Is Melaleuca a Pyramid Scheme? Scam or Legit MLM? Exposed!

Melaleuca is an MLM company that sells nutritional, cosmetic, and personal care products. It is not a pyramid scheme, and it is one of the legit MLM companies.

There is a good chance that you heard about Melaleuca through someone – a friend or family member.

Many people these days are looking for additional income, and you are most likely one of them. There was then an opportunity to work from home by joining Melaleuca as one of their independent distributors.

However, as I’ll discuss in this review, there are some reasons why success with Melaleuca is unlikely. Experienced salespeople and well-funded recruiters are the only ones I can think of to have real success with this MLM program.

As a disclaimer, I’m not affiliated with Melaleuca. It means I’m not paid to write this review. So you can rest assured that you will get an honest and unbiased review from me.

At the end of this review, I’ll also tell you the best alternative to the Melaleuca MLM program that has enabled me to make a full-time passive income online.

What is Melaleuca?

Melaleuca, The Wellness Company, often referred to simply as “Melaleuca,” is a $780 million dietary supplement, cosmetics, and personal care products company founded in 1985 and headquartered in Idaho Falls, Idaho, USA.

VanderSloot is the founder and has served as president and chief executive officer. Melaleuca operates internationally but has U.S. offices in Idaho Falls, Idaho, and Knoxville, Tennessee.

Customers buy directly from Melaleuca’s website or retail stores, and “independent marketing executives” receive commissions from Melaleuca for each purchase made by people who refer them and by people who refer their customers: 60 through seven “referral generations.” The company refers to this arrangement as “consumer direct marketing,” a term it has trademarked.

It’s an interesting fact that Melaleuca gets its name from the Melaleuca plant. They claim that this plant is responsible for the high quality of their products, which makes sense. I’ve never tried it, so I’m not sure if it’s everything they say it is.

In any case, the majority of the products sold by the company are vitamins, supplements, beauty products, detergents, and cleaning products.

There are several other items on the shelf, but this is the most important. They claim that their products contain no non-green ingredients such as chlorine, formaldehyde, coated pills, and so on.

Melaleuca is appealing and potentially profitable because the whole “green” thing is already a proven psychological draw. Melaleuca was thus ahead of its time in that regard.

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What Products Does Melaleuca Offer?

Melaleuca sells nutritional, cosmetic, and personal care products. They sell a wide range of products, including:

  • shower cleaner
  • toothpaste
  • furniture polish
  • laundry stain remover
  • tea tree oil
  • shampoo
  • lip balm
  • vitamins
  • fibre
  • tub & tile cleaner
  • …many more!

Melaleuca offers their products for purchase on Amazon. 

Their website claims to have over 400 products, but you can’t read about any of them there.

Who Founded Melaleuca?

Melaleuca, based in the United States, is owned by Frank VanderSloot. According to The Land Report, he was the 92nd largest landowner in the United States in 2011. With a net worth of $2.7 billion, VanderSloot was named the richest person in Idaho and the 302nd richest American by Forbes in 2017.

Riverbend Ranch and Riverbend Communications are two of his other ventures. VanderSloot is also a member of the US Chamber of Commerce’s board of directors and executive committee. 

He donates significantly to Republican presidential candidates and political campaigns in Idaho. He has also paid for ads against several Democratic candidates in Idaho. VanderSloot is the major donor to the American Heritage Charter School in Idaho Falls.

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What is MLM?

Before we get into determining whether Melaleuca is an MLM, I’d like to explain what MLM is and how it differs from traditional business models.

Multilevel marketing companies are also known as direct sales companies or network marketing companies.

An MLM company does not pay you a salary.

You make money by recruiting others to join your business rather than selling products. If you hire someone and they start making money, you get paid a commission on the sales and recruits they bring in.

There are several levels to this (hence multi-level).

