gained a reputation for being scams, but then why do thousands and thousands of people fall for it? Do people really make money from these unique business opportunities? I have been approached by many of these ‘Hun-bots’ (named that due to their bot-like tendency to slide into anyone and everyone’s DMs with a cut and paste message starting with ‘HEY HUN’), especially on Instagram. I’ve even had a bit of an argument with one or two.

I’ve become quite passionate about them over the past few years. Or, passionately against them. But what’s the deal with them? Are they legit? Why do so many people hate them?

Let’s take a look into the scammy world of Multi-Level Marketing. MLMs. Network Marketing. Whichever way you want to polish this turd.

Mac computer for blog post Multi-Level Marketing Businesses and Pyramid Schemes - Why MLMs are scams

Multi-Level Marketing Vs Pyramid Schemes

First, let’s take a look at the difference between the pyramid scheme and an MLM.

What is a Pyramid Scheme?

A pyramid scheme is a fraudulent system of making money. It’s based on recruiting new members, who will, in turn, recruit more members and so on. It’s called a pyramid scheme because those at the top gain a lot of money from those on the levels below. These Pyramid Schemes are illegal in the UK. Those who use them or promote them can be prosecuted under the Consumer Protection from Unfair Trading Regulations 2008. You are likely to lose money and could face jail.

What is Multi-Level Marketing?

A Multi-Level Marketing business (MLM) is a way of selling products to customers without a shop, but through recruits (often known as consultants). The consultants will recruit more people to be part of their team, then they will earn commissions on their sales also. As you can see – it’s very similar to a pyramid scheme where the people near the top of the pyramid will make lots of money, the difference is they sell a product.

They are legal in the UK, as long as they comply with disclosure laws and provide customers with an actual product in exchange for their money.

What’s an Upline and Downline?

Just a bit of terminology for you as I will be using this in the article. If I recruited someone, they would be my downline. The person who recruited me would be my upline.

Usually, when a Hun-bot is talking about their team, it’s their downlines, who their groom to recruit more people to make them, and their uplines, and their uplines upline even more money. Make sense?

Iphone flatlay on calculator with stationary

Can I make money with an MLM?

About 1% of people make money with an MLM. 99% of people don’t make any money or they lose money.

Just have a quick Google and you will see this for yourself.

How can anyone lose money with an MLM?

You might be wondering on on earth do people lose money? Well – most MLMs usually consist of a startup fee to join or to buy the starter pack of products.

Then consultants are often encouraged to use the products themselves so they can post images and videos of them on social media. This means they have to buy them.

Often, uplines will tell their downlines to buy a large inventory so when people want to place orders, they already have them in stock. The pressure to do this can get quite intense, especially when there is an end of number figures to be met! I read a horror story on a Facebook group of a women who had $140,000 worth of jewellery from an MLM removed from her house in her attempt to sever herself from the company that has cost her so much. It happens.

A lot of MLMs have set targets that you must meet to earn a commission or earn a higher level of commission. This is when these people trapped in these multi-level marketing schemes get desperate and start sliding into people’s DMs.

You’ve probably had those DM’s before:

Hey hun, are you interested in working from home with the chance for uncapped earnings and flexibility in hours?

Or you might see on Facebook and Instagram:

Only 3 spaces left to join my team, message quick if you want to earn extra $$ from home!

A sense of limited opportunity and urgency get people. I reality, there’s not only 3 spaces left – it’s just another sales tactic that these people have been brainwashed into using.

If they don’t meet the targets, many people will buy the products themselves to meet their targets.

But think about it really – do you really think you could sell a stranger on Instagram a product? A lot of people get caught up and think they can. It’s actually so hard to get people to buy things, especially in such an oversaturated market. But after people have done trying to convince their friends and family to join as a consultant and/or products, they move on to strangers on the internet.

Income Disclosures – what’s the proof?

Okay, so by law, these companies have to publish their income disclosures which state what people are earning. There are a few things to remember when looking at these.

  1. these disclosures don’t include expenses – so any start up fees, samples, buying stock themselves isn’t taken into account
  2. these disclosures don’t include anyone who is inactive or makes zero
  3. they can be hard to interpret as they delberatly try to hide the true figures

Let’s take a look at Arbonne’s income disclosure.

Remember- these do not include any expenses or fees. To join Arbonne, there’s a £30 registration fee and then you need to buy a starter pack.

