With networking no longer being limited to real-life events and
conferences and expanding to social media, so did scams and all sorts of weird
businesses.
That’s how I was approached by a multi-level marketing (MLM)
representative on Shapr about a year ago.
MLM 101
Step one: appearances
Months ago, I matched with Marie (I changed her name for
this story), who described herself as a “public speaker” and “mentor” on Shapr.
I told her I would be interested in meeting her and get advice on public
speaking — to which she replies that she is “connected to a group of powerful
women” — I think “sure, okay” but don’t think much of it — and says she would
like to get coffee as well. I notice a “no mlms please!” mention at the end of
her profile — again, I disregard it, not being familiar with that term and not
bothering to look it up. How I wish I had!
And so we meet for coffee one evening. It is past 7 pm in
Montgomery Mall. She orders a double espresso. Marie looks like an active
60-something, fast-paced (or on edge, depending on how you look at it), dresses
smartly, and is easy to talk to. She asks me about my job, doesn’t talk much
about hers, at first— except in vague terms drizzled with buzzwords like
“social networking” and “entrepreneurship”.
Step two: financial independence
Financial independence is something my husband and I have
been thinking about, though not obsessively. (I am personally opposed to
concrete or detailed long-term plans: it is usually a loss of time in the face
of life’s unexpectedness. And I think COVID-19 supports my point.)
During my conversation with Marie, I thought I had brought
up the topic of financial independence on my own; in retrospect, I think she
might have just skillfully drawn the conversation towards it.
Keeping vague about her job, Marie talks about how important
it is to have a network of people and how “you make your network work
for you” — without specifying how. She proceeds with stories of “social
partners” of hers making 100K a year without having a standard job, but
by mentoring people everywhere in the world and help them be
financially successful.
Step three: Kiyosaki the Great
Marie then tells me about a book by Robert Kiyosaki — being
from France, I had never heard of him before. She goes on about this book’s
insight in order to become financially independent, even though this all starts
to sound more and more like BS to me.
 |
| Robert Kiyosaki on book tour / Wikimedia Commons |
Finally, at the end of a 1h+ conversation, she says: “I have
a gift for you.” And she pulls out Kiyosaki’s book, Business in the
21st Century, from her bag, after having carefully crafted her sales pitch
without me even noticing.
Step four: forcing a social commitment
That’s only when my alarm bells went off. What started as a
casual financial independence conversation and exchange of book suggestions —
or so I thought — actually revealed itself to be a sales pitch with a nasty
hook at the end: a “gift”.
She lays down the book in front of me and tells me to take
it, and I can’t seem to find a good way to refuse on the spot. Much in the same
way a man buys a drink to a woman at the bar, thereby forcing her to
acknowledge him. Here, receiving Marie’s book had brought upon me a forced
social reciprocation; I just didn’t yet know what it was.
After reluctantly taking the book and putting it in my backpack, we keep talking for a few minutes, during which she insists on me
coming to her “group meeting” the following weekend. Ah, so here it is.
“Luckily, next weekend we have a big convention. It’s sold
out, but if you really want to come, I can talk about you to the leaders and I
can get you a seat”, the classic “make you feel special” trick. “And you can
keep the book this week and read it”, she goes on, “and next weekend when you
give it back to me at the convention, we can talk about what you think of this
book. Bring your husband too!”
Plan B: retreat, cut your losses
She keeps trying to get me to commit to this “convention”,
but I keep giving evasive answers and saying I would be busy that weekend. As
an alternative, she tries to get my husband and me to meet her and her husband
over dinner to talk further, to which I also reply evasively.
She finally realizes I am slipping away, meaning she
probably won’t get her book back. And so she ends it: “Okay, I will need my
book back then, but you can find it and buy it online, it’s not expensive.” I
gladly retrieve the book from my backpack and give it back to her, unloading
the burden of this forced gift.
We pay the bill, walk back to the exit, and I delete our
Shapr match right away.
A classic MLM story
When I go back home, I go online to check the reference of
this Robert Kiyosaki — who, interestingly enough, also wrote a book with Donald
Trump called “Why We Want You to Be Rich”. The dream team.
In the Amazon
comment section for the former book, I stumble upon many,
many other stories similar to mine, only those happened in physical places like
the mall or the supermarket—or Ikea, which apparently has become an all-time
MLM favorite
according to one Redditor.
Another MLM target recounts how he was approached by a
representative at the grocery store. “He told me about his great mentors who
retired in their 30s and how they are mentoring him to do the same thing”,
Ahmed says, and that he “tried to get an idea of what kind of business he is in
but he was very vague about it”. The MLM rep also gave Ahmed this book, to read
over before their next meeting.