Think about a triangle. If the person at the top of the triangle recruits ten people, and each of these ten recruits ten more, and each of these ten recruits ten more, you will receive commissions from everyone in the triangle because they are all in your direct downline (in an MLM, the people beneath you are known as your ‘downline,’ and you are their ‘upline’).

You can earn $1100 by recruiting 10 people.

Even if your MLM company offers a wide range of products, most people prefer to recruit others because they can earn a lifetime passive income from them, whereas if they sold a product, they would only receive a one-time commission.

People at the top make a lot of money because money trickles up to the top of the triangle, while people at the bottom make the least.

The ultimate goal of someone who works for a company like Melaleuca is to have as many people in their ‘downline’ as possible, allowing them to earn large amounts of passive income.

Is Melaleuca an MLM?

Melaleuca is a legit MLM (multi-level marketing) company. Melaleuca is a member of the United States Direct Selling Association, a trade association that engages in public relations and political lobbying on behalf of the multi-level marketing industry.

As a multi-level marketing firm, Melaleuca won’t provide its sales representatives with a regular salary. After joining Melaleuca’s MLM program and becoming one of the members, you’ll run your own business as an independent distributor of Melaleuca products.

Melaleuca distributors can receive commissions from Melaleuca for each purchase made by people they refer and by people their customers refer,  through seven “referral generations”.

The average commission rate is 7%, which can quickly add up if you bring in a few or a lot of new members. However, before you can begin recruiting, you must first purchase some products.

As a Melaleuca member, you must purchase a certain number of product points each month in order to maintain your “non-active” status and continue receiving payments.

The current point level is 50, implying that the item costs around $80. So, if you want to stay with the Melaleuca MLM program, you should order approximately $80 in products each month.

Typical of multi-level marketing companies, there are many “levels” of selling Melaleuca products.

  • Product Advocates
  • Business Builder (Director 1-2)
  • Director 3-9
  • Senior Director
  • Executive Director
  • National Director
  • Corporate Director

As a product advocate, you just sell some products to people you know. As a business builder, you still just sell products, but you do it more seriously.

The multi-level aspect kicks in once you reach Director level 3+. You will be expected to hire team leaders who will lead their own teams that will report to your team.

Those who have reached these leadership statuses have not only invested enough time to refer several customers, but they have also helped some of those customers start a business and become Marketing Executives. Those Marketing Executives have, in turn, referred additional customers who purchase Melaleuca products each month.

Surprisingly, Melaleuca never refers to its recruitment methods as “MLM.” Instead, it repeatedly states that they are “based on referrals.”

The company refers to this arrangement as “Consumer Direct Marketing,” a term it has trademarked.

Of course, you can buy or sell products without recruiting any new members. However, Melaleuca‘s top salespeople and earners manage teams of people who also sell memberships.

MLM is not about the products, it’s about the memberships they sell and building the downline needed to succeed.

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Is Melaleuca A Pyramid Scheme?

Melaleuca is not a pyramid scheme. It is a legit MLM company that allows members to make money by selling their health products. As a distributor of Melaleuca, you don’t have to make money solely through recruitment.

However, in 1991 Melaleuca received a cease-and-desist order for violating Michigan’s anti-pyramid scheme laws. In 1992, Melaleuca signed a consent decree with the states of Michigan and Idaho agreeing to “not engage in the marketing and promotion of an illegal pyramid.”

To date, Melaleuca still has not been classified as a pyramid scheme.

So, what makes a pyramid scheme? A pyramid scheme recruits members by promising them money or services in return for recruiting others. It is unsustainable and often a scam because members at the bottom end are doomed to lose money.

Those who want to join must pay a membership fee to the company that runs the pyramid scheme. The company would share a portion of the funds raised from each additional member they recruit as a reward.

Melaleuca distributors, on the contrary, are not paid to recruit new members. There is no direct financial incentive. 

A pyramid scheme is profitable only for the directors of the company, i.e., those at the top of the pyramid since they can receive a portion of the payments from every newly recruited member. The scheme continues as long as members recruit and funnel money to the top of the pyramid.

