Pyramid Schemes and Multi Level Marketing Explained

I have just done a radio interview about pyramid schemes and why they are a bad idea. I only had ten minutes so I struggled to get in all the information. Click on the image below to listen to it. I am at 1.32.

 

 

Here, I cover the information I gave, with references and further information that I couldn’t cram in.

What is a pyramid scheme?

It is useful to think of pyramid schemes on a spectrum. Just before you get to pyramid schemes, there is Direct Selling. This is where people sell things and get a commission from the sales. Like a double glazing salesperson who goes door to door and gets a cut of the sales. That is perfectly legal, although it can be hard on the salesperson to earn money if they don’t sell much.

On the other extreme, after pyramid schemes, there are Ponzis. These are schemes where people pay a fee to join. They have to recruit to people and they recruit two people, and they recruit two people. When the pyramid is a certain size, all the joining fees from the people on the bottom rung go to the person at the top. They then retire with a large amount of money and everyone moves up a rung. To be successful and leave with money, 64 people would have to pay the fee. Quite often, not al the spaces can be filled and the whole thing collapses. An example of a Ponzi is the Airplane game.

Ponzi schemes are illegal in the UK. In Albania in 1997, there was a civil war due to a Ponzi scheme collapsing. Two thousand people died and a government was toppled.

war.PNG

Between Ponzi schemes and direct selling, you have pyramid schemes. These are defined by the Fair Trading Act 1973, under the section called ‘Part IX Pyramid selling and similar trading schemes’. The law calls these schemes ‘Trading schemes’ that have to comply with the pyramid selling regulations. It talks about the pyramid structure of the schemes. In 1996, when the Trading schemes laws were being updated, there was an attempt by Amway ( a large multilevel marketing scheme) to have the term ‘pyramid scheme’ defined as an illegal scheme. The Government stated that they saw the terms ‘pyramid selling’ and ‘multi level marketing’ as interchangeable.

trading schemes

It doesn’t sound very good though, to say that you are in a pyramid scheme. It would be very hard to recruit people if you said you were in a pyramid scheme. The Direct Selling Association (DSA) are a trade association and promote these schemes, trying t make them appear respectable. Of course, they wouldn’t want to put off people joining their schemes so they say this on their website.

dsa

I challenge them to show me where in law it says pyramid schemes are illegal. I believe in fact checking and looking at the evidence and I will be happy to change my statements if they are wrong.

So what is a pyramid/multi level marketing scheme? The 1997 consultation document makes this clear-

what is

More simply, this means that people are in a trading scheme if they sell products, usually in their home, and recruit others to do the same. They can earn commissions from the sales of the people they recruit, and also get bonus payments. The structure is pyramid in shape. To be considered legitimate, they must adhere to a set of rules. These are The Trading Schemes Act 1996. The Pyramid Selling Schemes Regulations 1973 , and later The Trading Schemes Regulations 1997  lay out the conditions that a scheme must follow to be considered legal. If any of the conditions are broken, the scheme is illegal. Importantly, the law says that the definition of a ‘trading scheme’ remains the same as in previous legislation.

“trading scheme” has the same meaning as in Part XI of the Fair Trading Act 1973.”

These are the conditions-

Part 3. Adverts for the scheme must say the name of the company, describe what is being sold, and give the statutory warning.

Part 4. A written contract has to be given to anyone joining up.

Part 5. The contract can be cancelled within 14 days. People must be told of their financial obligations for the first year. Further minor contract details.

Part 6. When someone leaves a scheme, they are entitled to a refund for the products bought in the previous 90 days.

Part 7. Some technical rule about refunds.

Part 8. People in these schemes must be given receipts from the company for every transaction.

Part 9. Rules about commission payments once someone leaves a scheme.

Part 10. People cannot pay more than £200 in the first week of joining a scheme.

Part 11. People who join up are under no obligation to buy anything unless it was clearly stated in their initial join up agreement. They should not be tricked into buying anything.

Section 1, part 3 of The Trading Schemes Act 1996 says that trading schemes must provide products or services to external customers. The participants can’t just purchase products for themselves.

That is quite a list of rules that a company must adhere to be considered legitimate. You can see why it is difficult to determine if a scheme that is being presented to you is ok or not.

These schemes cause problems for people, regardless of whether they are legitimate or not.

These problems are-

  1. Dr Jon M Taylor analysed the statistics of MLMs and found that participants typically lost money in 99.9% of cases. He concluded that gambling on roulette gives 286 times more chance of winning money than earning anything in Amway. These statistics were presented to the Federal Trade Commission.

cartoon.PNG

Image from MLM-The Truth Website.

2. People lose money through paying for training, going to conferences, buying their own marketing products, petrol costs from driving everywhere, buying nibbles and drinks for in-house parties, buying samples, buying prizes for raffles, buying products for themselves, paying for stalls at fairs.

3. People in these schemes follow the Law Of Attraction where they are taught to believe that bad things happen if you have bad or negative thoughts. They also believe that good things happen if you exclusively concentrate on positive things. The Law teaches that if you want something, you can have it if you want it hard enough and visualise it enough, sending out the correct ‘vibrations’. You are encouraged to act rich if you want to be rich. The theory is that you acting all successful will attract success and will attract recruits who want to be like you.

Hence you see memes like this

thoughts

People in these schemes become afraid to think of their failure and will not allow themselves to focus on the money they are losing. This type of dangerous thinking could be called a mind control technique. People stop themselves from being critical and lose the ability to be rational. This is a very dangerous state to be in. It keeps people in these schemes longer than they would otherwise stay.

Another side effect of this way of thinking is that people are encouraged to cut contact with people who are being critical. I know people who have lost brothers, sisters and children through these schemes. They were taught that the negative vibrations from these people would bring failure. This further isolates people and they surround themselves by other scheme members who are all believing the same thing.

