This is a long article, so I only posted some of it. The rest is here: https://time.com/5864712/multilevel-marketing-schemes-coronavirus/
Pandemic Schemes: How Multilevel Marketing Distributors Are Using the Internet—and the Coronavirus—to Grow Their Businesses
Illustration by Guy Shield for TIME
BY
ABBY VESOULIS AND
ELIANA DOCKTERMAN
JULY 9, 2020 6:29 AM EDT
When Christine Baker, a financially strapped stay-at-home mom to two little girls, made up her mind to lose 30 lb., she took a cue from a friend who’d gotten fit with Beachbody. The company’s online workouts and diet products cost Baker about $160, but they worked.
“Literally within 30 days, I looked and felt like a different person,” says Baker, of Roseville, Calif., who was so impressed with her 2015 transformation that she decided to become a Beachbody fitness coach herself. She started paying around $135 per month to set up her own online portal and to purchase Beachbody products, and she got to work looking for customers. Yet as she spent more hours trying to sell people on Beachbody and fewer hours working out herself, Baker says the pounds piled back on but the money did not roll in.
“You’re working your ass off. You’re having to check in every day in your group, you’re having to keep everybody motivated, because if they don’t lose weight and see results, they’re not going to keep buying from you,” says Baker, 48. “It was like I was just throwing money away.” By the time she gave up on Beachbody, Baker says, she’d lost several thousand dollars and countless hours that she wishes had been spent with her daughters.
Multilevel marketing companies (MLMs) like Beachbody, which rely primarily on distributors like Baker instead of salaried staff to sell goods and services, have long been eyed with suspicion by regulators, and for good reason. The Consumer Awareness Institute, whose research has been posted on the website of the Federal Trade Commission (FTC), found that 99% of people who participate in them lose money. “Statistically, it is more likely you will win the lottery than you will make hundreds of thousands of dollars selling for an MLM,” says Robert FitzPatrick, the co-author of False Profits, a book about MLMs, and the president of PyramidSchemeAlert.org.
But as the COVID-19 pandemic sends the economy into its worst tailspin since the Great Depression, some MLM distributors are wooing new investors with promises of big money and the opportunity to work from home–seemingly ideal for people who are unemployed. Facebook posts promising jobs are easy to spot, though the caveats that these opportunities do not offer guaranteed paychecks are rarely mentioned. “Worried about the Coronavirus?” reads a Facebook post by a Young Living essential-oils distributor touting its Thieves product line. “Thieves kills germs!” A similar post by a seller for Color Street, an MLM that sells nail-polish strips, urged members to “invest some of that stimulus check in yourself and start making money instantly.”
Attendees at Beachbody’s Coach Summit in July 2019 in Indianapolis take part in a group workout
Evan Jenkins for TIME
Some sellers imply that their non-FDA-approved supplements and essential oils can protect people from the virus. “With the flu and coronavirus spreading throughout the U.S., things are selling out,” wrote a seller for doTERRA, an essential-oils MLM. “If you are running low on these immune boosting protection items, now is a good time to replenish.” TIME reviewed dozens of similar claims made on social media.
The FTC has sent letters to 16 MLMs warning them against making claims about the coronavirus-related health benefits of their products, the potential earnings for investors, or both.
But the FTC is fighting an uphill battle as the $35.2 billion industry rapidly evolves, courtesy of the Internet. Unlike MLMs of yesteryear that relied on door-to-door sales, today’s MLM distributors can reach millions of potential recruits around the world on Facebook, Instagram and other social networks. Included in a distributor’s marketing tool belt are private messages, which regulatory agencies like the FTC can’t monitor. “[Social media] can be like a laboratory for deception,” says Kati Daffan, the FTC’s assistant director for marketing practices. “You’ve got all these members competing with each other to deceive more people. And they can do it however they want if there’s no one watching from above.”