Such companies almost never sell valuable goods or services. The scam’s only source of revenue is from recruiting new members and soliciting more money from current members.

A pyramid scheme would have to grow infinitely to make money for everyone who participates. This is impossible due to the finite population of the planet.

The scam will fail if there are no new recruits and other sources of income. Since the majority of members are at the lowest level of the pyramid, most of them will lose their money.

A good example of pyramid schemes is Vemma, a producer of energy and weight loss drinks. The FTC accused Vemma of operating a pyramid scheme in August 2015 that paid more to recruit new members than to sell products.

New members, who were typically college students and other young people promised high compensation, were required to pay $600 for starter packages and hundreds more for monthly products. According to the FTC, the majority of participants lost money.

Melaleuca Compensation Plan

MLM companies make figuring out how to get paid more difficult than learning astrophysics in Latin.

It is said that there are nine ways to make money:

  1. Commissions (20% for your referrals and 7% for 7 “tiers below”)
  2. Advancement bonus- rank up one of the 49 “status” (see diagram below as a small sample)
  3. Pacesetter bonus- Rank up in a certain time frame
  4. Mentoring bonus- When your enrollees move up the ranks
  5. Core mentoring bonus- When your enrollees move up the ranks
  6. Double core mentoring bonus- When your enrollees move up the ranks
  7. Leadership growth bonus- more bonuses when you get really high ranks!
  8. Monthly car bonus- monthly bonus for a car at certain ranks
  9. 20/20 bonus- 20 enrollees in your first 5 months

So you might think this is really cool. That’s great because you can get bonuses and rewards in a variety of ways.

But there is only one way to get paid commission on sales. You must recruit new employees for the remaining eight ways to make money.

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10 Reasons Why I Don’t Recommend Melaleuca MLM Program

1. False Claims On Their Supplements

Melaleuca has developed an extensive line of nutritional products such as vitamin and mineral supplements that claim to promote heart health, cardiovascular, and blood pressure supplements, and a glucosamine product for healthy joints.

However, the health claims are misleading. In 1997, the U.S. Food and Drug Administration sent Melaleuca a warning letter for “false and misleading” claims about two of its supplements.

Dietary supplements are considered foods and are subject to less stringent Food and Drug Administration (FDA) regulations.

Some doctors and pharmacies warn that some natural supplements may interfere with prescription medications, so anyone taking strong prescription medication should consult their doctor before taking any supplements.

You’re putting customers’ health at risk when you sell Melaleuca supplements. 

2. Very Few People Can Make Money With Melaleuca

Success is difficult to achieve with an MLM company like Melaleuca.

You can look at the statistic that says 72.5 percent to 99.9 percent of MLM members lose money.

The reason for this is that MLMs have sales quotas that require members to continue selling products in order to remain active and eligible for commissions.

They will not be paid if they do not meet the quota.

As a result, many MLM members lose a significant amount of money before even recruiting one person into the company.

3. Losses From Melaleuca MLM Are Reframed As Investments

Melaleuca MLM uplines often reframe their financial losses as ‘investments’ in their business so as to keep their reps in an MLM scheme, dangling the carrot of future financial freedom. 

But the reality is that these are not investments. You are unlikely to get the money back. And the return on “investment” is negative in most cases. So saying that it’s an investment is cheating.

4. Melaleuca is a Cult

Why do people continue to work for Melaleuca if it appears to be so bad? Our investigation of MLMs revealed that they all have cult-like company cultures.

Critical thinking is actively discouraged among MLM representatives. They are chastised and even isolated when they ask questions that deviate from the ‘this company is a-mazing’ mindset.

MLMs, like abusive partners, encourage you to isolate yourself from anyone who questions your involvement.

Those who leave an MLM are labeled as failures or bad people/influences, and reps are not allowed to contact them.

Rejection from people they once considered practically family is one of the most devastating losses experienced by former MLM representatives.