A further problem with this type of thinking is that when people inevitably fail, they will blame themselves. They will have attracted the failure to themselves. This makes them feel ashamed and they will often try to forget about the whole thing, and not come forward to speak about their experiences. So the deception continues. When people leave a scheme, they often find themselves ostracised from the group, who now see the person as a failure who could bring them down. They are now left feeling like a failure, lost friends/ family and no support group. This can make people feel terribly isolated.

4. People in these schemes are often seen making false health claims for the products they sell. This is because the products are expensive due to the added amounts that are needed to be fed up the pyramid. The sellers become desperate to make sales so that they cam achieve their monthly targets and to earn money themselves. The products are nothing special so people will lie about how good they are, breaking advertising laws and encouraging people to ditch their medications in favour of their snake oil.

Truth in Advertising (TINA) have documented some false health claims they came across with MLM products. They found that of the DSA member companies in the USA“( 97%) have made or are making — either directly or through their distributors — claims that the companies’ products (which include supplements, as well as devices, clothing, and skin care products) can treat, cure, prevent, alleviate the symptoms of, or reduce the risk of developing diseases or disorders, in violation of the law.”

aloe.PNG

autism.PNG

Who joins these schemes?

Anyone can be vulnerable to joining one of these loss making schemes. People who need money and are not getting what they need from their current situation could join. They are vulnerable because often it is a trusted person who approaches them to join and people don’t think their loved ones would lie to them. Often, people are promised that it is easy to earn money, just follow the system, recruit people and you will be successful. Examples are held up of the few people that earn large amounts of money.

2017-04-04 (2)_LIcheques.PNG

Image from TINA.org

It is easy to see why people would want to try pyramid schemes when their current situation is less than ideal.

Intelligent people and professionals are sometimes targeted because they can lend credibility to the company. I have seen adverts on Facebook aimed at NHS staff, trying to recruit them to sell MLM products and the opportunity.

It is important to realise that anyone is vulnerable to being recruited. The best protection is to educate yourself. Stay one step ahead and be as aware as you can. If you are on Twitter or Facebook, follow me or the MLMtruth coalition. There are a few campaigners you can add to the people you follow. Keep these scams at the forefront of your mind and you may be better able to resist.

What to do if a friend is involved

This can often be a very difficult situation. Your friend may be asking for your support and may be desperate to make a success of it. They may not know of the full facts around MLMs and may not be willing to hear it.

I wrote a blog post full of tips that you can look at for ideas on how to deal with your situation. Have a read of it here.

If you have a friend who goes from one scheme to another, get them to read this article on how to choose their next one. You may not be able to help them leave just yet, but you might be able to stop them joining one of the more ridiculous ones.

If your friend is maybe open to the idea of listening to reason and they want to hear what you have to say, get them to read this or this.

If you would like more of an insight into what is going on with your friend, you would do well to read up on cults. Pyramid schemes have been described as commercial cults or greed cults. Once you read up on why they are cults and how they work, it can be quite concerning. However, it will give you a good understanding of the behaviours you might be witnessing. Have a read of Steve Hassan’s work. He has written two really good books on the subject called Combatting Mind Control and Freedom of Mind. Margaret Singer has a good book on the subject too, called ‘Cults in our Midst: The continuing fight against their hidden menace’.

Cultwatch explain how cults work, and they delve into commercial/greed cults.

Steve Hassan has a website about cults that you may find useful.

I have written a piece on MLM and cults with John Evans from Juice Plus Lies website.

How to fight MLM

Become a Bot Watcher and join the team. You might be able to help us or the coalition if you have any skills or experience that might be useful in our cause. Perhaps you could help with some research or advise us.

If you have had an MLM experience, consider telling us about it and we can get your story out there to warn others.

Write emails to complain if you see something dodgy going on. Complain to fairs that allow MLM stalls. Complain to schools if they allow MLMs anywhere on the premises. Write to your MP if you feel things need changing. I have some letter templates here to help you guide your writing.

Report dodgy health claims to the ASA and get the advert pulled. Blog post on understanding about health claims.

Order something from the coalition’s little shop to help our cause and help spread awareness.

stock.PNG

 

Take the cup to work to spread the message. Keep cards in your pocket to slip to people that you might hear being prospected. Someone we know has been slipping the cards in library books aimed at MLM reps!

Please contact us if you need any advice with any of the issues discussed in this article.

If you come across a Ponzi scheme or a pyramid scheme that you suspect is an illegal one, complain to Trading Standards via their Consumer Line. You can also report illegal schemes and fraud to Action Fraud. They are part of the police.

Advertisements

The stages of leaving

From helping many people through their journey away from Multi Level Marketing, I have noticed common themes. I have attempted to describe them here. Have you been through these stages? Would you add any others?

Trigger

There is often a single event that unsettles people. This trigger goes against their personal ethics or crosses a line that is important to the person. For example, someone finds out that Younique is not as animal friendly as they were led to believe or they witness an upline encourage lying. Perhaps they find out the CEO is a homophobic tax evader or the charity the company supports is a sham.

Whatever the trigger is, it is enough to upset the person on a level where they cannot deny the wrongness of it.

Dawning realisation

Once someone has been awoken to the trigger they are more easily able to see other troubling things around them. They start questioning like never before. Niggling doubts become real concerns. The nagging upline can now be seen as the bully they are. The little lies they have been encouraged to make are now seen for the deceptive recruiting tactics that they are.  The rep becomes more and more horrified at what they have become involved in.

Fear

The fear at this stage is real. Timeless Vie looked into the fear that is instilled into MLM members. The fear is probably worse the longer someone has been involved in the company. They will have been faking it to make it. This would have involved presenting the image of success to their friends and family, telling them they are making money. They will have had conversations with friends and tried to persuade them to join them in this successful venture.  If they then decide to leave, they will lose face.

