The FTC Just Spooked A Bunch of MLMs Into Behaving (Somewhat Better)

The FTC Just Spooked A Bunch of MLMs Into Behaving (Somewhat Better) May 16, 2020

Hi and welcome back! Recently, I noticed something new in the social-media activities of multi-level marketing scheme (MLM) participants. It was, as the song goes, something there that wasn’t there before. And once I found out why it was there, I had to laugh! It was a bit of rare good news for the rest of us, but really bad news for a whole lot of them! Today, let me show you how the FTC’s been spending Americans’ tax dollars lately.

(See the end of the post for MLM terminology.)

Something There That Wasn’t There Before.

The other day, I saw an Arbonne hun’s social media post. As usual, the hun hunted for recruits. Most of her rhetoric sounded tired and shopworn — just the usual self-infantilization, droning before-and-after testimonial, and vapid, empty promises of success.

But what was this? Something new swam into sight in her pitch.

a post including the income disclosure statement
An interesting post from an ItWorks hun.

I know that capture isn’t easy to read, so I’ll skim it briefly.

The wall of text recounts the hun’s totally-for-realsies testimony as a shill for ItWorks, a supplements-based MLM. She very carefully hints that her MLM changes participants’ lives. (I guess going broke and driving away every one of her friends and family members does qualify as changing her life. She never does specify exactly how it changed her life.)

The hun talks about how her soul just wanted more, uses all the expected praying-hands emojis and veiled Christian dogwhistles, and invites “that girl who wants MORE in life” to contact her for info.

(Yes, huns constantly call themselves “girls” and refer to their downline as “girls.” It’s incredibly grating. Even middle-aged huns do this to other middle-aged women — including prospective customers and recruits.)

It’s just a standard-issue boilerplate come-on for MLMs, nothing at all remarkable — except in what accompanies it.

Well, That’s Different.

When I looked at the right side of the capture, under the photo of the smiling couple, I saw something I’ve never seen before in any hun’s recruitment pitch.

That’s her MLM’s income disclosure statement.

And then I began noticing them in several other ItWorks huns’ recruitment pitches, too. One hun apparently even tried using the statement by itself as a recruiting tool in and of itself!

Here’s the relevant bit, embiggened:

2018 ItWorks income disclosure statement. Whee!

Hm, I thought, that’s weird.

What Is It And Why Was It There?

In the MLM world, an income disclosure statement is a legal statement an MLM is forced to release. It discloses how likely participants are to make money based on the MLM’s current huns’ success, and what percentage of huns reach which levels in the MLM’s scheme.

Not all MLMs release these statements — I think the government must compel them to do so. The r/antiMLM subreddit somewhat maintains a master list of various MLMs’ income disclosure statements. You’ll likely notice a number of very big names that aren’t on that list.

These statements are invaluable tools for potential participants. They’re also devastating condemnations of whatever “opportunity” the huns claim their MLMs to be. These facts explain why a lot of MLMs don’t release disclosures (or only release partial disclosures), and why almost all MLMs massage their numbers as much as humanly possible to avoid giving potential victims a full picture of just how bad their scheme is.

As you can see from the above disclosure, most ItWorks huns don’t make much money at all. Since these statements never include the MLM’s required fees or expenses, chances are the vast majority of huns in ItWorks lose quite a lot of money.

That’s how every MLM’s disclosure statement runs. The only difference between any of them is the exact number of huns who’ll get it in the shorts, and how much exactly they’ll lose.

But most MLM recruits don’t even look at this invaluable tool, one of the few the MLM provides to warn them about their real chances of success.

Avoiding Reality.

In fact, huns usually avoid their MLMs’ income disclosure statements. Perhaps a concerned friend or relative shows it to them later, but they don’t go seeking it out on their own.

By the time the hun has signed up, paid her dues, and begun sniffing the heady fumes of faux-empowerment and faux-sisterhood, it’s usually too late for anyone to dissuade her from the disastrous financial and personal decision she’s just made. Her upline will already have indoctrinated her with sufficient thought-stoppers and hand-waving to deal with the stark reality these statements represent.

If nothing else, any hun who’s actually examined and understood her MLM’s income disclosure statement thinks she’s totally gonna be the one-in-a-thousand participants who actually makes a decent living with any MLM. (Often, huns join because think Jesus told them they’d be successful at it. It’s really gross, how often I see huns cite the results of prayer as a factor in their decision-making.)

