The Rise of the Legal Pyramid Scheme

Thursday, 8 February 2018

Multi Level Marketing Cartoon

If you lurk on the internet for long enough, you'll be bombarded with adverts for "get rich quick" schemes that rarely work. The British public has lost £27 million in the last year on binary option trading alone but that doesn't stop us from being sucked into these false promises of fortune. With our economy in disarray, our wages never seeing an increase and our budgets being stretched atrociously far, it's no surprise a lot of us are turning to offers of additional income for very little effort.

If you are active on social media, you may have come across people who have already jumpstarted their quest for a small fortune and are trying to drag you onto their money ship. These people are actively involved in multi-level marketing (MLM) businesses and are looking to put you into their downline so they can profit from any purchase you make; whether it be your start up kit or additional inventory. MLMs are elaborate pyramid schemes and, unless you thoroughly enjoy losing a lot of money and are willing to step on a lot of toes, you should avoid them at all costs.

A pyramid scheme is described as a person who tells a number of people to “invest” their money before recruiting more individuals and convincing them to invest their money. This process is repeated 13 times until you’ve exceeded the population of the earth and the people who signed up late have lost their money while the people who got in early directly benefit from each new recruit. A pyramid scheme is illegal but, if you call it a multi-level marketing company and sell products while simultaneously recruiting more people, you’re well within the limits of the law.

In the United Kingdom, multi-level marketing businesses haven’t quite gained as much popularity as they have in the United States but a few companies may have infiltrated your home without you even realising. Not too long ago you couldn’t venture outside your front door without being invited to an Avon, Ann Summers or Jamie at Home party. While the majority of us attended these parties in hopes of buying nice makeup, quality nipple clamps and a decent frying pan or two, the distributors were frantically trying to sell us crap we didn’t need in hopes of making a small amount of money.

The desperation to flog overpriced products is a direct result of the majority of MLM distributors making very little to no profit. For example, Avon sellers can make up to 25% on orders that are over a certain value but are expected to pay for brochures, bags and samples. This means they can make £50 on a £200 order but the cost of their time and tools to get them that small commission effectively means they've made no profit and are potentially looking at a loss.

One of the biggest MLM companies in the UK is Forever Living. In 2016 the company had over 6000 UK representatives all trying to make the fortune that Forever Living promised them. The products are aimed at the health conscious individuals who are looking for natural remedies to keep their insides in tip top shape. Aloe Vera is a prime ingredient in a lot of Forever Living’s products and you’ll often find their distributors claiming the products solve multiple issues from IBS to coeliac disease. In 2015, the Advertising Standard Authority cracked down on Forever Living and their false health claims but distributors continue to push the inaccurate health benefits of the products regardless.

Forever Living isn’t alone when it comes to its distributors pushing false health claims. Herbalife - yes the same Herbalife that sponsors Cristiano Ronaldo – has distributors who claim their products have cured people of cancer, ADHD, depression and diabetes. Both Young Living and doTerra came under fire from the FDA after their distributors claimed their essential oils cure cancer, insomnia, MS, autism and even Ebola. There is never any scientific evidence to back up these claims but some distributors have gone as far as hosting parties and presentations where they bring out an alleged cancer survivor and claim that, thanks to whatever product they’re pushing, this person is cancer free. The danger of making such absurd claims to potential customers doesn’t seem to cross anyone’s minds as the desperation to make a sale takes hold.

While the ASA in the UK clamped down on Forever Living for false health claims, the FTC in the USA took things one step further against Herbalife. After the federal-government sued Herbalife for misleading distributors, the FTC fined Herbalife for $200 million and demanded they issue refunds to 350,000 people. Unfortunately, the FTC did not regulate the cheque distribution well enough so people who had signed up to Herbalife solely for product discounts ended up receiving cheques. The FTC decided that if you spent at least $1000 with Herbalife between 2009 and 2015, you were entitled to the money regardless of whether you felt misled by Herbalife or not.

Due to the lack of care, a lot of people who have received cheques are putting the money back into Herbalife which only adds fuel to the “Herbalife did nothing wrong” fire. The FTC also refrained from deeming Herbalife a pyramid scheme thus allowing the business to continue operation - with major changes - to this day. The only real thing going against Herbalife right now is hedge fund manager Bill Ackman’s attempt to short their stock but, as he has lost money and has now capped his loss to 3% while Herbalife’s stock continues to rise, Herbalife keeps coming out on top.

Herbalife is in good company when it comes to lawsuits filed against them. LuLaRoe, an MLM clothing company that specialises in awful patterns, has faced multiple lawsuits in the last few years but the latest is a $1 billion class-action lawsuit. This lawsuit claims LuLaRoe encourages its distributors to take out loans, run up credit card debt and actually sell their breastmilk so they can continue purchasing an absurd amount of inventory.

The LuLaRoe start-up kit costs $5000 but does not provide an adequate selection of LuLaRoe's clothing for your inventory. In order to get the full collection along with additional sizes, you have to pay even more money on top of your initial $5000 investment. That in itself sounds ridiculous to most people but, if you target vulnerable people and tell them for a relatively small investment they can become millionaires, it sounds like the most appealing business strategy imaginable.

The promise of becoming rich for minimal effort is a dream pushed by the majority, if not all, MLM companies but the only ones who truly make that 6 or 7 figure salary they all not so humbly brag about are the ones at the very top of the pyramid. If you get in early and continue to recruit more and more people into your downline, you’ll pull in thousands while the poor people below you desperately put more money into their failing business.

You’ll see these mysterious MLM millionaires at seminars and events hosted by MLM companies for their distributors. The millionaires love to show up to these seminars oozing faux positivity (Herbalife even encourage their distributors to shake their vitamin bottles in excitement at their seminars) and brag about their fancy cars, lavish holidays and huge houses. They’ll tell everyone in the room that, so long as they work hard, they can have all of these nice things too. Once those brainwashing gatherings are over, the distributors of whatever MLM company they represent will immediately take to social media and tell anyone who will listen how they’re so close to becoming rich, how much they love their job and how you should get in contact with them to find out how you too can make a fortune.

The whole concept of advertising that you can make thousands to other people across social media seems absurd when you eliminate the idea that these businesses are pyramid schemes. If you can make a good amount of money by selling products, why would you want to recruit more people in your area to do the same thing when that would saturate your market significantly? Walmart wouldn’t say to Target that their business is doing brilliantly in randomville USA and they should open a store there too so why on earth would you, as a seller, want people stealing your customers? Logic would dictate that you would refrain from directly increasing your own competition but MLMs encourage you to do so regardless.

In spite of potentially saturating their market, the MLMers I have on social media do their best to recruit as much as possible but have yet to make that fortune. I won’t give you the name of the company they signed up to but I will tell you that 94% of its distributors made less than $20 in 2016. In that same year, 3.5% made $924 and less than 0.1% made that 6 figure salary they’re all promised. Only one of the girls involved in this company on my social media made it to “supervisor” status while the other participants are in her downline. That means she’s directly profiting from any purchase the other people she convinced to sign up make.

Every MLM company will argue that they can’t be a pyramid scheme because it’s the sale of the products that make money as opposed to recruitment. What they fail to admit is that distributors are purchasing the products to maintain whatever status it is they’ve achieved in their MLM or even to avoid being hit with additional fees. There is no real transparency when it comes to how the money is made. The only MLM business that is supplying a slight glimpse into sales is Herbalife . Due to the aforementioned FTC ruling, Herbalife now have to supply information regarding their product sales and are challenged to ensure 80% of their sales are from consumers as opposed to distributors.

There is a typical response from people involved with MLMs when faced with the “isn’t this a pyramid scheme?” question and that is to point out that every single corporation and small business is a pyramid scheme. Even former Herbalife CEO Michael Johnson has gone as far as saying this:

I go back to any company, I started in Disney as a director then I went to be executive vice president and then president of the international entity of the company so I moved up six or seven levels and, at the top, was sitting the CEO of the company, Michael Eisner. Is that a pyramid? Is that any different than we’re doing here?

This argument however, is fundamentally flawed. The major flaw of it is Michael Johnson doesn’t actually prove that MLMs are not pyramid schemes; it’s merely a deflection tactic. Another flaw is that, unlike MLMs, legitimate businesses do not encourage their employees to purchase their products or recruit more people so they can actually earn a pay cheque. With most jobs, you agree to work a set number of hours for a certain amount of money every day/week/month. You don’t have to worry about pounding the pavement looking for sales or posting positive messages to social media with an incessant number of emojis to accompany it in a bid to drum up some business. You go to work, you do your job and then you receive your agreed upon wage. That is not a pyramid scheme.

Multi-level marketing businesses avoid the “pyramid scheme” tag as they claim to focus more on the sale of products over the recruitment of potential distributors. Unfortunately, the laws surrounding MLMs are grey areas and state regulations are reserved more for anti-pyramid activity over multi-level business structures. For as long as MLMs can prove their money comes from product sales, regardless of who is actually purchasing those products, MLMs will no doubt continue to escape the pyramid scheme tag for the foreseeable future.

Although it’s estimated that approximately 99% of people involved in MLMs lose money, there are people who are successful and make that allusive 7 figure salary. While doing the research for this post, I went in search of these success stories and found very few. The “success” stories I did find were extremely vague and they all followed a similar pattern of losing thousands of dollars with multiple MLMs before supposedly finding success with their current company.

Multi-level marketing business opportunities are designed to be as appealing as possible to the most vulnerable people. MLM seminars are flashy, polished and peppy but the distributors can be rude, intrusive and desperate. The sales and recruitment tactics are often forceful and intimidating while the products are overpriced and generic. MLMs are not there to make you money, they’re there to make the people above you money and it’s usually your finances they’re taking. If you find yourself on the receiving end of a business pitch that’s supposed to make you rich with minimal effort, get as far away as you can. If it sounds too good to be true, it’s probably because it’s an elaborate pyramid scheme.

Exercising with Teddy

Friday, 22 December 2017

I thoroughly enjoy being one of those humans who wears a fitness tracker. I’m the annoying person who stands up every hour to walk 250 steps because my tracker has told me to and I check my step count periodically to ensure I beat the previous week’s exercise. It’s put me in direct competition with myself which I love and my dog benefits from my constant movement.

Black Labrador Retriever Cross

If you’re not familiar with my black Labrador-Retriever cross then I’d like to introduce you to Teddy; my 3-year-old former Guide Dog puppy that my fiancĂ© and I adopted last year. He is the sweetest, friendliest, wiggliest dog I’ve ever met and I protect and spoil him at all times like he is my child. Other than biscuits, he doesn’t want much and is happy so long as you sit on the floor and let him cuddle into you. He also occasionally sits on me which was fine when he was a puppy but now that he weighs 34kg I get pins and needles pretty quickly when he decides to plonk himself down on me. He’s too cute to turf off though so I just have to sit there with numb legs until he eventually decides to move.

The problem with Teddy being so content with very little is I fear he’s not getting enough exercise. He thoroughly enjoys walking the same routes and they’re not always lengthy walks. I can see how much exercise I’m getting thanks to my fitness tracker but that doesn’t mean a whole lot for Teddy as he’s not always by my side. Fortunately, Teddy now has a PitPat, a fitness tracker for dogs that securely attaches to their collar and monitors how much walking, running, playing and resting a dog does each day. You just have to sync it to a free app via Bluetooth and you get to see your dog’s daily stats and whether they’ve met target that day.