The worst fear will come from the realisation that friends will have been lost due to the MLM. Often people are encouraged to ditch their friends and family if they are less than totally supportive. They could have unfriended people and upset long standing friendships. Slowly their friend groups will have been replaced with their MLM family, their Senesisters, Y-sisters, other family/group name of belonging.

2017-12-17

 

It’s a bit culty actually. People spend a lot of time with their MLM ‘family’ and feel a real connection with them due to the immense amount of time they spend with them. The slow backing away from friends and the encroaching influence of the MLM group creeps up on people and they can feel quite isolated when they realise how alone they really are.

This isolation can be worsened when people left their normal jobs (‘sacked the boss’) or if they have mental health issues.

There will also be fear from the thought of how the upline and team will react. They will have seen people leave the team before and heard how they were treated. They may have witnessed the blocking, isolation and character assassination that often occurs to the traitors that leave. They are blamed for their failure and lack of commitment to the group. Again, the cult vibes surface here. The excommunication and vilifying of outsiders is a feature of cults and MLMs.

Action

In this stage, the person decides that they can no longer continue in the MLM and they have to do something. They know it will be hard to take action but they know that they must. The question here is what they need to do. Do they stay members and let it fizzle out? Do they have a raging argument with their upline? Do they just delete and block everything and pretend it never happened? Do they tell an old friend and seek some perspective? Do they contact Bot Watch, Elle Beau or Timeless Vie for support and advice?

There is no simple answer here as each person’s situation will be different and their ability to cope will vary. I would strongly advise, whichever tactic people use, that they stop spending money on the products/ training/ any MLM activity. Take time to decide what to do, but stop trying to make it work. Once you have gone this far down the decision making process, you will not be happy in MLM any more. The visor has been lifted and you can no longer pretend it might be ok. The person will be OK, but not if they stay in MLM.  It can be harmful to keep trying to lie to yourself and knowingly lie to others to recruit.

 

Consequences

This is the part where people have to deal with the upline, contact head office, admit to friends what happened. Sometimes people need to admit to partners about the money that they borrowed or face their downline and try to make amends. They need to deal with friends who can no longer quite trust them due to previous attempts to recruit them and the perception from friends that they were seen as a way to make money. There must be the problem of coming across people who are thinking ‘I told you so’.

This part can be very isolating and can be difficult when you have been told repeatedly to just follow the plan and to reject the ‘normal’ way of working by having a J.O.B. So much hope and energy and money will have been invested in the dream of succeeding in the MLM. The actual process of leaving will be unchartered waters and can be very scary.

Healing

This is a very important part.  People need to be able to sit back and lick their wounds. Often a mental health problem such as anxiety or depression could be worsened. Previously strong people might be feeling fragile. Their belief systems have essentially been shaken to the core and everything they were working for has come crashing down.  Sometimes a reaction can be to start blogging and becoming an active voice against the MLM can become all-consuming. The anger and distress can be overwhelming and people seek to channel it.

If you have been through anything like this, it is very important that you slow down and take time to process what has happened. Please realise that you have been subjected to many techniques designed to keep you in the company, spending your money and working every spare minute to send money up the pyramid to the owner. You have been manipulated and it will take a lot of healing to overcome the damage.

If you have a friend who has been through this process, be gentle with them and allow them to talk about their feelings. You may have to occasionally step in and offer  a different perspective when their faulty logic shines through. They may blame themselves for things that happened that wasn’t their fault. They may have a negative view of themselves and their abilities. Be gentle with them and be patient.

Please contact Bot Watch if you need help, support or advice.

Some other articles you might find useful on this site are

How to help someone in an MLM,

How to leave an MLM,

How to be a Bot Watcher,

Why do people join MLMs?

Network Marketing is a cult.

MLM Expectation vs Reality

The scandal of ‘cancer care kits’

These ‘cancer kits’ or ‘positivity packs’ are appearing all over the internet at the moment, and on the face of it, look harmless. Helpful, and charitable even. Increasingly though, it is making people feel very uncomfortable. I will attempt to explain why.

I think the biggest element that makes people feel uncomfortable is that it is hard to criticise someone when they are helping to raise money for a good cause, especially if they are doing it without making any money. Who wants to stop people raising money for cancer patients?

Part of my job brings me into contact with people who have cancer. I want to help them, not stop them from having nice things. I also want to protect them from being exploited, especially if a massive multi national company in America is going to profit from the sales, as well as people in a multi level marketing scheme. The people selling these kits are being less than truthful and I feel a lot of people are being taken advantage of.

Let’s have a look at some of the calls for help to make these kits and see if we can analyse what is going on.

This one was spotted on Facebook on Thursday 9th November 2017, and the packs were due to be dropped off on Friday 10th November.

2017-11-09.png

Her friends and family have bought these products from her. Forever Living will make a profit, the woman selling the products will be closer to earning her bonus, and her uplines will get a percentage.

 

2017-11-09 (1).png

The person writing the post says she ‘told her story’. Telling of a story is a common occurrence in MLMs. People stand up in front of a group and explain to them some health problem they had or some dreadful problem with a job, or something else that was bad in their lives. Then they explain how their MLM came along and everything changed. Their health problems went away, they left heir job, they found a ‘new family’ etc etc. Then they explain how they are so thankful for the amazing opportunity and then they subtly/ or not so subtly (depending on their audience) try and recruit people. The people in the above picture could be being subjected to a recruitment attempt.

The post claims that the products can ‘help with certain side effects’. It is very common for sellers of these products to make false health claims.

 

Have a look at this attempt to make sales and false health claims. This person has set up a Just Giving page where she can appeal to people to send her money so she can purchase products from Forever Living and give them to cancer patients. She wants to raise £1500 to make 100 packs. (Not sure why she says £300 when she says each pack costs £15 to make).

