Beware of enticing opportunities to earn quick cash through multilevel marketing (MLM) schemes. These remote-work opportunities, popular during the pandemic, often turn out to be elaborate scams or unprofitable ventures. In fact, according to the FTC, 99% of participants make no profit, with many losing money while a select few profit.
Time magazine even compared the odds of making a profit in an MLM to winning the lottery.
In this article, we expose eight notorious MLM companies that have transformed the traditional direct-selling model into something more sinister.
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Primerica, a well-established insurance MLM firm, often finds itself under scrutiny due to its extensive use of high-pressure sales tactics and recruitment as its primary business model. Although similar to Beachbody, another legitimate company, Primerica’s history leads many to assume it’s a scam.
Unlike traditional insurance companies, Primerica recruits individuals without any prior insurance experience. These recruits are then thrust into a high-pressure environment, expected to quickly sell complex insurance products. Moreover, they face relentless pressure to recruit new members and offer them the same “opportunity.” Unfortunately, this recruitment-driven approach is the main avenue for earning substantial income, a feat that very few representatives manage to achieve.
Primerica’s initial public offering in 2010 garnered attention when Business Insider published an article with the headline: “Meet Primerica, the Wall Street IPO That’s Really A Multi-Level Marketing Scheme.” In the years since, the company has faced numerous lawsuits and even played a role in the establishment of the Anti-MLM Coalition. Despite these controversies, Primerica continues to thrive, boasting impressive numbers as of December 31, 2022, including over 5.7 million insured lives and more than 2.8 million investment accounts held by clients.
While Primerica may have a legitimate status and a substantial customer base, it’s essential to be aware of the challenges and controversies surrounding its MLM business model. Making informed decisions about participation in such ventures is crucial to avoid potential pitfalls.
If you’ve ever scrolled through your social media feed, chances are you’ve come across posts promoting the Beachbody program. It promises impressive weight loss and a fit physique, all while working out from the comfort of your own home. But behind the success stories and transformative journeys lies a darker side to Beachbody’s MLM (multi-level marketing) structure.
One woman’s story, as featured in a Time article, sheds light on the pitfalls of getting involved with Beachbody’s MLM scheme. She initially joined the program, inspired by her own weight loss journey and hoping to help others achieve similar results. However, the financial burden quickly became overwhelming. To maintain her status as a Beachbody fitness coach, she had to pay $135 in monthly fees. These fees were just the tip of the iceberg, as she was also responsible for finding new clients, coaching existing ones, and managing all the demands that came with it.
As the pressures mounted, she found herself sacrificing her own fitness goals and regained the weight she had worked so hard to lose. Not only did she lose precious time with her children, but she also lost thousands of dollars in the process.
Sadly, her experience is not unique. Time magazine, along with the Anti-MLM Coalition and the Economic Secretariat, has reported numerous stories of individuals without any fitness coaching qualifications or experience being coerced into selling supplements, merchandise, and workout programs. The system heavily relies on frontloaded inventory and expenses, putting immense pressure on these individuals to find elusive clients and make sales.
In 2023, Beachbody rebranded as Beachbody on Demand Interactive (BODi). While BODi itself is a legitimate company, it’s important to recognize that most people who join its MLM team end up leaving within 24 months, often disillusioned and with financial losses.
So, if you’re considering getting involved in Beachbody or any MLM scheme, it’s crucial to approach with caution. Remember that success stories may not reflect the reality for most participants. Instead, focus on making your money work better for you through proven and reliable means.
In a shocking turn of events, LuLaRoe, the women’s apparel brand, made headlines in 2019 when Buzzfeed News revealed that the company had abruptly terminated all of its warehouse workers just days before Christmas. This move was a clear indication of the immense legal challenges the brand was facing due to its controversial multi-level marketing (MLM) business model.
However, this was not the first time LuLaRoe had faced legal trouble. Two years prior, a group of dissatisfied former “consultants” filed a class-action lawsuit, alleging that the company was operating as a recruitment-based pyramid scheme masquerading as a legitimate business. These individuals had invested significant amounts of money in startup costs, believing that they would quickly recover their investment as their businesses flourished. Unfortunately, the expected success never materialized, leading many to declare bankruptcy. Adding to LuLaRoe’s woes, a supplier filed a $49 million lawsuit against them for non-payment, followed by another class-action suit accusing the company of fraudulent practices.
The troubled history of LuLaRoe did not go unnoticed, as evidenced by the release of the Netflix documentary, “LuLaRich,” in August 2021. This documentary delved deep into the company’s turbulent past and present, shedding light on the controversies surrounding its operations.
Given the numerous legal issues and negative experiences shared by former consultants, it is advisable to steer clear of LuLaRoe. The brand’s track record raises serious concerns about its business practices and the potential financial risks involved for those looking to become consultants. It’s essential to research and carefully evaluate any business opportunity before investing your time and money to ensure you’re making an informed decision.
Amway, the MLM company specializing in health, beauty, and homecare products, recently put up a post on its website addressing the question, “Is Amway a pyramid scheme?” The answer provided in the first sentence of the post is a resounding “No, Amway is not a pyramid scheme.” However, the fact that they felt the need to address this issue speaks volumes, as many of their “independent business owners” (IBOs) who went through Amway’s sales and recruiting system would vehemently disagree.