PitPat Fitness Tracker for Dogs

After inputting Teddy’s information into the app, his target exercise goal came out at 80 minutes which doesn’t seem like enough for Teddy but it’s completely doable. For the most part, he gets at least 80 minutes of walking a day and further playing time with our other puppy so he’s a very active dog. He isn’t one for chasing things and was never allowed a ball until he was withdrawn from training so, if you try to play with him, he looks at you in utter confusion and makes you fetch whatever it is you just threw for him. I swear the majority of my steps are a result of me throwing a ball and then running after it myself.

Teddy does have his mad moments though which typically happen in a forest I run with him in and when it’s snowing. He has a habit of running at top speed all over the place before stopping and staring at me with a look on his face that never fails to make me laugh before running around again. He doesn’t go far but if there’s water, you can guarantee he’s going to end up in it and I’ll have forgotten a towel.

Black Labrador Retriever Cross

Before Teddy wiggled his way into my life, I would very much avoid exercising beyond walking to the fridge and back. I understood the importance of exercise but walking from my house to the end of town just to come back again seemed rather dull. Having Teddy with me makes that walk a little bit more exciting (and challenging when he decides he wants to go one way but I want to go the other way) and it makes running so much more fun. I actually enjoy being outside now which amuses me greatly since I was the kid who would build a fort in their bedroom and sit in there for days on end reading book after book. I’m actually not alone in preferring to be outside and exercising more thanks to my dog, it’s quite a common occurrence for dog owners.

I’m so happy I decided to adopt Teddy when he was withdrawn from training. I can’t imagine my life without that weird little dog taking up all the room on the couch, getting his head stuck in the laundry basket and staring at me with his big brown eyes until I give in and feed him copious amounts of biscuits. He’s a happy dog who is probably currently hatching a plan to break into the room I keep his food in and eat it all again. He would’ve gotten away with it if he hadn’t burped.

Disclaimer: This post is in collaboration with More Than. The PitPat was sent to me (and Teddy). All opinions are my own.

Why I Hate Christmas

Thursday, 14 December 2017

Christmas Starts Earlier Each Year

Ok let’s get this out of the way, I don’t actually hate Christmas. Yes I am outing myself as a liar and I suppose a user of clickbait titles in the first sentence but hear me out, I love Christmas on the actual day and the few days leading up to it, it’s the rest of the time when it irritates me. As a kid, I was never that bothered by December 25th and everything that comes with it but then I joined the big bad world of adulthood and had to start fending for myself. Christmas isn’t as fun when you suddenly have to spend your own money and budget accordingly.

There are a number of things that have made me dislike Christmas over the years. It’s the fact I’ve been forced into listening to the same Christmas music playlist one too many times and that I can’t drive down a nice residential street without neon signs for “Christmas trees” blinding me. It’s the Christmas lights twinkling away around the gutters of someone’s house in the middle of November and it’s the sudden realisation that everyone I have to buy presents for has everything they could ever want or need but social convention dictates I have to get them something. It’s the Secret Santa for people I don’t like, it’s the Christmas cards to people I barely know and it’s because you’ve put on Elf for the 400th time this year.

Despite all of that though, I can just about stomach Christmas until I have to venture into a store to do my weekly food shopping. I’ve almost turned to the luxury of ordering my food shopping online despite the fact Tesco is 5 minutes from my house because I can’t handle the obnoxious amount of Christmas decorations and products plaguing every single aisle. Do we really need an aisle dedicated solely to Christmas chocolate that’s so full to the point where Toblerone practically jump off the shelf and smack you in the face? All I want to do is buy my odd looking sweet potato and get out; I don’t want or need any more tinsel.

