MLMs’ Future: LuLaRoe and Its Pyramid Scheme Settlement

MLMs’ Future: LuLaRoe and Its Pyramid Scheme Settlement April 10, 2021

Hi and welcome back! What with everything else going on, I haven’t had time yet to show you one of the biggest things to happen lately in the multi-level marketing scheme (MLM) world. LuLaRoe, one of the biggest MLMs around, recently had to settle Washington State’s lawsuit against them. It seems like the pendulum has well and truly swung against MLMs, and I’m absolutely here for it! Today, let me show you some of the backlash going on nowadays against these predatory financial cults.

a shiny blue pyramid in california
Something different for our MLM banner pics. (matt evans, CC.) The Walter Pyramid, an athletic building at California State University, Long Beach. (More info.)

(See endnotes if you need info about MLMs and the abbreviations we’ll be using here. Short-n-sweet: a “hun” is an MLM participant.)

Situation Report: LuLaRoe.

LuLaRoe is the brainchild of Deeanne and Mark Stidham, a pair of Mormons with a nose for schemes. Their MLM offers soft, shapeless clothes in short-run prints. The MLM started in 2013. By 2016, Mark Stidham claimed $USD1Bn in sales.

As MLMs go, though, LuLaRoe is one of the worst ones around.

Resellers spend a huge amount of money to get started and maintain eligibility for commissions. They have no say whatsoever in what prints they receive from the mother ship — unless, it’s been alleged, their higher-ups like them enough to let them raid the warehouse to pick whatever they like. And in recent years, a great many huns have expressed concerns about the quality of both the prints and the actual clothes themselves.

So when the backlash against MLMs finally began, LuLaRoe quickly became one of the anti-MLM movement’s biggest targets. Vice did a documentary about them, ex-LuLaHuns made all kinds of tell-all videos, and journalists (like from CBS) began to take interest.


“Why Women Are Quitting Their Side Hustle: Leaving LuLaRoe.” Uploaded May 22, 2019 by Vice.

The Washington State Lawsuit Against LuLaRoe.

By 2017, frustrated distributors were suing LuLaRoe. The company reeled from class-action lawsuits about their shoddy shopfront software, their pyramid-scheme scammery, and their extremely shady and sketchy business practices.

But then in January 2019, an 800-pound gorilla stepped into LuLaRoe’s living room. And where do 800-pound gorillas sit when they visit? Wherever they like. This one went by the name of Washington State Attorney General (AG) Bob Ferguson. He brought along a hostess gift: a big lawsuit accusing the Stidhams of operating an illegal pyramid scheme. The AG also accused LuLaRoe of lying about income potential to their victims, focusing way more on recruitment than on product sales, and running a very unfair refund policy.

Around that same time, one of LuLaRoe’s main suppliers sued them too, for unpaid bills totalling around $49M. They’d actually been looking for that money since 2018, but now they wanted to seize the Stidham’s assets.

LuLaRoe settled the AG’s lawsuit in February. They paid $4.75M to the AG’s office, $4M of which will go back to various Washington-based ex-LuLaHuns. The company must also follow a whole slew of rules about how they must operate in the future (detailed in the AG’s news release).

Strangely, Jesus did not step in to protect all those LuLaHuns from their MLM’s predatory practices. Nor did Jesus rein in the Stidhams themselves. Indeed, at the height of the backlash against them these two were Jesus-ing it up and enjoying lavish hobbies and vacations.

Make hay while the sun shines, I suppose.

LuLaRoe: A Portrait of Decline.

Of course, LuLaRoe’s no longer the new hotness in MLMs. Hell, LuLaRoe didn’t even figure in a November 2020 infograph someone made of the 25 highest-earning MLMs (h/t r/LuLaRoe). They’ve suddenly become small potatoes in the MLM tug-of-war.

See that r/LuLaRoe link just above? It used to be an even mix of wry criticism and fannish adoration. That mix is no more. Now, when I look at it I see tons of GOOB (going out of business) sales, solid walls of criticisms lamenting the deteriorating quality of the clothes and prints, and people expressing anger over what a scam they think the MLM really is. Very, very occasionally I see a thread with positive comments about some of LuLaRoe’s clothes.

Welcome to the life cycle of an MLM. The old-guard MLMs like Amway were built to last, I guess. But these newer whippersnapper MLM creators get all starry-eyed with ambition. They grab for too much, too quickly. And yes, they definitely make a lot of money — at least, before the law realizes that their products are just a front to hide the predation going on behind the scenes.