But suddenly and recently, a bunch of ItWorks huns went from pretending these statements don’t exist to putting their MLM’s current statement on their recruitment pitches.

Y’all, something had to be going on here.

A Question Soon Answered.

Though MLM leaders love to pretend that what their huns do is totally out of their hands, the FTC has always disagreed. They’ve made no secret of their long-standing legal opinion on that matter.

A while ago, the FTC fired off a bunch of warning letters to various scammers and fraudsters seeking to sell fake coronavirus preventives and cures to the frightened, gullible public. We talked about that episode recently here.

Well, apparently not everyone got the clue that it was time to stop doing that stuff.

So in April, the FTC fired off another round of letters. This time, they set their sights on MLMs exclusively. They evaluated these companies based on their huns’ social-media posts, which they detailed briefly in each letter, and found that their sellers had crossed legal lines.

These letters are a stunning reminder of the agency’s power and opinion.

What Got the FTC Steamed.

Some of these MLMs’ huns made false or unsupported income claims, which is a big issue nowadays with so many people out of work and desperate.

One MLM on the list had sellers making false health claims about their products’ ability to prevent or cure, well, anything, but especially coronavirus.

Most MLMs’ huns made both types of claims.

Here’s the list of MLMs that received letters, what got them in trouble, and what their huns pretend to sell while scouring the entire internet hunting for new victims to sign up for their ever-collapsing downline:

False/unsupported health and earnings claims:

False/unsupported earnings claims alone:

  • Rodan & Fields, LLC (supplements, skincare)
  • IDLife, LLC (hilariously dubious-sounding supplements)

And false/unsupported health claims alone:

  • Zurvita, Inc. (supplements aimed at weight loss)

The FTC gave them two days to clean up their act and report back with exactly how they’d fixed the problems identified.

Two days.

Dang.

What’s Illegal, Again?

So that was why the ItWorks huns were suddenly so conscientious about making sure their recruitment pitches include their income disclosure statement! I just noticed it on ItWorks first, is all.

Indeed, soon enough someone spotted Arbonne releasing its own 2019 income disclosure statement (and it’s just as bad as ItWorks’ disclosure) and even very detailed instructions for their huns in how to discuss recruits’ earning potential. I bet the other MLMs are doing something similar as we speak.

All of these MLMs have been skating on thin ice for years.

See, the FTC can’t flat-out say MLMs are illegal. Indeed, the general idea of direct sales isn’t illegal. MLMs become predatory scams when they start focusing on recruitment more than sales. The FTC has published a list of five red flags consumers should keep in mind when evaluating an MLM “opportunity,” and most MLMs fall afoul of every one of those warning signs. The rest run afoul of most of them. I’ve never seen an MLM that was free of any red flags. (If an MLM misses any of these red flags, it’ll probably be the one about commission payout past five levels of downline.)

Their huns all chirp that their schemes can’t possibly be pyramid schemes because omg don’t you know that pYrAmiD sChEmEs ArE iLLeGaL! Do your research, sweaty! But the swift action taken here suggests strongly that the MLMs in question knew their huns were making false and illegal income and health claims, and did nothing whatsoever about it until they absolutely had to.

Meanwhile, all that’s saved most of these operations from dissolution and their owners from legal repercussions is the amount of time and effort the FTC can bring to bear to stop them, cuz guess what? A business can do tons of illegal stuff and still operate, just like theft can be illegal and yet people still commit theft! Like totally! Illegal stuff still happens despite being illegal! Crime goes unpunished every single day!

Who would’a’ ever thunk?

An Opportunity to Do the Right Thing.

The FTC is supposed step in if a given MLM oversteps the legal line between “direct sales” and “pyramid scheme.” However, in the past the FTC has had neither time nor funding to do it. Over the years, they’ve reined in several large MLMs (Amway, HerbaLife) and dissolved a bunch of smaller ones like BurnLounge. But most MLMs fly their red flags with impunity.

I’m guessing that if it weren’t for the pandemic and the egregious overstepping going on in MLMs lately, they’d still be dragging their feet. But hey, it is a pandemic, and the huns are egregiously overstepping legal lines. So finally, something’s happening.