MLMs frequently expect their representatives to prioritize their events and business over their personal lives in order to further embed them in the business while separating them from their family and friends.

5. You May Need to Purchase Melaleuca Products Yourself

If you don’t have a large network of friends, family, neighbors, and so on, you may have to buy products yourself each month. It’s a losing proposition all around.

I think it’s quite ridiculous when you have to buy the products you are trying to sell. But this is very common for people who join MLMs like Melaleuca. That’s why in the long term, you are going to lose a lot of money, not to mention making money.

6. Melaleuca Products are Overpriced

As with other MLMs, Melaleuca offers overpriced products. There are many other brands that offer similar products but at lower prices.

Therefore, you may find it difficult to sell Melaleuca products because your prospects can buy the same product elsewhere at a much cheaper price. This explains why most people who join MLMs only focus on recruitment instead of selling actual products.

7. Melaleuca’s MLM Business Model Has a Bad Reputation

Some people have benefited financially by joining a network marketing/MLM company. Unfortunately, most people who join MLMs are left with nothing but regret and a lot of useless products that they were unable to sell.

MLM like Melaleuca is fundamentally flawed. The distribution of commissions is skewed toward the top.

The majority of those in the top tier and pioneers make the most money, while those at the bottom will not even break even after a few months.

As a result, many people do not consider Melaleuca to be a legitimate business opportunity.

8. Exaggerated Claims Of Income

Melaleuca, like any other MLM company, makes exaggerated income claims, but in reality, very few people make a good living by promoting Melaleuca.

Melaleuca’s low retention rate can also be discouraging, as less than 41% of its distributors are active.

According to Melaleuca’s payouts to distributors, over 99 percent of Melaleuca distributors never make a profit.

9. Melaleuca Is Like A Pyramid Scheme In Disguise

If you want to avoid losing money every month, the MLM will actually encourage you to recruit people.

Every system that requires you to recruit people in order to make money eventually looks like this.

Melaleuca is not a pyramid scheme in the traditional sense because you can earn money by selling their products.

However, in order to make a living, you will need to hire others in reality.

10. Recruiting is Required to Succeed

I don’t recommend MLMs to people for this reason. MLMs like Melaleuca put a lot of effort into recruiting. Eight out of ten ways to earn money with Melaleuca require recruiting. If you don’t recruit, you are destined to lose money at the end of the day.

My #1 recommended platform is different. You can make a 4-figure, 5-figure or even 6-figure passive income by promoting and selling products you truly like. You don’t have to recruit people but recommend useful and great products. I will tell you more at the end of this Melaleuca review.

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How Much Does It Cost To Join Melaleuca?

To get started, it only costs $19 plus tax. This is an annual fee, but once paid and joined, you can begin earning money.

Melaleuca members must earn 35 “product points” per month to remain “active.” Some claim that it is possible to do so for as little as $50 per month.

However, based on what I’ve learned and what the product pricing pdf says, I believe the best monthly price you could pay is $60 or more. You can now make up for what you have to spend on yourself if you sell these items.

However, many new members will have to pay for this themselves for the majority of the first year (if not all of the costs).

So, for a year, the total cost is at least: $19 + $60 x 12 = $739.

Melaleuca MLM Program Feedbacks By Real Users

Positive Feedbacks

  • Products are excellent, and there are plenty of them. Melaleuca is one of the world’s largest multi-level marketing brands due to its extensive product line.
  • The company has been in operation since 1985, making it one of the oldest MLM businesses that has not changed its name.

Negative Feedbacks

  • Hidden costs: According to the brand, membership costs $19 plus tax per year. However, the harsh reality is that if you want to stay in the program, you must pay $739.
  • Expensive items: The requirement to purchase products and then resell them at a higher price every month is a red flag. Compare the prices of similar items in different stores to get an idea.
  • Lack of a consistent source of income: Melaleuca may be able to assist you in making money if you are fortunate. However, you can be certain that you will not earn six figures per year, especially since finding “executives” is a difficult task.