2017-11-09 (8)

 

2017-11-09 (6)

She claims that the aloe vera toothgel helps with mouth ulcers. This is an illegal health claim. Aloe Vera cannot be claimed to help with mouth ulcers.

She claims that aloe gelly can help with hair loss and dry skin. Again, this is an illegal health claim.

She recommends taking the gelly internally. This is not actually recommended by the scientific bodies that regulate medicines and herbal remedies. There is no evidence it is good for people, and some evidence it can cause harm.

She claims that aluminium is linked to breast cancer. It is not. She is scaremongering people into buying her products. Cancer Research UK are among many websites that debunk the myth that aluminium and cancer are linked.

2017-11-09 (7)

She claims here that the packs are ‘none profit’ (sic). This makes it look like she is doing this out of the goodness of her heart and not making any money. In reality, she has to sell these products in order to earn her bonus, and her upline will be getting a cut of the profits, as will their upline. By selling these packs, she is losing nothing, whilst gaining financially and making herself look good.

So what is being bought for £1500? A deodorant stick, lip balm, nail varnish and a card. I can’t help but wonder what else this amount of money could be spent on that would actually be useful.

 

This person is trying to raise £898 to purchase products from her team. She will benefit from all sales from people below her in her team.

2017-11-09 (3).png

 

It’s not just Forever Living that use this tactic, Modere are at it as well.

They use the exact same techniques- cancer patients, bogus health claims, aluminium free deodorant, being kind to needy people.

Here is a NuSkin rep raiding money for her kits. She omits to mention the NuSkin element in her Go Fund Me page. You have to go to her Face Book page to see that is what she is actually selling.

2017-11-11

Some reps have been more creative with their links to charities when getting people to buy their products.  This one seems to have swapped a proportion of her proceeds to a hospice, gaining sales and contact details of customers/ potential recruits.

2017-11-11 (1)

This one managed to persuade at least four people to buy C9s from her for a hospice fundraising activity.

2017-11-11 (2)

C9s cost £108.95 each. That’s £435.80 if only 4 people bought them. This effort raised £100 in total for the charity, costing the ‘customers’ £485.80. It earned the FL rep some great sales, enough to qualify for her bonus, new customers and some publicity.

 

This Consumer Reports article examines the phenomenon of ’cause marketing’ where product sales are related to a charitable cause. There are many negative aspects to it.  Here are a few  interesting quotes from the article.

After all, companies don’t do cause marketing solely to give, but also to get more of your business. Surveys show that almost 90 percent of consumers say that given similar price and quality, they’re likely to switch to a brand associated with a good cause. (Case studies suggest that is actually what happens in stores.) And businesses get to bask in the warm glow of good PR. “Nonprofits are lending their good name to the business, and consumers are well aware of that,” Irvin said.”

Think before using a product as a go-between, Krishna says. “Are you buying a $30 T-shirt from which $2 will go to the charity?” she said. “Or could you give $30 to the charity and do without the T-shirt?”

If you see someone selling some expensive products that they and their company will benefit from, think hard. Would it be better to donate the £10 directly to a charity? Where they can directly benefit, spending it where it needs to go? Would the cancer patients benefit from being given some toiletries and used as a sales prop, handed false health claims that could harm them, or would they be better served by their ward being given £1500?

I think cancer patients would be better served with direct donations to charity. I think friends and family of the reps would prefer not to be tricked into thinking they are doing a good thing. Many people find it hard to decline making a purchase to MLM reps at the best of times. People want to help their friends out and are often guilted into supporting them. If the donor is told their purchase will help someone fighting cancer, they will find it even more difficult to resist purchasing.  This is a very manipulative tactic.

Summary

Friends, family, social media contacts and the wider public are not told the whole truth about who will benefit from their purchase.

Cancer patients are given expensive packs of toiletries with false health claims.

Cancer patients are used to persuade people to help them. Sometimes their photos are used. All with the aim of making more sales.

Opponents of these schemes are reluctant to speak up, because who wants to be seen denying nice things to ill people?

 

 

 

 

 

The Legal Bit

 

This page is currently under construction but has been published early because it could be useful to people now, before it is complete.

I am not qualified to give legal advice and this page should not be taken as such.

I have gathered together some of the common laws that are relevant to trading schemes in the UK.

Timeline of UK Pyramid laws.

1973 Fair Trading Act 1973, section XI Pyramid selling and similar schemes is passed.

1973 Pyramid selling regulations were produced, based on the Fair Trading Act.

1989 Pyramid selling schemes regulations 1989 and amendments 1990 revoked the 1973 Pyramid selling scheme regulations 1973.

Trading schemes Act 1996 is passed which produces the Trading schemes regulations 1997. They revoked the regulations from 1989.

So now we have the Fair Trading Act 1973 (section XI), with some changes and the Trading scheme regulations 1997. Hopefully in the near future these regulation will be updated again to counter all the dodgy goings on that we see now.

 

 

What is a pyramid scheme?

In the UK, the term ‘Pyramid scheme’ is used interchangeably with ‘direct selling’ and ‘Multi Level Marketing’. MLMs tell you that pyramid schemes are illegal but their scheme is legal. This is not true. All these schemes are subject to the same rules and they are deemed to be legitimate if they adhere to the relevant laws. Here is an extract from the government research paper that describes the changes and development of the Trading Scheme Regulations Act. The paper describes how Amway tried to have the term ‘pyramid scheme’ designated to mean an illegal scheme. They were unsuccessful. We just have legitimate or non-legitimate pyramid schemes.

2017-05-07 (2)

 

Joining fees.

Regulation 10 The Trading Schemes regulations 1997 You cannot pay more than £200 in the first 7 days of joining a scheme.

2017-05-03 (2)

 

Cancelling a membership.