Those IBOs have a solid legal foundation to support their claims, whereas Amway does not fare as well in that regard. In 2010, the company settled a class-action lawsuit for $54 million due to deceptive business practices and misleading IBOs about their potential earnings and expenses. But that wasn’t the only legal challenge Amway has faced. Just last year, a lawsuit filed in California made similar allegations to the 2010 case, asserting that despite Amway’s claims on its website, it is, in fact, a pyramid scheme. Despite these legal battles, Amway continues to operate, albeit with a slight decline in sales. According to the company’s financial report for the full year of 2022, their sales amounted to $8.1 billion, signaling a decrease compared to the previous year’s sales of $8.9 billion.
In light of these facts and circumstances, it’s wise to exercise caution when considering involvement with Amway. The company’s legal history and diminishing sales figures indicate potential risks and challenges that could impact your experience as an independent business owner.
Herbalife, the well-known supplement company, has gained notoriety for all the wrong reasons within the MLM industry. Back in 2016, the company was embroiled in a major controversy, leading to a $200 million settlement with the FTC. The complaint alleged that Herbalife was operating as an illegal pyramid scheme, where the vast majority of its independent distributors struggled to make any money. Interestingly, the lawsuit took a new approach by targeting the top-level distributors, known as TOPPs, who were responsible for conducting training seminars and appearing in recruitment videos.
Fast forward to 2023, and dissatisfaction with the settlement has surfaced again. A group of Illinois residents staged a protest at the Thompson Center, asserting that the agreement with Herbalife did not adequately compensate them for their losses. This ongoing discontent highlights the lingering skepticism surrounding Herbalife’s practices and the lingering effects of its alleged wrongdoing.
While Herbalife promised to restructure its business model as part of the settlement, the company’s troubles did not end there. In 2019, Herbalife found itself in hot water yet again when it reached a $20 million settlement with the SEC for misleading investors. Then, in 2020, Herbalife faced further legal repercussions when it paid $123 million to settle criminal and civil penalties linked to a Chinese bribery case.
The series of legal battles and settlements involving Herbalife raises serious concerns about the company’s ethical practices and the potential risks involved in engaging with MLM organizations. It serves as a cautionary tale for those considering involvement with such companies, urging individuals to exercise caution and thoroughly research any business opportunity before committing their time and resources.
In 2019, the Federal Trade Commission (FTC) took legal action against Neora, a wellness/skin care/supplement MLM company. The FTC accused Neora of operating as an illegal pyramid scheme and misleading recruits with false promises of financial independence, as stated in a public statement by the FTC.
Following the Supreme Court’s AMG Capital Decision in April 2021, which limited the FTC’s authority to recover monetary damages, Neora made three specific arguments. Firstly, they requested the dismissal of the entire action based on improper federal court case procedures. Secondly, they argued that a permanent injunction was unwarranted. Lastly, they cited the AMG Capital Decision to dismiss the requests for monetary relief. While the court dismissed the requests for monetary relief, it rejected Neora’s other arguments. This means that the FTC can still employ other legal tools in future litigation against direct sellers like Neora.
Similar to other MLMs that border on pyramid scheme practices, Neora emphasized recruiting new members rather than focusing on actual product sales. The FTC complaint highlighted a company training video in which the three keys to success were listed as “Number one: Recruit. Number two: Recruit. Number three: Recruit.”
It is important to exercise caution when considering involvement with Neora or any MLM company. The allegations and legal actions against Neora indicate potential risks associated with their business practices.
As part of a comprehensive report on the challenges of the MLM-based beauty industry, the Guardian shed light on the experiences of Younique “presenters,” primarily women facing difficulties, who found themselves caught in a familiar cycle. Attracted by the promise of financial freedom, they signed up with Younique, only to discover that maintaining their presenter status required ongoing merchandise purchases.
Younique operates with eight different status tiers. The higher the tier, the greater the commission potential. However, for many individuals, climbing the ranks proved to be an insurmountable task, as they found themselves overwhelmed by accumulating inventory, increasing expenses, and relentless pressure from the company. In fact, in 2019, Younique settled an unrelated class-action lawsuit for $3.25 million.
While Younique presents an opportunity for individuals to earn income, it is important to be aware of the potential challenges and pitfalls associated with the company.
In 2019, AdvoCare, a supplement MLM company, found itself at the center of a $150 million settlement with the FTC due to operating as an illegal pyramid scheme. The FTC took action and refunded $149 million to individuals affected by an alleged AdvoCare pyramid scheme in May 2022.
The issue stemmed from AdvoCare’s focus on recruitment rather than sales. They were accused of inflating profits to deceive investors and misleading recruits about their potential earnings. Furthermore, recruits were misled about the upfront costs, which involved purchasing thousands of dollars worth of merchandise that they had to buy upfront in order to sell.
The controversies surrounding AdvoCare have raised concerns about its business practices and the potential risks associated with participating in their MLM structure. It’s important to be aware of these issues and consider them before getting involved with the company.