Multi-Level Marketing: Why 99 Percent of MLM Recruits Lose Money

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The message starts with a friendly hello from an old friend and ends with an invitation to be your own boss. Behind that pitch is a study of 350 companies finding that at least 99 percent of recruits lose money. This episode examines how multi-level marketing sustains a multibillion-dollar industry anyway. The compensation plan pays a little for retail sales and far more for the downline, so sellers are pushed to recruit their own customers as competitors. The product serves mostly as the legal distinction from a pyramid scheme, and the real buyers are the recruits themselves, meeting monthly purchase quotas to stay active.

The numbers are bleak. Newsweek reported that fewer than 1 percent of MonaVie participants qualified for commissions, and a 2018 Vox poll found most sellers made less than $100 in sales over five years. The legal footing traces to a 1979 FTC ruling on Amway that held the model was not inherently illegal, leaving regulators to act case by case. Elsewhere the judgment is harsher: Bangladesh banned MLM trade in 2015, China outlawed downlines, and Saudi Arabia treats it as illegal. Utah, meanwhile, has more MLMs per capita than anywhere in the nation.

• In the 2018 Vox poll of more than 1,000 sellers, 20 percent never made a single sale and nearly 32 percent took on credit card debt to keep participating.
• Amway's defense in 1979 rested on safeguards such as the 70 percent rule and the 10 customer rule, which regulators have little practical means of auditing.
• The FTC shut down Fortune Hi-Tech Marketing as a pyramid scheme and mailed $3.7 million back to victims. Most of its paid reps had earned about $93 a month before expenses.
• Many Islamic jurists have issued fatwas declaring MLMs haram, likening them to riba, or usury, and gharar, meaning deceptive uncertainty in a contract.
• Scholars tie Utah's concentration of at least 15 major MLM companies to missionary training, a culture of self-reliance, and tight community trust. Locals joke that MLM stands for Mormons Losing Money.