“A few days later, he called me to set up an appointment to
check if I had the “Right Mindset” to introduce me to his mentors”, he
continues, feeling sorry for the representative as he “seemed genuinely sincere
and honest” about this MLM venture — much like Marie appeared genuine to me
too. They really do drink the Kool-Aid.
 |
| Some other books by Robert Kiyosaki, including the one with Donald Trump / Flickr |
Ahmed, who says he is from Saudi Arabia, mentions that “I
would have called the police if this happened to me at home.”
Indeed MLM is illegal in Saudi Arabia, China and, since
recently, Myanmar. They view MLM as a product-based pyramid scheme,
rather than a fundamentally different marketing structure from pyramid schemes
(more on that below). The United Kingdom and France, on the other hand, follow
guidelines similar to those in place in the U.S. and allow MLM companies.
And the grey area permitting MLM companies to still be legal
in the U.S. and elsewhere is not likely to be tackled under the Trump
administration. Indeed President Trump had his very own MLM business, The Trump
Network, which sold vitamins and health products and eventually went bankrupt.
In 2011, its remaining assets were sold to another MLM company called
Bioceutica.
A little back story on what is MLM
Multi-level marketing, also known as “network marketing” or
“direct sales,” is often mistaken for “pyramid schemes” because of their
similar mode of operation. But while MLM is legal in the U.S., pyramid schemes
are not. The thing is, many pyramid schemes present themselves as MLM, thanks
to legal loopholes.
How MLM got defined
The most famous MLM businesses are Tupperware, Amway (run by
Betsy De Vos’ husband), and Herbalife. The latter was fined $200 million as
part of a settlement under the Obama administration and was asked to
restructure its business model to “start operating legitimately,” according to
Edith Ramirez, Chairwoman of the Federal Trade Commission (FTC). But after a
5-year battle, “the Federal Trade Commission […] never officially called the
company a pyramid scheme,”
writes Forbes.
Back in 1979, the FTC sued the company Amway, alleging it
was a pyramid scheme based on these traits:
- The
participant makes a payment of money to the company;
- In
exchange for this payment, the participant receives the right to sell a
product (or service);
- The
participant receives compensation for recruiting others into the program,
not based on the sale of the actual products (or services).
Amway fought back, claiming that it does not pay its
affiliates for recruiting others into the network, but that it pays affiliates
based on their recruits’ sales. After a long argument and
getting Amway to adopt a few new rules, the FTC conceded that the following
rules — which came to be known as the Amway safeguard rules — prove that Amway
is not a pyramid scheme:
- The
participant does not receive compensation/commissions for recruiting
people — only for the sale of products
- The
representatives must retail the products
- The
company must offer to purchase back unopened and unused inventory
- Representatives
must use or sell 70% of their inventory before ordering more
From then on, MLM businesses have claimed to focus on
product sales rather than on recruiting — remember what Marie told me, “you
make your network work for you” and her story about people mentoring people
and “help them be financially successful”. That’s really what she meant.
In the end, some MLM businesses are merely restructured
pyramid schemes that have slapped a product onto their brand as a façade to
avoid legal repercussions. The company can then say its focus is on the product
rather than the representatives it hires, when, really, the contrary is in
effect.
 |
| Both multi-level marketing and pyramid schemes rely on “distributors” / Wikimedia Commons |
But,
the FTC warns: for an MLM business to be legal, the product
it sells also needs to
have a market for it, as opposed to
pressuring people to buy a bogus product: “Where such an unlawful compensation
structure exists, a participant is unlikely to be able to earn money or recover
his or her costs through selling [the] product to the public. In such
circumstances, participants will often attempt to recruit new participants who
will buy [the] product, and pressure existing recruits to buy [the]product,
with little concern for consumer demand.” That, indeed, resembles more
extortion.
Legal but not kosher
That MLM is legal does not mean it is moral. It often preys
on people in the same way pyramid schemes do, mostly by promising flexible
hours and financial independence. Following years of research and analysis of
the compensation plans of 350 of the leading MLM companies, Jon M. Taylor, from
the FTC Consumer Awareness Institute, writes: “Our studies […] clearly prove
that MLM as a business model — with its endless chain of recruitment of
participants as primary customers — is flawed, unfair, and deceptive.”
MLM usually preys on lower-income populations, immigrant
communities, students and stay-at-home moms: sections of the population who
tend to be in need of extra income. An MLM rep will talk to them about owning
their own business and being able to provide jobs for their friends and family.
Indeed the modus operandi is always the same in all of the self-reported MLM
scam attempts I came across online.
While some may still defend the practice of MLM as a
legitimate business, there is — in my opinion — something inherently wrong in
having someone tap into vulnerable people’s most basic fears of not being able
to make ends meet, in order to attain their own financial goals. Not that MLM
is the only business plan to use that trick, but that’s another story.
And with that, I will leave you with John Oliver’s take on
it:
