The unrelenting allure of multilevel marketing (MLM) remains a strong fixture in US society, with even well-known figures like billionaire hedgefund manager Bill Ackman taking against it. During the 2010s, Ackman embarked on a five-year campaign against Herbalife, a dietary supplement company, labeling it a pyramid scheme. The MLM model thrives on recruiting people who recruit others to sell products, with only those at the top reaping significant financial benefits while those at the bottom often lose money.
Despite a lawsuit from the Federal Trade Commission (FTC) against Herbalife, which found that even among those who achieve Sales Leader status, half earn less than $5 monthly with half of those losing money, MLMs remain popular. However, judges have dismissed lawsuits resulting from MLM activity, bringing into question the effectiveness of lawsuits and FTC actions against the MLM model. Critics argue that the FTC fails by trying to differentiate between a “legitimate” MLM and an illegal pyramid scheme.
As explored in popular media such as the “LuLaRich” documentary or ‘The Dream’ podcast, MLMs often target women in disadvantaged communities. These schemes promise them a stable income and an independent business they can run from home, only to leave them with immense debt and unsold stock.
MLMs, while often labeled as pyramid schemes and despite the bad press, continue to thrive in the US. The MLM model typically targets suburban or smalltown stay-at-home mothers, often due to their desire for an additional income stream that can be managed from home. Military wives are another group that is commonly targeted by these schemes.
Such MLM businesses often create a sense of community and shared identity that attracts these woman, by offering not just a potential source of income, but also the promise of social connection and activity. Unfortunately, they are often left with substantial debt, unsalable stock, and broken promises.