Also from the Trading Schemes Regs 1997.

Regulation 5 (e) you can cancel your membership within 14 days and get your money back.

You can return goods you purchased to a UK address and get a refund.

The scheme is not allowed to charge you for returning the products.

2017-05-03 (20).png

 

Returning stockpiled goods.

Regulation 6. You can return goods you purchased upto 90 days before leaving. The scheme has to refund you but can deduct a handling charge. This is because often people in these schemes end up stockpiling products because of the pressure to purchase and the difficulty in selling.

2017-05-03 (22).png

 

Members have to sell a product or service to others.

This is from The Trading Schemes Act 1996 section 1

A scheme is illegal if people are purchasing goods for themselves only or if there are no goods or services.2017-05-03 (26)

Translation in simpler language-

a) People in MLMs have to supply products or services.

b) These products or services

(i) are to be sold to customers by the people in MLMs or

(ii) Are to be used for helping the member make sales. For example-  samples                  for helping the member demonstrate products to customers.

Either way, products cannot be sold to members just for their personal use. There has to be involvement of customers.

 

Advertising MLM schemes

Any advert trying to encourage people to join an MLM must satisfy certain criteria under The Trading Schemes Regulations 1997, namely

The name and address of the company should be mentioned.

The goods or services should be mentioned.

The ‘statutory wealth warning’ (see next section) must be included and not be a smaller font than the rest of the advert, and must not be hidden away.

2017-05-06 (3)

 

Any written advert (e.g. Facebook post etc) that describes a brilliant opportunity that can earn you money, join me now, I need more people on my team etc should satisfy the above criteria. Many scheme participants choose to hide the name of their company or omit the warning. This is breaking the law.

 

Statutory Wealth Warning

This is schedule 1 mentioned above.

2017-05-06 (11).png

Making promises to prospects

This is from  The Fair Trading Act 1973, from the wonderfully named section XI called ‘Pyramid selling and similar trading schemes’.

2017-05-06 (5)

(3) means that an MLM participant cannot persuade another member or potential member to make a payment, based on a promise that they will get payments for recruiting others.

(4) means that the person making these promises is breaking the law.

 

Penalties for breaking the above laws

2017-05-06 (8)

 

This is from the Fair Trade Act 1973, section XI (Pyramid selling and similar trading schemes). I think it is self explanatory. People involved in these schemes might be encouraged by their uplines or company to break these laws. There are penalties and you could end up in prison.

Fraud

The Fraud Act 2006 describes the different ways people can be guilty of fraud.

2017-05-08 (2).png

Section 2 (fraud by false representation)  If a person lies, or implies an untruth, and they gain from this lie, and the lied-to person is exposed to a risk of loss, this is fraud.

Section 3 (fraud by failing to disclose information). If a person omits to tell something that they are legally bound to disclose, and this omission leads to someone being exposed to a risk of loss, or the liar gaining, this is fraud.

Section 4 (fraud by abuse of position). This happens when someone occupies a position where they should be safeguarding someone’s financial position. If they then lie or omit to tell the truth and that causes the liar to gain or the victim to be exposed to a loss, this is fraud.

I can think of lots and lots of examples where MLM companies and the recruiting members commit fraud. It is pretty widespread. These companies and the recruiting participants are taking quite a risk because the potential repercussions are a fine and/or up to  ten years in prison. TEN YEARS!!

The Fraud Act 2006 apples to companies, as well as individual people so that the people running the business could be found guilty and subject to a fine or prison sentence.

 

 

False advertising

Adverts in the UK are governed by the CAP code. The Advertising Standards Authority oversees this code. Here are some of the sections-

Section 8 Promotional marketing. This section reminds people to ensure their raffle/ lottery/ prize draw complies with the Gambling Act 2005 and data protection legislation. It covers offers that may be made, such as ‘buy one, get one free’, sales, competitions and prize draws.

Section 13 Weight control and slimming.  “A weight-reduction regime in which the intake of energy is lower than its output is the most common self-treatment for achieving weight reduction. Any claim made for the effectiveness or action of a weight-reduction method or product must be backed, if applicable, by rigorous trials on people; testimonials that are not supported by trials do not constitute substantiation”.

“Vitamins and minerals do not contribute to weight reduction but may be offered to slimmers as a safeguard against any shortfall in recommended intake when dieting”

“Health claims in marketing communications for food products that refer to a rate or amount of weight loss are not permitted”

“Claims that an individual has lost an exact amount of weight must be compatible with good medical and nutritional practice. Those claims must state the period involved and must not be based on unrepresentative experiences. For those who are normally overweight, a rate of weight loss greater than 2 lbs (just under 1 kg) a week is unlikely to be compatible with good medical and nutritional practice. For those who are obese, a rate of weight loss greater than 2 lbs a week in the early stages of dieting could be compatible with good medical and nutritional practice”

Section 12 Medicines, medical devices, health related products and beauty products. Adverts must not offer advice on the treatment or diagnosis of an illness or condition. They must not falsely claim that their products can cure anything. There are links in this section to other laws and resources to assist in working out if any rules have been broken.  The MHRA have a Blue Guide that has more details on medicine reporting.

 

More on health claims

According to Regulation 2 of the 2012 Human medicines regulations, and amended since then

A medicinal product is:

  • any substance or combination of substances presented as having properties of preventing or treating disease in human beings
  • any substance or combination of substances that may be used by or administered to human beings with a view to restoring, correcting or modifying a physiological function by exerting a pharmacological, immunological or metabolic action, or making a medical diagnosis

 

Medicinal products have to be carefully tested and registered with the MHRA for them to be considered medicines. To tell if a product has been through this process and is properly registered, it will appear on the MHRA’s medicines information database.   The European Medicines database covers the whole of the EU, including herbal remedies and veterinary products. Look up a product on these lists. If it isn’t there, no health claims can be made.

 

Libel and slander

When faced with criticism scheme participants will often cry slander or libel, often inaccurately. This is a brief description just to help clear up any misunderstandings if you are accused of either. The relevant law is the Defamation Act 2013.

Libel is defamation of a person that is written down. The complaining person does not need to prove they have been damaged by the comments made.

Slander is defamation of a person that is verbal. The complainer has to prove that they have been damaged by it.

For both types of defamation, the burden of proof rests on the defendant. For example, if I complain that you lied about me, and I have been harmed by that lie, you have to prove you are telling the truth. If you say it, you have to be willing to prove it.

If a comment is made and someone is upset about them but the comment is true, this is not libel or slander. This is why people say things like ‘I believe you are running a scam.’

To avoid being accused of libel or slander, do not tell lies on purpose. If you are saying something you think might offend or upset a powerful, rich and litigious company, be sure to make it clear your statements are based on facts or your beliefs.

 

 

To be added soon-

How to complain

How to leave an MLM

If you have made the decision to leave your Multi Level Marketing company, chances are you are filled with all sorts of emotions right now. And probably a few worries as well. Let me walk you through some things you can do to help yourself get out of your situation.

 

Be kind to yourself

More than 99% of people will lose money in an MLM, no matter how hard you try. It is not your fault that you did not become a successful millionaire like you were promised. It is not you that is the failure, the MLM system is set up to be like that. For the few to be successful at the top, the vast majority of people need to fail.

When you joined your company you were slowly and subtly subjected to techniques that changed the way you think. It is possible you ended up doing some things you were not proud of. Some people feel ashamed of some of the things they did and said and how they treated people.  Please do not feel that any of this makes you a bad person or that it is your fault it all went wrong.

You would do well to think of yourself as a victim of a fraud. Take some time to examine your thoughts and feelings and try to be kind to yourself. You have been through a traumatic experience that should not be underestimated.  If you are having trouble with your thoughts, you would do well to confide in friends and family or even seek counselling.

 

Reconnect with old friends

You may have unfriended people on social media or declined social engagements, withdrawing into your MLM. Perhaps you cut off friends and family that you thought were not being supportive of your ‘business’. These people cared about you and you may have pushed them away.  Maybe some of them unfriended you when you constantly tried to recruit them or persuade them to hold parties or buy products.

All is not lost though. Your good friends and your family will have seen what happened to you and they may well have been very concerned for you. They might be very upset at losing you. I have had some very distressed people contacting me about people they love who have been lost to them because the MLM took over their lives.

Reconnect with people that you have lost touch with. Don’t just add them as friends on Facebook because they might  think that you are still trying to sell them something. Send them a message or phone them. Explain what has happened and how you have left the company and you want to catch up with them. Chances are they will leap at the chance of meeting up and will be very happy for you.

Be aware as well though that relationships may be a bit strained at first as your friend could be wary and may not understand what happened. Be patient with them and explain you want to get back to the old you and you need their help.

Your upline

I think it best that you don’t tell your upline until you have formally left the company. There is always the chance they might persuade you to stay and you could be quite fragile at this point. Some uplines might be lovely about it but others could turn nasty. It is probably best that you don’t find out how they treat leavers until after you have left.  They may be charming at first and promise you things, sweet-talking you. Then they might turn to blaming you for your ‘failure’ and try to make you stay on a bit longer. Here are some things that were said to an MLM escapee.

“Thing is if you are 100000% dedicated and WANT it to work…. there’s no way you can fail

“Lots of people do give up. Everyone wants the success but not everyone is prepared to do whatever it takes. This business seriously changes lives.”

This is victim blaming. You cannot be successful just because you want it. You should not be expected to ‘do whatever it takes’ to make any money. You will have been having a bad experience because the system is designed for you to fail.  You are the gambler and the house has won again.

Your upline will most likely be finding it hard to recruit and make any money so you leaving is going to make their job even harder. They don’t want you to leave.

 

Cut all ties with your old company

Shut down your Facebook groups, unfriend MLM people that you do not know, and probably never even met. There are likely hundreds of them and they won’t even notice you disappear. Remove yourself from group chats, leave your MLM completely, do not even remain as a customer. Shut down any websites you might have set up. You need to make sure that you will not be tempted to join again. You do not need to see glimpses of special offers or news of a old upline doing well. You were tempted before and you could be tempted again. Are there any website or group fees that might be automatically renewed? Make sure you cancel them.

You need to protect yourself from having another go. Like an alcoholic giving up drink. You don’t want to have just one little drink in case you get drawn into alcoholism again. I think being in an MLM can be like gambling, hoping the next move will be a good one and you will be lucky this time. Throwing good money after bad, trying to win back more than you lost. The good feeling when you make a bit of money, ignoring the money you lost and will lose again.

You may need to assess for yourself who you cut out and who you stay in contact with. Perhaps a very good friend recruited you, or your sister. It is entirely possible to maintain good relationships with these people. You will need to think long and hard about how to deal with some people. If they turn nasty or start spreading things about you, delete and block. They can try and make amends when they see the light, but for now, you can do without that kind of aggravation and stress. They aren’t trying to help you, they are trying to hurt you.

 

Get rid of all your products

You might be able to resell a lot of it back to the company. They are obliged to buy back a lot of it, depending on which country you are in. Most MLMs have a ‘buy-back’ clause which is supposed to protect people from stockpiling products and being called a pyramid scheme. Have a look at your terms and conditions. You won’t be able to get all of your money back but it is worth a try.

If you are backing out less than 30 days from joining, you may be able to get most of your money back. This is to do with having a cooling off period when making an online purchase. Again, check your terms and conditions carefully.

Make sure you cancel any autoshipping agreements. These won’t automatically be cancelled when you leave a company.