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Is Melaleuca Legit?

Yes. Melaleuca is a legit company.  Melaleuca has been vocal against the abuses in multi-level marketing and the damage it can do. Melaleuca, on the other hand, does not allow inventory loading (a practice used by many multi-level marketing companies to encourage customers to buy thousands of dollars worth of inventory), limits the marketing chain to seven generations, and prohibits “breakaways” (another practice common in multi-level marketing).

Melaleuca also slightly differs from MLMs in that it does not require its Marketing Executives to maintain an inventory, according to the company. To continue to be an active Marketing Executive and receive commissions from clients, Marketing Executives must produce at least 35 product points per month (which equates to about $45-55 per month). The client is then eligible for a 30-40% discount.

In addition, the company offers the opportunity to earn up to 15% of the monthly order back in the form of “Advantage Awards” dollars. The customer can redeem Advantage dollars for products after receiving $20 in Advantage dollars.

The products purchased are everyday items such as shampoo, hairspray, and cleaning products. The minimum quantity required, according to merchants, is for typical household or personal use.

Is Melaleuca a Scam?

Melaleuca is not a scam. It is a legit MLM company. A scam is defined as “a dishonest scheme; a fraud” by the Oxford Living Dictionary. 

That said, Melaleuca blatantly makes disingenuous and irresponsible marketing claims to recruit members.

According to the founder VanderSloot, the company has a “business model for those who want to supplement their income.” However, according to a study of multi-level marketing companies conducted by the U.S. Federal Trade Commission, less than 0.29% of Melaleuca distributors make a profit and more than 99% of distributors lose money.

The FTC states that “Melaleuca fails to disclose that approximately 99% of all participants lose money and therefore get further behind financially because of their participation.”

The FTC issued a warning to Melaleuca in June 2020 for making unsubstantiated profit claims during the COVID -19 pandemic that contradicted previous FTC findings that less than 1% of Melaleuca distributors make a profit and the vast majority lose money.

If you want to become one of the few Melaleuca distributors who make money, you have to put in a lot of effort. And usually, the way they make a lot of money from Melaleuca is by recruiting aggressively.

My #1 recommended platform, however, has seen a lot of beginners earn four figures a month after joining it for a year.

I will tell more about my #1 recommended platform at the end of this review.

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Final Verdict: Melaleuca Review

Here comes the conclusion of my Melaleuca review. Overall, I don’t recommend working for Melaleuca as a distributor.

You will have a tough time in the beginning when you are prospecting and trying to find recruiters to add to your Melaleuca commission.

The worst part is that you practically have to ask your family and friends to join your Melaleuca business opportunity. It’s not fun.

Your upline is constantly following up with you to encourage you to buy more Business Support Material even as you struggle to get people to join your downline.

The reality is that you’re likely to lose more money. Statistics confirm this as well. 99% of people who join an MLM break even or lose money, according to a case study on the FTC’s website.

People who join these MLM-type businesses often feel under pressure to succeed, and that is one of the main reasons they leave. 

Why not consider starting your own online business if you want to earn money and have a flexible schedule? 

Thus, you can choose what you want to promote rather than having someone tell you what you must promote.

Let me tell you how to build an online business in a legit way to make passive income online in the next section. This has allowed me to make a full-time income in a year. Most importantly, unlike MLM models, It’s 100% legit and sustainable.

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Best Alternative To Melaleuca MLM Program

If you’re beginning your online business journey, you deserve a program much better than the Melaleuca MLM program.

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But How Much Can You Earn with Wealthy Affiliate?

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Compared with Authority Hacker, Wealthy Affiliate has a much longer history, which has been established for 15 years and there are many success stories in the past decade. Actually, Wealthy Affiliate has more than a million members so far, so you can see how popular this platform is.

To give you more examples, here are some of the other inspiring success stories of Wealthy Affiliate members.

Where to Join Wealthy Affiliate?

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