It's no doubt that MLM products are expensive. Even MLMs like Lou Abbott agree saying:

"The problem so many have is their prices aren't competitive in the real world.

Many MLMs simply brush it off by saying that the quality of the products are superior to other non-MLM products. Of course it wouldn't make sense that the distribution method is related to the quality of the product, but I've learned to never credit the MLMers with an over-abundance of smarts.

What if the experts actually said that the MLM products quality was WORSE than their non-MLM equivalaents?

That's what Alan Aragon said in a Facebook Post:

I regularly get questions about this or that MLM product, whether it be Advocare, Herbalife, Visalus, Isagenix, or Whateverthehell. I am yet to come across a health/nutrition-related MLM company that doesn't economize production costs with sub-par nutritional formulations, especially the protein-containing products (for example, MLMs love to use soy as the first ingredient or fructose as the second ingredient). Adding insult to injury, these protein-based products cost at least double that of the leading non-MLM brands that actually use higher-quality protein formulations. To top it all off, these mediocre MLM products are hyped as the best things on the market, and of course they rely on the emotional triggers of zealous testimonials rather than the weight of the scientific evidence. So yeah, my opinion of MLM-based nutritional products is LOL (yes, let the hurt flow through your butt over that). As for the MLM business model, here's a fun read:"

When someone asks what's wrong with MLM, there's three things right there. The product quality is low, the price is high, and they rely on zealous testimonials instead of scientific evidence. Of course we know that MLM testimonials are pointless, but the MLMers still push it.

You can read more about Alan Aragon on his website.

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Bad MLM Arguments

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If you are not familiar with Troy Dooly, you are on the right track in life. Congrats! Go be productive and move on with your life.

For the rest of you who have had the misfortune of listening to his MLM rants with backwards logic promoting MLM, I'm sorry. Troy's business is essentially promoting MLM, in just about any way he can. He's paid by MLM companies as a consultant. He sells membership to his MLM Help Desk website.

However, most of what I've seen are videos that are eye-poppingly biased overlooking basic facts about the company to come up with some kind of thing that he can promote in a positive light. To make an extreme example, it's a little like someone focusing on the money that hospitals make money from domestic violence and pitching the economic benefits of that. If you try to question them on it, they'll just say that they are trying to look at the positive side of life.

Recently Troy Dooly was caught by the SEC for promoting Zeek Rewards, which the SEC shut down for being a Ponzi scheme. In my mind, that was a minimal part of what came out about him. In fact, you can watch his video here where he admits the bad things:

When he was asked point blank if he was getting paid by Zeek Rewards to promote it, he said no. In the video he explains that he was paid by the parent company of Zeek Rewards, Rex Venture Group and that his response was "splitting hairs." While it isn't technically a lie, it would be husband saying that he didn't sleep with another woman, because he didn't actually fall asleep with her. It's misrepresenting yourself to your audience.

At another point in the video he points out that he claimed that Zeek Rewards was "covering his expenses", but now discloses that one of his expenses is his "monthly retainer." He says this is "splitting hairs" as well, but it is an outright lie. A person's "monthly retainer" is not their expense, it is the expense of the company paying it. If I hire a lawyer and he requires a monthly retainer, he doesn't get to deduct that as a business expense from his taxes like he would a transportation expense. Troy Dooly is outright lying to his audience.

In the video, he says he's going to try to do better and disclose such relationships. My interpretation of that is: The SEC is watching me and I have to be clear with these disclosures now.

Of course, none of this will stop him from "splitting hairs" in the future and it doesn't begin to show how much he's "split hairs" in the past. It's clear that Troy Dooly has no credibility and one can never be certain if he's telling the true.

We can put him in the same category as Tim Sales: MLM Scammers

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MLM Scammers

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There's a great illustration at American Express' Open Forum for Small Businesses. I'll let you click over to see it. As you can see someone who is all talk and no work is very much a charlatan (in the author's view).

I know that some MLMers believe that "building a team" is actual work, but it's all talk. In reality the sales can be done by an inanimate shelf at Wal-Mart or via a website like Amazon. In many cases it can do it better because it doesn't illegally market the product through illegal health claims.

This is yet another reminder of why MLM is a terrible business.