If nothing else, having income disclosure statements right there in the pitch should do a lot to educate potential victims of these scams about what a disastrous idea they are. (See endnote.) If it dissuades only a tiny percentage of recruits from joining these schemes, then good.

“Jesus” might still tell recruits to take the plunge, but maybe MLM victims who take his advice will learn a lesson there about what a nasty sense of humor their imaginary friend seems to have. 

NEXT UP: In The Scandal of the Evangelical Conscience, Ronald J. Sider’s gauzy vision of Original Christianity has destroyed his chances of accurately perceiving why his tribe is so hypocritical. See you tomorrow!


Endnotes.

MLM terminology:

A “hun” is a seller for an MLM. People call them that because they’re aggressive and like to use unearned endearments in talking to their marks, especially the misspelled “hun” and “sweaty.” The hun’s “upline” is the person who signed her up under her, plus the people who signed that person up under them, and so on up to the top of the pyramid. The hun’s “downline” is everyone the hun personally talks into signing up under her, plus everyone those recruits sign up under them down to the bottom of the pyramid. The upline makes commission from downline purchases.

I usually use female pronouns for huns because the industry overwhelmingly signs up women. However, there’s lots of bro-huns too. (Back to the post!)

Who Finds Success In Any MLM, in roughly descending order of success:

  • The founders of the scheme (natch)
  • Family members and good friends of the founders who join the scheme under sweetheart deals
  • Huns who get super-lucky and sign up the second a popular scheme begins, so every hun who signs up afterward is automatically part of their downline
  • Huns who are mega-successful in other MLMs (see previous group) who get tempted to join this one through back-room sweetheart deals given in exchange for them bringing their downline with them
  • To a lesser extent, recruits who already have humongous social-media followings that they can mine for downline; often sweetheart deals are involved here as well
  • A very small army of huns working their tail ends off in 100-plus-hour weeks to achieve an income comparable to any minimum-wage worker’s 40-hour-a-week paycheck (see: Merchants of Deception) and facing the collapse of their downline at any moment

As a given rule, if you encounter a hun online who claims wild success with her fakey-fake “small business,” she is not going to be one of these few success stories. The first five groups don’t give a damn what anybody thinks. The last group’s too exhausted maintaining their downline to have the time to argue about MLMs’ legitimacy. Just statistically speaking, any hun you meet has a 99%+ chance of being one of the many failures in the MLM world. But if she’s got the time and energy to argue online about it AND claims success, then bet the farm. (Back to the post!)


Final Note:

I had nowhere to put this in the post, but y’all NEED to see this. OMG. Someone made a Charlie Wall of Crazy to track a pack of dishonest ItWorks huns. I’m incredibly impressed by the effort this person put into making this.. this.. chart? Chart, I guess.

Here’s what the chart’s saying:

Basically, huns in a lot of MLMs get taught to cluster around their fellow huns’ social-media posts to drum up engagement. (Often, an upline will command her downline to do this as well.) They reply to each other’s posts with encouragement. They express idol-level adoration of their products and get all goo-goo-eyed over the idea of participating in the MLM that they already participate in.

This activity is supposed to trick normies into thinking that the MLM will be easy for them to sell and recruit for, so they get tricked into signing up. Whenever you see a lot of positive engagement on a hun’s social-media post, you can count on it being a fellow hun pretending to be a customer.

I’ve seen similar false engagement happen more times than I can count. It happens in every MLM, as far as I can tell, not just ItWorks. But the chart really put their conniving into perspective — which is what chart creators want to do anyway, right? Whoever made this, good job!


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About Captain Cassidy
Captain Cassidy grew up fervently Catholic, converted to the SBC in her teens, and became a Pentecostal shortly afterward. She even volunteered in church (choir, Sunday School) and married an aspiring preacher! But then--record scratch!--she brought everything to a screeching halt when she deconverted in her mid-20s. That was 25 years ago. Now a comfortable None, she blogs on Roll to Disbelieve about psychology, pop culture, politics, relationships, cats, gaming, and more--and where they all intersect with religion. She lives with an adored and adoring husband named Mr. Captain and a sweet, squawky orange tabby cat named Princess Bother Pretty Toes. At any given time, she's running out of bookcase space. You can read more about the author here.
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