The price of the starter pack is hard to find online (MLMs hide a lot of this type of information!) but they have been seen on Facebook marketplace/eBay for around £150. So it wouldn’t be illogical to assume that the 44% of people who made an average of £97 a year actually lost money.

Just Google ‘Income Disclosure..’ then the name of any MLM to find their data. It’s all very similar.

The district managers (41%) earn an average of £1078 a year. Which isn’t that much over a year. Think of how many hours they put in to earn that!

Another MLM, Herbalife, were actually fined $200m by the FTC in 2016 for unfair and deceptive practices.

Macbook with dried flower and glasses for MLM scam blog post

Why are they not ethical?

Multi-level marketing businesses are a predatory business model.

They often prey on vulnerable people. It’s often women with young children desperate to make some extra cash. They are cult-like and very toxic. You are told that the reason you’re not earning enough is your fault. That you need to recruit more people, that you need to beg family and friends to join your team.

You get pressured to post on social media using the products. To post lies about what you’re earning. I’m sure you will have seen posts such as:

My side hustle has allowed me to go on holiday with my family! I love my small biz!

If you think about it, it’s strange, isn’t it? Like, if you had a job as a doctor you wouldn’t post ‘my job as a doctor allowed me to buy my new car! WOW! I’m so lucky!’

It’s all fake it until you make it. These consultants are told to do this to get people interested in joining.

The next time you see a post on social media that reads something like ‘only 3 spaces yet to join my team, they’re going fast’ you may notice a lot of comments like ‘I’d love more info, DM me!’. Click on those profiles – I bet you they’re all consultants too. It’s just another tactic to love bomb on each other’s social media posts to make the offer look attractive.

In the end, you do not get more recruits because the market is oversaturated. You lose friends because they are sick of them pestering you, or they try to talk you out of it and you decide if they’re not going to support your small business, then they’re not really your friends.

Then it becomes hard to admit it didn’t work. You’ve put lots of money into this, you’ve defended it to those close to you, you love the community of new friends you’ve met, you are told you just need to put the work in, work hard, post more on social media, sign up to the events, buy more samples and it becomes incredibly hard to get out of.

stationary flatlay

People get into debt with MLMs

It’s true, people end up in debt over these things. They often get told to buy more products to have inventory on hand to sell or have to buy products themselves to keep earning a commission.

Small business owner

An MLM isn’t a small business. You are selling the product of a big company. You aren’t a CEO or a boss babe. You are someones downline and they want to squeeze as much money out of you as possible as it feeds those at the top of the pyramid.

Sadly, there is some sense of ownership that these consultants have, why they act like they’ve started their own business and are selling their own product. Some people do believe that these are small businesses and may support them under this false idea that someone has created a product themselves.

But I’m not recruiting..

Some people feel like if they aren’t recruiting, then they aren’t doing anything unethical. Some people claim that they just like the products (the products are usually crap!) and want the consultant discount.

Remember that if you are doing this, you are still putting money into an unethical business modal. There are so many small businesses out there that you can support.

But they are just salespeople who work on commission.

Incentive Scams

Have you ever seen MLM girl boss brag about the car that their company bought? Some consultants will reach a level where they are eligible for a free car. There is a catch, of course. You have to take the car out on finance in your own name and as long as you meet your target, the company will pay for the car payment. But if you don’t meet the target? You pay yourself. Just another way to get into debt.

There are similar incentives such as holidays. But for these, you have to put a deposit down, they’ll only pay so much, they don’t cover flights, they encourage you to get the most expensive room, you have to make rank every month until you go or they cancel it with no deposit refund and you only have a short amount of time to decide if you want to of once you’ve been picked. It’s scammy.

It promotes unhealthy working habits

Would you like to earn money on your home from the beach

No hun, when I go on holiday, I want to go on holiday and relax. Multi-level marketing schemes encourage and promote this idea of constantly hustling to make more money. This is deeply rooted within MLMs where people are often told by their uplines that they need to work harder to get results. If you are not in the top 1% making thousands, then you need to work more.

They brainwash people into thinking that you are the problem, not the crap business model.

stationary flatlay

The products are crap

The products in these types of schemes are bad because the product doesn’t matter. It’s really about recruiting others. And when it comes to the product, it’s about making a high profit. So selling a cheap product that costs £2 to make for £30.

Let’s take Herbalife, for example. Herbalife products have been shown to cause side effects like liver injury, jaundice, nausea, pale stool, tiredness, fatigue, and abdominal pain. Yet consultants will use them and even sell them to pregnant or breastfeeding women. You can read more about some Herbalife horror stories here.