Sell any of your left over products on Ebay. It’s what thousands of people end up doing. The MLM won’t be able to do anything about it. You won’t get a great price, but there isn’t much else you can do with it.

 

Believing in the product

MLM products are often very poor quality with no real customer base. The only customers are the people selling the stuff or friends and family of the reps buying out of a sense of duty. I have often seen people who have left an MLM but who still believe in the product and still purchase it. Please analyse the product and look at similar products. Note the price and quality difference. You will have been told lies about the products and have started believing in them. You have to believe in the product to sell it so you may have made yourself like it. Please be objective. Stop purchasing these products because you will be supporting the company and enabling it to continue.

Many MLMs make false health claims. Please look into a product if you have been using it for health reasons. Chances are, it isn’t good for you at all.

 

Here is an example of an MLM product-

2017-04-29

They sell 12 bottles of Cheddar water for £14.76 ( £1.23 a bottle). Go to Cheddar water’s website and you can get 24 bottles for £12.72 with 10% off at the moment as well (48 p each).

2017-04-29 (3)

How can they get away with that sort of mark up? Because they convince people that their product is great and everyone believes in it so much, they don’t question it.

Here is an extract from this MLM’s magazine.

2017-04-29 (6)

 

 

Deal with money problems

It is likely that you have been spending money irresponsibly, seeing it as an investment in your business. It is easy to spend a lot of money in an MLM. Add to this the factor that you probably really needed money when you started, could be a recipe for disaster.

Face your money issues head on. Be assured that your money problems would have continued to get worse had you stayed. At least now you can be realistic and unbury your head from the sand. I have written a blog post on money issues which has contact details for organisations that can help. Also there are some ideas on how you might make some money from legitimate sources. I haven’t been paid for any of the links or information in these posts. You will not be directed to my own dodgy scheme as you often see in MLM type blog posts.

 

It is not your responsibility to bring down the MLM company

Some people react to their experiences with anger and horror. They can become obsessed at fighting MLMs and warning everyone about them. This can sometimes come at a high personal cost, and overshadow people’s lives. The Freedom of Mind website has a very good article on this phenomenon which is worth reading.   It describes how people are confused and angry and need to get over what happened to themselves instead of lashing out and being consumed by the overwhelming need to do something.

It’s kind of like seeing a bad driver and getting road rage. It isn’t up to you to shout at the bad driver and stress yourself out about it. Accept there are bad drivers and you do not need to put yourself in front of them, swearing and threatening. The best thing to do is to drive defensively and keep calm. Don’t get into a fight where you might get hurt and your blood pressure is at risk.

 

Law of Attraction

This theory is rife among MLM members and you definitely will have come across it. How much you believe in it is dependent on how long you were involved. For those unfamiliar with it, here is an illustration.

2017-04-29 (9).png

If you believe in this, you may be thinking your ‘failure’ is due to you not trying hard enough or being negative. You didn’t believe in yourself enough. Again, this equates to victim blaming.

Please stop believing this sort of dross. You may need to examine your thinking for quite a while after leaving your MLM. You may experience your inner voice telling you that everything is your fault, you haven’t tried hard enough, that you have invited failure into your life.

Please, please be aware that if you have made the decision to leave MLM, this means you have become aware of the reality of your situation. You will now be able to make sensible decisions to get your life back on track. Don’t let the nagging ‘law of attraction’ crap cloud your freedom. You don’t have to pretend anymore that everything is ok. Be realistic and practical, drop the false hope and gratitudes that you may have been encouraged to indulge in.

You can be you again. No more pretence. No more prospecting, no more looking at people as potential recruits. Just be you. The you that used to have hobbies and interests and friendships based on fun and support, not based on who can give you success. Friends can be very forgiving if you give them a chance. Explain to them what happened to you and ask for their forgiveness if you need to. They have probably been waiting for this moment.

 

Thanks

The information used in this post has come from the experiences of people who have left an MLM, as well as from reading around the subject and from my experience of supporting people through the process. I hope you have found it useful.

 

I would like to thank “Chammy in real life“, Elle Beau and the numerous people who have explained to me over the last year or so what it is like being in an MLM. It is because of the people that speak out that we know what is going on.

 

If you have left an MLM and have any more tips to add, please comment below. Thanks.

How to help someone in an MLM

I have complied this factsheet in an attempt to help you understand what your friend or relative is going through and how you can best help them out of this situation. I have gleaned this information from reading books on the subject and background research on MLMs and cults.

A word of warning. This is a very difficult subject and people can be emotionally and financially tied up in these schemes and can be very vulnerable. If you attempt to help them and you feel you may be making it worse, back off. They will be vulnerable and you don’t want to make things worse. Just remember, you are on their side and want to help them.

Notes on this article

I will refer to the person in the MLM from now on as ‘your friend’ to avoid repeatedly having to say ‘friend/relative/colleague/person you care about.’

Some other sources of help.

Ethan Vanderbuilt has made this useful YouTube video of advice for people who have a friend or loved one in an MLM.

This article- “Emergency Handbook, what to do when a friend loves woo”  is very enlightening. It covers MLMs as well as pseudoscientific products. It is from the Skeptoid website.

Your overall aims and objectives

You should not be aiming at ‘getting them out of the MLM’. Instead, you should be trying to empower them to understand their situation and to allow them to autonomously decide for themselves that they want to leave. They should not be emotionally blackmailed or forced to leave. You should be trying to give them back their lost powers of critical thinking.

Accept that this may take time and cannot be achieved with one quick meeting and a handover of facts.

Do not go in with the attitude that you know best and they are stupid. You could make them dig their heels in further and upset your relationship. Your friend has been subjected to some very clever techniques and we need to tread very carefully.

 

  • Take the time to educate yourself about what MLMs are and how they operate.