The sad reality of my disdain for 3 months of festive crap ruining my already least favourite activity is that Christmas and the months leading up to it are always the biggest push for profits. Last year, the only big store out of both supermarkets and fashion retailers that reported a loss in sales was Next and they decided to use the tired old scapegoat of Brexit as an excuse for the dip. The supermarkets and stores that reported the best increase in sales were cheap and cheerful companies such as Aldi, Lidl and B&M. Asos reported an increase of sales by 18% in the UK and 52% internationally (unlike Next, Asos can actually use Brexit as a legitimate reason for this due to the decreasing value of the pound) which is possibly a result of the rise of internet shopping and the Christmas season requiring a number of sparkly dresses.

Doesn’t the likes of Aldi and Lidl doing better than Tesco and Sainsbury are not say something about us as a nation? There is an estimated £4.2 billion expected to be spent in the week before Christmas but with Brexit in the air and inflation rearing its ugly head while our wages remain the same, can we actually afford Christmas at this point? We have adverts pushing £99 interactive tigers that will be forgotten about within 5 minutes when approximately 20% of people in Britain live in poverty. There are people dipping into their savings for the first time just so they can put together a simple Christmas as the big blowout is out of the question. Cries for people to refrain from writing “from Santa” on all of the presents to their children are abundant on social media as there’s a worry other kids won’t receive the same kind of expensive toys and will wonder what they did wrong for Santa to ignore them.

This is the part where I’m sure someone would say “it’s not the present but the thought that counts” but let’s be honest, that saying is a load of crap. The present counts just as much as the thought which is why we spend hours fighting the crowds and scrolling through websites to find something that they maybe won’t throw out in the trash along with all the wrapping paper. No one wants to be the person who is giving bars of Milka chocolate that they got from Poundland when someone else is giving bottles of Chanel No 5.

Christmas has become one giant warped competition that we happily enter into because we’re told to. We’re shown shiny adverts that don’t actually mean much when it comes to Christmas but we talk about them regardless and then end up purchasing a load of garbage from those stores. Debenhams isn’t actually selling Ewan McGregor (and if they were I’d fight you for him) but the use of him in their modern Cinderella story advert got you talking and now you’re unconsciously making your way into Debenhams.

If we could eliminate the profit margins and the sales tactics, I’d be ok with Christmas but a part of me resents how over-commercialised it’s become. I don’t want to see fully decorated Christmas trees in the corner of supermarkets in September, I don’t want selection boxes diving off the shelf at me in October, I don’t want to walk around with The Final Countdown stuck in my head thanks to whichever supermarket used it in their advert last year. All I want to do is spend time with my family, eat chocolate for breakfast and laugh as my dog excitedly runs around the house with his new toy. You can keep your overhyped John Lewis adverts and vicious Toblerone. Now if you’ll excuse me, I have to buy someone a remote control Range Rover.

It’s not all doom and gloom since a lot of us get a little bit more charitable this time of year so, if you have a few extra pennies and you’re in a giving mood, here are a few ways you can donate time, money and presents to people who really need it:
- Cash for Kids is looking for toys for underprivileged kids. These can be dropped off at your local branch of Wickes.
- Oxfam sells fairtrade chocolate so not only are you giving money to charity, you’re also getting a few delicious presents for people.
- Supermarkets often have containers for local food banks; check what kind of food they’re looking for and purchase a few bits and pieces as you do your Christmas food shop.
- Your local animal shelters may require food, blankets and toys for the animals.
- Guide Dogs and Canine Partners require toys for their puppies in training. Please check what kind of toys they’re looking for before donating as some cannot be given to the dogs (for example, a certain former Guide Dog puppy of mine swallowed a “roadkill” type toy and had to have it surgically removed).
- St Mungo’s along with Street’s Kitchen are turning Euston station into a shelter for 200 homeless people on Christmas day. They’re always looking for additional funding and more volunteers.
- Any local charities will happily welcome donations and, if you have the time this Christmas, volunteering is a great opportunity. If you have a teenager who’s spending their time gorging on food and watching a movie they’ve seen countless times, encourage them to volunteer for a few hours. It’s not only beneficial to the community but it’s a great starting point for a CV.
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