This is terrifying when it operates in 94 countries with over 4.5 million distributors.

FM World sells dupes of perfume and they lie and say it’s the real perfume just in different packaging. They even say it’s made in the same factory.

Doterra consultants encourage people to ingest essential oils. Which absolutely should NOT be ingested. They tell you to give them to your children, your dog. They claim they can cure cancer. It’s just scummy.

People lose friends

Network marketing can be quite emotive. It’s just awkward, isn’t it? When your friend messages you and asks if you want to join up, they make it sound too good to be true (because it is!) and hard to refuse. They are pressured into messaging everyone they know. They are send scripted messages with just small details changed. They are told to lie and do whatever it takes to get more recruits.

So when someone says no, it can often go a bit sour. Either the person who has been messaged feels frustrated, or the Hun-bot is annoyed that their friend hasn’t supported their small business.

Then there’s those that do get recruited, quickly realising that it’s a big old scam, many getting into debt and feeling trapped. Now, this is where a lot of people lose friends.

How could you do those to a friend?

Then there are all those people you’ve pestered to hold parties or that time you invited people to your own party without being honest about your intentions before. Only to pressure people to order once they are there.

They trap people

People have an emotional attachment to their small businesses. They have spent hours and hours working on it and are determined to make it work. They’ve slid into so many people’s DMs and had a lot of negativity for the cold messages. They have defended their business so much that they now believe that it’s not a pyramid scheme in disguise and ‘it’s network marketing’.

MLMs change the way people think and have them doing things that they are ashamed of out of desperation. These are all techniques that are used to try and influence you to recruit more and make even more money for your upline.

They have posted all over their personal social media, many even have dedicated Instagram accounts. They have made new friends and invested their own money. Plus, it’s worth mentioning again, hours and hours of time unpaid.

To get out of an MLM means admitting that it’s not working, that maybe people were right.

They also make it hard for you to get out. They have rules against reselling products to get rid of them, they delete any negative comments from Facebook groups and you are shunned by your new community of friends when you leave.

They make it hard to understand the ranks

When researching about a multi-level marketing company, their ranking system can be quite unclear and vague. Often, they have impressive names as you move up to ranks. Area manager, millionaire team, regional vice president, star diamond.

But what they don’t freely give you is the information you need to get those ranks. Those that do offer some kind of information, it’s in some strange point system that equates to money. We just don’t know how much!

A list of MLMs

I hope this post has helped to educated some people on the predatory nature of MLMs. They really are unethical, praying on those who are vunvrable. Often being told that if they don’t have the money for the startup fee then they can find it. They promise a life of luxury when the reality is they only cause stress, debt and broken relationships which has a seriously negative impact on mental health.

  • Ann Summers
  • Arbonne
  • Avon
  • Beach Body
  • Body By VI
  • The Body Shop (home)
  • Doterra
  • FM World
  • Forever Living
  • Herbalife
  • ItWorks
  • Juice Plus
  • Kleeneze
  • Le-Vel
  • LulaRoe
  • Mary Kay
  • Monat
  • NuSkin
  • Oriflame
  • Partylite
  • Pampered Chef
  • Phoneix Trading
  • Pure Romance
  • Stella&Dot
  • Scentsy
  • Younique
  • Tropic Skincare
  • Tupperware
  • Usbourne
  • Utility Warehouse

How can I actually make money online?

You can read this post about how I made some extra cash with some side hustles, and this post on my finance blog also talks about a few side hustles to earn a bit of extra cash here and there.

I may write an updated blog post about how I make money online as a full-time blogger if anyone is interested?

8 comments

  1. I surprisingly haven’t been contacted by many hun-bots recently – Watch me jinx it now! I used to get SO many when I’d first had Amelia, but I haven’t had any for a while! Someone I know sells scentsy products. They’re SO expensive! It’s insane how the £ compares to the quality! Eeek! I bet you’ll get loads of response to this one! We all know a hun-bot!!

    Claire.X
    http://www.clairemac.co.uk

  2. My DMs seem to have been a bit quieter recently with these, which always lulls me into a false sense of security that I’ll never get bothered by them again!
    Amy x
    callmeamy.co.uk

  3. Thanks so much for raising awareness about this! The account list and the example messages are super useful.

  4. My Instagram is still bad with the DMs! It’s annoying how fake they are too with the whole “hello babe, I absolutely love your account. How old are your boys they’re gorgeous?! Two days later…. Would you like to join my crew xx

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