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MLM Scam

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I get a lot of comments from MLMers trying to defend their company or even the industry. One of the common comments is "All MLMs are NOT scams." Sometimes this is posed as a trap such as question, "Do you think all MLMs are scams?" Often it's just an erroneous supposition that the commenter assumes such as, "You just think all MLMs are scams."

In all cases, the goal seems to be to try take the focus off of the MLM that is the topic of the discussion.

The problem with these arguments is that they focus on absolutes, and presume it is an all-or-nothing situation. Not every person in prison committed a crime, but it isn't necessarily wrong to refer to them as criminals. It was long believed that swans were all white, until people found rare black swans. The few exceptions, less than 1%, does not detract from the vast majority.

There is no possible to ensure that there isn't an innocent prisoner out there, but it seems possible. As we found with swans, they are not always white. It is quite possible that not "ALL" MLM are scams.

However, just like when looks at 100 people in prison and presumes they are appear to be exclusively criminals or sees 100 swans and presumes that they appear to be exclusively white... any unbiased, intelligent person can look at 100 MLMs and presume that they appear to be exclusively scams.

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Bad MLM Arguments

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If you read about MonaVie or Protandim, you'll quickly learn in the comments that Dr. Bowden was correct about MLM distributors claiming their products are a cure for anything. In fact, I modestly claim that one of the best articles on the subject is No, Your MLM Health Product Doesn't Work!

I saw this comment by Anonymous Aussie and I think it hit home the point that many logical people are making when they point out that clearly Health MLM testimonies are pointless:

Anna Ruiz says ”i couldn’t pull a shirt over my head, open a car door from the inside, i couldn’t do any kind of pulling or pushing and the most painful part of my life was sleeping! “SLEEPING” imagine that!! no one new what was wrong with me, i tried Dr’s, Narcotics, Advil, deep tissue massage, acupuncture and nothing worked. I lost my job due to my situation and i began to become depressed….i woke up at 7:30am to the kisses of my grand son asking me to wake up. i couldn’t believed i had slept the entire night and woke up to at least 70% of my pain gone.”

Wow. I’m truly errr... amazed. I’ve taken a look at a few other distributor testimonials which are certainly not unlike Anna’s...

“I was on Morphine injections ( 30 mgs 5 a day) and oxycontin 40 mgs (3 a day). I noticed within a week that my pain level had reduced by 80% and I was using hardly any Morphine and had reduced the oxycontin to only 1 a day. I felt much better in myself and the depression was lifting, I was also sleeping like a baby.”

“Within three days I noticed I was sleeping better, and within 2 weeks I noticed I had more energy. I am thrilled. It is now 5 months later and I have been able to cut my medications for Restless Leg Syndrome in half.”

“I had terrible PMS and menstrual problems. I had insomnia and leg cramps nightly... The tiredness began to lift and after only a few weeks I was sleeping through the night. By the 3rd month the PMS and related distress was greatly reduced... Today I can say with confidence that I have a healthy immune system which means no more antibiotics. I no longer get depressed and ultra sensitive before my menstrual cycle.”

“I am elated to report that I never needed to resume my Paxil tapering schedule. I’m Paxil free. AND – I have tons more energy, my anxiety level is normal (I was diagnosed with General Anxiety Disorder, Social Anxiety Disorder and Post Traumatic Stress Disorder) so I think this is fabulous. I’ve also begun to loose weight. I cannot recommend this product enough.”

“This lead to other physical problems: shortness of breath,major hypertension, a dragging of her leg,a general weakness and fatigue, restless leg syndrome,which leads to difficulty sleeping, much frustration, anxiety and depression…Within 3 months her restless leg syndrome was gone, she was sleeping better, her blood pressure had stabilized with medication reduction and she was able to take off on visiting vacations(driving 400 miles alone).”

The most amazing thing though, aside from the fact that each distributor is reporting similar health benefits, is that NONE of the above testimonials relate to the same MLM... these claims have been made by distributors of Monavie,
, Herbalife and Melaleuca (and Malaleuca again):

It would almost seem that distributors are virtually taught from the same textbook when it comes to promoting MLM products – they’re taught to concoct their own testimonial (my friend was given a list of “common ailments” by Monavie to assist him with this) and like Anna’s, these always end up being such that they depict the products as having some ability to treat, cure or improve the symptoms of a disease or condition. It’s no accident that it’s the distributors, who have a vested financial interest in believing, are touting extraordinary health benefits rather than the bona-fide customers they don’t have.