And with so many people out of work, there’s an eager audience. The Direct Selling Association (DSA), the trade group representing MLMs, says that 51% of the 51 companies that participated in a survey in early June said COVID-19 has had a “positive” impact on their 2020 revenue; 59% reported the same in a later survey. DSA president Joseph Mariano says some sellers have inflated the potential rewards of investing in their companies. “You inevitably have a few overzealous people saying things that perhaps they shouldn’t,” he says. “When you have a vulnerable population of people who have lost their jobs or are concerned about losing their jobs, the fact of the matter is … direct selling is generally a modest supplemental income opportunity. It’s not something that is going to make you rich.” Mariano says the DSA has worked with the Better Business Bureau to monitor claims about products’ benefits and sellers’ potential earnings. The DSA-funded Direct Selling Self-Regulatory Council has referred four cases to the FTC this year for investigation of possible falsehoods.
But recessions tend to be good for MLMs, and this recession shows no sign of abating as new COVID-19 outbreaks slow reopenings. During the 2007–09 Great Recession, the number of MLM sellers began rising and went from 15.1 million in 2008 to 18.2 million in 2014, according to a DSA report.
Celebrity support helped. Soccer star Cristiano Ronaldo, lifestyle guru Rachel Hollis, former Presidents George W. Bush and Bill Clinton (after they’d left office), and private citizen Donald J. Trump have, over the years, appeared at MLM events or endorsed companies. Many influencers and athletes still back them, as distributors sign on to sell everything from leggings to home cooking products.
Attendees at Beachbody’s Coach Summit in July 2019 in Indianapolis take part in a group workout
Evan Jenkins for TIME
At most MLMs, investors, who are also known as distributors or sellers, make money by selling a company’s products and recruiting others to do the same. They then earn commissions or bonuses based on their recruits’ sales. But after investors have recruited as many friends and relatives as they can find, communities become saturated, making it difficult for new sellers to find customers. Countless distributors end up wallowing in merchandise they can’t sell and sinking into debt as they’re pushed to spend more money attending training seminars and bonding conferences, critics say. “They tell you if you don’t go to a training, if you miss a single training, you will never be successful,” says Illyssa Demarino, 31, a Phoenix bartender who tried three MLMs and spent thousands of dollars without making any money. “It’s so easy to get wrapped up in the cultlike mindset.”
MLMs fashion themselves as alternatives to the gig economy, which has been hit hard by COVID-19; apps like Uber are suffering as people avoid shared transport, while others, like Instacart and Doordash, are flooded with new workers, driving down gig pay. The MLM world implies a glamorous and safer alternative, and its prime target is women, who have been hit especially hard in this recession. Their service-sector jobs were the first to go when restaurants, bars, hotels and casinos closed, and when babysitting and housekeeping jobs ended.
Even before the pandemic, MLMs adopted the language of pop feminism with hashtags like #bossbabe and #momtrepreneur. Some sellers post doctored before-and-after photos for fitness and beauty products online in hopes of selling not just a payday but unattainable beauty.
“I was the perfect target,” says Jamie Ludwig, who in 2014 was convinced by a friend that she could make good money working from home in Kansas City, Mo., while selling weight-loss shakes and other supplements for an MLM called AdvoCare. “A new mom with baby fat I wanted to lose, desperate to be at home with my kids.” New Orleans Saints quarterback Drew Brees endorsed the company, which in Ludwig’s eyes gave it an air of legitimacy.
Attendees at Beachbody’s Coach Summit in July 2019 in Indianapolis take part in a group workout
Evan Jenkins for TIME
She and her husband Josh bought a $79 starter kit, and she scaled back her hours as a hairdresser to devote time to AdvoCare. All they had to do, their recruiter told them, was find enough buyers for the $900 in supplements that arrived on their doorstep each month. “I spent the entire time on the phone trying to sell, giving my kids no attention, working 50 or 60 hours a week, more than I did before,” says Ludwig, 39. She and her husband, who is 41, found only a handful of buyers. They gave up AdvoCare 18 months later, but not before spending about $300 (plus transportation, food and housing) to attend a three-day “success school” sponsored by AdvoCare to learn sales techniques. When their car broke down on the trip, the couple was forced to face their financial straits. For years, Ludwig could not bring herself to look at the boxes of unsold shakes in her pantry.