116 3rd St SE
Cedar Rapids, Iowa 52401
During my first semester of college I accidentally attended the NSFW version of a Tupperware party. Without knowing, I had attended a Pure Romance party, where they peddled sex toys, lube and body care products. A fresh crop of cash-strapped college kids made for perfect new clients … and recruits. A multilevel marketing scheme — also known as a MLM or network marketing scheme — permeated my freshman dorm within weeks of move in.
These companies aren’t new and you probably know people who worked in pyramid schemes over the years. MLMs provide non-salaried jobs that require participants to buy products directly from the company to then resell. The best way to make money in these companies is by recruiting “downlines” to work under you. Recruiters are aggressive, especially on social media, and promise an “empowering” work-from-home lifestyle with impressive monthly earnings so long as you invest money into the company first.
Recruiting online isn’t illegal, but these are empty promises. In 2011, researchers found that 1 percent of MLM participants make a profit.
In April 2020, the Federal Trade Commission sent a warning to MLM companies. MLM distributors tried taking advantage of stimulus checks as ways to pull in recruits. Social media posts flaunted promises like “turn a small investment into six figures” and “achieve financial independence.” Some companies claimed their products could treat or prevent COVID-19, despite a lack of scientific testing supporting those claims.
Des Moines resident Nancy, who would like to be referred to by first name only, has been on both sides of MLMs. After distributing for now defunct companies Excel Communications and Lia Sophia, Nancy tried the weight loss company Xyngular and invested $600 in that product alone. Nancy supports free speech but draws the line when MLMs make unfounded medical claims.
“If you are not medically certified, that kind of advice can kill people.”
Social media platforms have the power to stop the spread of disinformation and should be active in protecting vulnerable people from scams. While social media platforms are required by federal law to remove disinformation, MLMs are legal businesses. This makes censorship difficult.
Last year, the video sharing platform TikTok became the first social media platform to ban content that “depicts or promotes Ponzi, multilevel marketing, or pyramid schemes.” Anti-MLM groups celebrated this as a step toward limiting new MLM victims.
“We do not permit anyone to exploit our platform to take advantage of the trust of users and bring about financial or personal harm. We remove content that deceives people in order to gain an unlawful financial or personal advantage, including schemes to defraud individuals or steal assets.”
Community guidelines have the power to change the recruiting landscape for MLMs. Platforms should add guidelines that protect users from scams, but as Nancy said, “The heads of these companies are getting creative because they have to now compete with online buying and make it look appealing.”
The personal social media profiles of MLM distributors can paint a rosy picture — especially profiles of those with a hoard of downlines. This is what roped in 21-year-old Emily McHugh. After seeing the #bossbabe lifestyle of a successful ItWorks distributor, McHugh decided to join the beauty and nutrition company as a distributor. The opportunity seemed like a great way to impact lives and make money. McHugh’s friends and family were wary of her new business venture, but she brushed off their concern.
“Your ‘team’ tells you that if they can’t support you in your journey then they don’t matter.” McHugh said. “I feel like I ruined relationships with people that were just looking out for me.”
McHugh was recruited under the guise of working from her phone for an hour a day. She said that in reality, she worked 24/7 which left her phone battery dead by 2 p.m. daily. After six months of making no profit while seeing little improvement in her customers’ lives, McHugh had second thoughts. McHugh was told she could leave the company at any time but was bullied by her recruiter when she shared her concerns about the effectiveness of the products she was selling.
“The distributors for these companies take advantage when you don’t know anything about the company,” McHugh said. “They want you to jump without looking.”
Like many former MLM distributors, McHugh has turned to social media to spread awareness about the realities of working for a MLM company.
“If we don’t speak out against these companies, [young impressionable people] are more likely to not know the dangers of blindly joining a MLM,” McHugh said. “I’m not against people in MLMs. They were more likely than not preyed upon and are also victims.”
Social media censorship, or lack thereof, leaves a hole for the vulnerable to fall into, whether that be scams, MLM companies or manufactured news. While legislation and community guidelines catch up to current problems, it’s important for users to stay on their toes. Research companies you are investing in. Look at the company’s income-disclosure statement to see what the average income of distributors was the year before.
“Whatever you join is not ‘groundbreaking,’” Nancy said. “It’s been going on for years and just gets recycled again every few years. The heads of these companies are getting creative because they have to now compete with online buying and make it look appealing. Don’t fall for it.”