Anna, Protandim isn’t intended to do any of the things you’ve stated and Lifevantage’s own website states it. Clearly you were deceived when you were sold on Protandim with claims outside of company policy and in breach of the law however, you’re no longer the victim... you’re the perpetrator.

Anonymous Aussie was going easy on picking only four companies to pick on here. She could have included many others such as Xango, Xowii, Nopalea, Zrii, Vemma, and many, many others.

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MLM Scammers

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I came across a great post on Fat Wallet warning people about Lyoness and thought it illustrated a great point about MLMs and pyramid schemes:

"Say Mr Pyramid buys pens in bulk from Staples and sells them for $100 each. Who's gonna pay $100 for a pen? But tell them that they can also sell pens for $100, and we'll pay you $30 for every pen you sell, plus you can recruit people to sell pens as well, and you'll get $10 for every pen they sell, and $5 for every pen their recruits sell. Three levels, $45 commissions total on a $100 sale. Everyone has to buy 10 pens a month for personal use to participate in the program. Just find three people who find three people who find three people.... In the end, yeah, you are buying 10 pens a month for $1000, but you are getting $3150 in commissions, so don't sweat it. Why wouldn't you join?

Product is moving. The pens get used. No recruitment revenue, only product commissions. Absolutely 100% a pyramid scheme. The only real reason people are paying $100 for a pen is for the opportunity to make money off the sale of pens. Completely unsustainable as eventually, you run out of people to sell to and those at the bottom get hosed buying $1000 pens but not being able to sell them. This is an extreme example, but if you look at the world of MLM, there are some pretty big name companies out there that somewhat fit this mold on a less cut and dry basis."

I loved how quickly and easily he described the scheme. So when a company like MonaVie sells a 25 ounce bottle juice at $40 or a shake company wants to sell you on 90 calories for $1.50, you've got a pretty good idea that they are pretty much a pyramid scheme. The companies and their distributors like to say that their product is a higher quality. The quality of the products, such as a juice, shake, or vitamin are often impossible to judge.

What is clear is that MLMs all seem to charge high prices. Are we to assume that each one has supreme quality or is there a fee being tacked onto the product due to the "business opportunity" where the people at the bottom get screwed? I'll go with the later.

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MLMs vs. Pyramid Schemes

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This is a post where I'll move comments that aren't related to the post that they were submitted for. Or people can comment on things that aren't on other posts.

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MLM Scam

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Many people bring up Tupperware as a great example of a legit MLM. They also often use it as justification that all MLMs must be legal because Tupperware is. As we know a square (a legit MLM like Tupperware) is a rectangle (MLMs), but a rectangle (MLM) is not necessary a square (a legit MLM like Tupperware). This is why the FTC says:

"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 not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money."

If someone makes the case about Tupperware being legit in an MLM discussion you know that they are trying to trick you. In fact, CNBC recently wrote about MLM and included this about Tupperware:

Tupperware, for example, no longer calls itself a direct sales company, instead using the term direct-to-consumer. The company didn't return calls from CNBC. But speaking to the Wall Street Journal (subscription may be required) , CEO Rick Goings said, 'Direct selling left us, because the industry became dominate by buying clubs and what looked like pyramid schemes.'"

So that's the CEO of Tupperware saying that they aren't in MLM or direct selling any more. They don't want to be associated with MLMs based on self-consumption buying clubs that appear to be pyramid schemes.

Clearly the CEO of Tupperware sees what is going on and is smart enough to distance themselves from it. Let's do the same and distance Tupperware from the dominate number of MLMs that hit the basic pyramid scheme guidelines.

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MLM News

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When trying to determine between an MLMs and Pyramid Schemes, it comes down to two points that the FTC has emphasized previously:

Often MLM supporters will claim that they have customers, but that they have signed up as distributors to get a discount on product. MLM companies have created this structure in an attempt blur the line between distributor and customer. This way, there would be no way to quantify the number of distributors who are failing to recruit others. They can always be explained away as people who don't care about the business, they just want to get a discount on the product.

