Both Buyers and Sellers Should Be Wary of Multilevel Marketing

William T. Jarvis, Ph.D.
July 2, 2006

Millions of people are selling health products as “independent distributors.” Product lines typically include vitamin supplements, weight loss formulas, fiber-containing snack bars, and/or herbal remedies. The National Council Against Health Fraud (NCAHF) has received so many inquiries about such products that it has developed some general caveats.

Consumers Beware:
  • Products sold in this fashion must be overpriced to finance the greedy profits promised to distributors.
  • Vitamins, weight loss formulas, and fiber supplements are ordinary items readily available in retail stores. Exaggerated claims are generally needed to justify extraordinary prices for these ordinary items.
  • Herbal supplements may contain potent drugs naturally or by adulteration. Herbal supplements are not manufactured or labeled according to the high standards American consumers have come to expect.
  • Salespeople, with little more than company training and subjective personal experience, may be misrepresented as “health counselors” when their real goal is to sell products and/or sign-up distributors. Selling health products one recommends poses a serious conflict-of-interest even when sellers are qualified and products worthwhile.
  • Salespeople are encouraged* to make oral health claims while companies seek deniability for themselves via fine print disclaimers. *Heroic anecdotes to be repeated in sales pitches are promulgated at pep rallies and/or in company publications.
Prospective Distributors Beware:
  • Multilevel marketing entices unwary people with the “sweet dream of success.”
    MLMs are driven largely by greed. The idea of working hard for a while, building up a substantial down-line sales system, and watching the money roll in, is appealing, but is “too good to be true.” Literature of the NuSkin company claimed that distributors could make $5,000 to $10,000 per month, but 98% of all distributors earned an average of $38 a month [1]. Even the well-established Amway company has not been able to deliver on the sweet dream for most of its people. In the mid-1990s, the company had 14,000 employees, over 3 million distributors internationally, and global sales of $7 billion. Yet the average monthly gross income of “active” Amway representatives was less than $90.
  • Some multilevel marketing programs are illegal pyramid schemes.
    A focus upon new distributor recruitment in hopes of sharing in their commissions can cause multilevel marketing programs to become illegal pyramid schemes. An important legal criterion is that in pyramid schemes, most of the products become inventory in the hands of hopeful distributors instead of being bought and used by consumers. Thus, the unwitting, hopeful distributor may be victimized twice. First as one stuck with goods that have little chance of being sold, and second, as one stigmatized by having been a part of an illegal business operation.
  • You may unwittingly become involved in quackery.
    A master in the art of quackery could not have devised a more effective way to turn ordinary people into quacks. First, studies have consistently shown that the primary marketing route for multilevel schemes—word-of-mouth via friends, relatives and neighbors—is the most common way people come to try quack remedies. Second, using testimonials as proof of effectiveness is quackery’s most common means of persuasion. A basic tenet of salesmanship is that to succeed you must believe in your product. Successful salespeople wanna-bes are told to become users so they can say “it works for me!” Third, quacks encourage the faulty validation of personal experience. Placebo effects alone are enough for a highly-motivated person to find something positive about the product. In the case of herbals, the naturally-occurring drugs that many herbs contain may give users a high, exert a tranquilizing effect, or produce some other pharmacological reaction. The drug-effect combined with the “sweet dream of financial success” cause users to make exaggerated claims for their products. Although individuals may control the extent of the claims he/she makes, it is easy to be deceived by one’s lack of medical knowledge and personal zealotry. Fourth, distributors are often taught to defend the company against alleged “persecution” by the FDA or others engaged in consumer protection. This type of siege mentality is another well established attribute of quackery.
  • You may pay a high social price.
    Because multilevel marketing is aimed at friends, relatives and neighbors, a distributor can easily become persona non grata. In 1987 Money Magazine reported on a woman who became so aggressive that she was thrown out of a PTA meeting. It took her a year to restore her good name in the community. Before becoming involved in multilevel marketing, you should consider how much value you place upon your good name. A short-term financial gain may not be worth what it cost in long-term loss of social status.
  • Doctors who become distributors may be guilty of unprofessional conduct.
    Distributors who are health professionals can easily abuse the unequal doctor-patient relationship by exerting undue influence, a form of unprofessional conduct. Also, many MLM companies eventually run afoul of the law. When they do, distributors are likely to be stigmatized. In common-sense terms this is known as: “if you want to dance, you must pay the piper!” Some professional groups specifically prohibit members from selling products directly to patients. The unavoidable conflict of interest that is created by a situation in which a health care provider profits directly from a patient is obvious. Just how perverse financial self-interest can be was shown by a physician who told a Registered Dietitian that if she did not recommend the brand of vitamins that he was selling, he would no longer refer patients to her for dietary counseling. Dietary counseling was one of her primary jobs at the hospital, and a lack of patient referrals could mean loss of employment for her.
  • Teachers and coaches who use their positions to influence students and athletes abuse their social status.
    NCAHF has received numerous complaints from parents, students, former students, and athletes whose teachers and/or coaches have attempted to recruit them as customers and/or distributors. Some teacher distributors have become so deluded that they have used parent-teacher conferences as opportunities to sell products alleging that these would improve the student’s academic performance. The lack of ethics of such conduct speaks for itself.

Dr. Jarvis, now retired, was Professor of Public Health and Preventive Medicine, School of Medicine and Public Health, Loma Linda University and President of the National Council Against Health Fraud. This article can be reprinted with proper credit.

This article was posted on July 2, 2006.