It’s an interesting cautionary tale for the modern age.

And now, I wonder if MLMs’ owners realize they must change significantly if they’re to have any hopes for survival. The sheer backlash against MLMs has begun in earnest at last.

A New Backlash Against MLMs.

It’s no secret at all that Millennial-aged women made LuLaRoe the bulk of its dirty money thanks to social media. Buzzfeed even centered them in its February 2020 article about LuLaRoe’s lawsuits. But MLMs like LuLaRoe may have ensnared all the Millennial women they could already, and Gen Z doesn’t seem like they’re willing to play those reindeer games.

TikTok, the current social-media darling of Gen Z folks, completely banned MLM-supporting videos on their site in December (anti-MLM videos are fine). That cut MLM huns’ recruiting power off at the knees.

Meanwhile, at some point Facebook quietly forbade huns from using their individual accounts to advertise and recruit for their MLMs. This seems to have happened well before they forbade a whole bunch of other ads that destabilize people’s lives, but they’re getting more serious about banning huns for breaking those rules. I’ve heard of anti-MLMers reporting huns on Facebook for using their individual accounts as business accounts — and also of huns being locked out of their accounts for doing it. Since Facebook is so integral to today’s MLMs’ business practices, huns constantly break the site’s rules.

And, of course, YouTube videos spring up constantly about how harmful and risky MLMs are. Many hundreds of thousands of people follow the creators of these videos.

Connecting the Dots.

Earlier in this post, I mentioned a phrase I’ve been seeing around lately to describe MLMs: financial cults. And it makes perfect sense. When we make a mental Venn diagram of toxic authoritarian religious groups and MLMs, we end up with nearly-perfectly-concentric circles.

venn diagram of mlms and christianity
(Click to embiggen.)

These similarities chased me away from MLMs back in the 1990s. Nothing’s changed since. People join MLMs for the same reason they join authoritarian religious groups: someone sells them a dream and tells them they can totally achieve that dream if they just do what they’re told. Don’t think, just obey, and you shall be rewarded. It’s a potent come-on for people who are authoritarian followers at heart.

In a very real way, running into a bunch of Ambots right after my deconversion inoculated me against both MLMs and reconversion. It was impossible to see anything supernatural about my former religion after seeing hucksters shamelessly monetize preachers’ patter like that. They ripped my religious devotions out of context, allowing me to perceive what they really were.

Hell, my deconversion was largely sparked by realizing that the forced-birther movement used Christians’ indoctrination against them. Once I realized that this movement’s leaders made claims that simply weren’t true and then used hamfisted manipulation to push them through anyway, I could not stop myself from realizing that Christian leaders did the exact same thing.

And I really, really hope that today’s recovering huns connect the dots in the same way.

In future days, I really hope someone official studies MLMs’ potential role in the decline of Christianity. Something in my gut tells me the link is strong. And I’m here for it.

NEXT UP: Christian leaders’ plans to bring churchless believers back into their sheepfolds… are about as likely to succeed as anything else they dream up. See you tomorrow!


Endnotes.

MLM Info: An MLM is a multi-level marketing scheme. A few people at the very top rake in big bucks. Those few will be the founders and their family members, usually. They sign victims up to their scheme and call those people their “downline.” (The “upline” is everyone above a participant: the person who signed them up, the person who signed THAT person up, and so on. It’s like a family tree.) At each level down from the founders, participants make less and less money for more and more resources expended. In fact, some folks call MLMs “endless chain recruiting schemes,” referring to the fact that there is literally no bottom level to the MLM pyramid. An ambitious hun can always add another level to it!

As this FTC paper tells us, MLMs sell products only to give themselves a bit more plausible deniability to the authorities. Officially, MLM participants purchase their company’s products and then resell them. They must purchase a set amount of products per month to remain eligible for commissions from their MLM overlords. Those products, they mistakenly think, function as the key to their scheme’s legality. 

However, the real money in MLMs gets made in recruitment. The most fervent participants in these schemes (nicknamed “huns or “hunbots” due to their robotic, copycat sales tactics and their use of “hun” as a false endearment; most MLM participants are women, but the term’s universal) try hard to recruit their own “teams” of more downline victims.

Growing numbers of people identify MLMs as “financial cults.” Often, the leaders MLMs use the exact same indoctrination techniques on their victims that cult leaders do. And huns get indoctrinated to disregard reality just like fervent Christians do.

(Back to the post!)


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