Unfortunately for the MLMs, this puts them in a bad place with the regulators. As we showed above the FTC has made a point to distinguish sales outside the network. A distributor, whether he/she be a discount buyer or a failing distributor is by definition inside the network. Thus those sales further go to fuel the pyramid scheme and can't be used to defend the company as being legitimate.

A wise MLM company would use the notion of a preferred customer (as some do) so that these discount buyers are correctly categorized as customers and accounted for separately than those interested in the business opportunity. This kind of transparency, and having the numbers independently audited and published would go a long way towards a pyramid scheme defense.

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I don't like to call out individuals for scamming people, but since Shellie Gold Davidson decided to go with "Educate Yourself! Know the Difference!" in the following photo, I thought I'd break down the chart of false information she's spreading.

Shellie Gold Davidson of ViSalus Doesn't Understand Pyramid Schemes

Shellie Gold Davidson of ViSalus Doesn't Understand Pyramid Schemes

Let's start off with the first row and the columns. Yes pyramid schemes are illegal. Thanks for letting us know that. Putting 100% Legal under the column of "Legal Multi-Level Marketing" is a little redundant, no? Well let's move on...

Row #2: Main Income Sources - Notice the use of "solely" in recruiting others for illegal pyramids and MLM is legal if "ONLY" by product sales. So it's black and white, but what if income is earned both ways as in MLM where the Income comes from sales of those who were recruited? The FTC says the following about MLMs and Pyramid Schemes: "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 not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money." and "Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time-tested and traditional tip-off to a pyramid scheme."

Clearly the FTC has a different definition than Shellie Gold Davidson of Pyramid Schemes. We'll be referring back to this document a few more times more than likely.

Row #3: Primary Purpose for Recruitment - I don't see either of these as a differentiating factor in the FTC guidelines. In MLM, why would you need to recruit people for product sales and distribution? For ViSalus (Davidson's MLM), distribution is done by the ViSalus via mail to an individual... the same way it is done from, which isn't an MLM. Come to think of it, they also do product sales. There's no need for a network for sales or distribution except to incentivize distributors to buy product to get involved in a fabricated "business opportunity."

Row #4: Plan - While a get rich scheme is certainly a red flag, claiming that MLM requires "true and personal effort" doesn't absolve it from being a pyramid scheme. I challenge you to figure out how to run a pyramiding business that doesn't require "true and personal effort." You can't, because you need to trick people into the scheme.

Row #5: Business Entry & Barriers - According to the FTC guidelines MLMs that are pyramid schemes can have low cash-out, low or no front-loading, and a buy back guarantee. So these aren't relevant. Furthermore Davidson's ViSalus coerces front-loading and high-cash out by requiring distributors put up $499 of product to be eligible for the BMW bonus of the "business opportunity." It's front-loading a bunch of product, though you could argue that high-cash out is a relative term.

Row #6: Value for Money - This is going to come up in the Pricing section below, but since ViSalus is overpriced, it fits the "product value far less than cash out" section of illegal pyramiding.

Row #7: Income Stability - This is just a boldface lie and the FTC guidelines make it clear. There's nothing defining about whether the income stops if the recruitment stops.

Row #8: Training - Training is not a differentiator of whether something is a pyramid scheme or a legal MLM. This chart is making up features of pyramiding just so that MLM can look good without actually addressing the FTC guidelines.

Row #9: Regular Product Movement - This is again another non-factor. Consumable products can and are often part of illegal pyramid schemes, because most of the sales are made to other distributors within the scheme. It is noteworthy that this mentions few retail sales (high cost doesn't matter). A look at ViSalus' co-founder Sarnicola shows he is making most of his money from recruiting... there's no reporting on how many retail sales he makes a month.

Row #10: Pricing - Using this test Davidson is pitching a pyramid scheme because ViSalus is clearly overpriced.

Row #11: Marketing - Refer back to Row #2 about how the money is being earned. If you are making most of your money selling product to people outside the scheme then its good. If you are recruiting others into a downline and making money from sales to them and their sales, it's an illegal pyramid scheme. Sounds like ViSalus'... and most MLMs... compensation plans are set up this way.

I've done all the hard work for you by creating a page that makes it quite clear: MLMs Vs. Pyramid Schemes. It has all the citations by the FTC and is much more reputable than Shellie Gold Davidson's biased disinformation.

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MLM Scammers

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