You need to understand what you are up against and to understand their responses when you talk to them.

Here is a good simple video called ‘How to spot a pyramid scheme.’ It describes how MLMs work.

Here is a video showing people’s experiences in Herbalife. Their experiences are relevant to all MLMs.

Some blog posts I have written explain the realities of MLM- Expectation versus reality. An analysis of the payment structure in one of the schemes here. A page on the things people in MLMs say and the truth behind them. This last one will be particularly useful to read before having a discussion about MLMs. Visit Bot watch on Facebook for links/ articles/ facts.

Have a look at Timeless Vie on Facebook and their blog and read about the bullying that goes on and some of the uncomfortable facts about MLMs. Here you will read about how vulnerable people are targeted, bullied and lied to. You will learn about some of the people behind the companies.

Visit Lazyman and Money for well researched articles on specific MLMs and more general themes that will give you some facts.

For a more detailed analysis of the workings of MLMs you could visit MLM expert David Brear’s website MLM The American Dream Made Nightmare.

Also, you might want to join in conversations or ask questions of people who can help you with answers. Send a message to Bot Watch, Timeless Vie or the anti-MLM coalition (of which I am a part of) who can advise or send you links that will help. Or join in the discussion on Mumsnet and jump right in. Go to the Money section there and select the discussion starting with the words ‘MLM chat’.

 

  • Look after yourself

It can be very distressing having discussions with people about their MLM. They will feel very loyal to their company and could get very defensive towards you. You will need to assess how much effort you are willing to put in.  If you have been contacted by an old school friend and asked to join their team, just say ‘no thanks’ and then leave a link for them that explains your position. ‘People who care about you are worried‘ is a good one that lays out some facts explaining why MLMs are a bad idea. Whether you take it any further is up to you.

If you are trying to help a close family member or partner, you will need to be a lot more involved and seek support. You will need to involve other family members and good friends. Make sure they realise what the person is involved in. You will need a united front and you will need to help each other. It will be very stressful for you if you are so closely involved and you feel you are on your own. It may take time and some people may not see MLM as a real problem. It will be worth the effort though if you can all work together.

  • Be aware that your friend is not who they used to be.

Your friend will have been changed by subtle but clever techniques from the MLM. You may notice personality changes and strange behaviours that are out of character for them. This is what has prompted observers to call them ‘bots’. This refers to their robotic behaviours and scripted-style responses. They may start posting inspirational memes, being overly happy and optimistic, posting pictures on social media constantly saying how amazing their life is. They may be lying about things that you know just aren’t true.  They are literally trying to change who they are and emulate the people higher up than them in the pyramid. They will have been subjected to ‘mindset training’ that tells them how to think and act.

Elements of Neuro Linguistic Programming (NLP) are used to change the way a person perceives the world and interacts within it. They are trained to see the outside world as hostile and desperate, their MLM as amazing and a perfect opportunity. They think their MLM is benevolent and the products desirable. They become unable to perceive things from multiple points of view and can only see things as presented by their MLM.

They sometimes become addicted to working on their ‘business’ and gain warm feelings and reinforcement from any sign of success. See this person’s experiences on Timeless Vie.

To borrow Steve Hassan’s concept from  his book ‘Combating Mind Control,’  the person changes from Mary-Mary to Bot-Mary. Mary has been partially taken over by Bot (Robotic) personality but it is still attached to the original Mary. She is still in there somewhere.

 

  • Do not criticise the company.

Your friend will take any criticism personally. They will see it as an attack on them and their dreams. They have had it drummed into them that their hopes and dreams can be achieved by this amazing company. People who stand in their way are just haters and do not understand how wonderful this opportunity is. By disagreeing with it you are criticising their choice and jeopardising their dreams. They genuinely won’t understand why you are trying to destroy their dreams.

The biggest danger of criticising the MLM is that you will be considered a threat to their success and could bring them failure. There are many, many instances of friends and family being cut off because of that. There have been divorces, lost friendships and family splits. This is a real threat, even if you had a very good relationship before.

 

  • Don’t buy the products and don’t join their team.

If you do, you will be giving your friend false hope and making them feel their MLM is legitimate. It might make them continue in it for longer. You may feel guilty and made to feel you are not being supportive but you are helping them really.

If you find yourself at a ‘party’ where products and the ‘opportunity’ are being sold, do not feel pressured to buy anything. Do not feel you need to give an excuse because they will just find a reason around that. Say something like ‘No thanks, I won’t be buying anything’ or ‘no thanks, it’s not for me’. Don’t feel guilty for being impolite, that is just a social norm that is being exploited by the methods used in MLMs. The system is banking on you making a pity purchase. Do not support this system.

If you are invited to one of these parties make sure you don’t take any money with you. Then you won’t be able to crumble and buy anything. You can confidently tell the person that you have no money on you. There’s not much they can do about that.

  • The stages people go through on their MLM journey

Understanding what phase they are in will determine what your approach will be. Also woven into this will be how close you are to them, so you will have to tailor your approach to your circumstances. This following bit is based purely on my observations, readings and speaking to people who have left MLMs.

  1. Interested about the opportunity. Might ask for ideas/ advice at this stage. Tell them everything. Maybe show them something like Timeless Vie or the reality vs expectation information.
  2. Invested in joining up and assigned an upline. First party booked. At this point they will be very excited and have spent money on the scheme. They are full of hope but will not have been changed too much. You might still have a chance here, but tread carefully and don’t criticise MLMs just in case they are deeper than you think and they cut you off. You could try some gentle questioning (see later point) here and react accordingly. Often at this point, they will be closely supervised by their upline so it could be difficult to have an opportunity to talk to them about it.
  3. They will have invested a lot more time and money and not making much back. They probably will be being pressured by their upline to work harder and will be starting to blame themselves for their perceived failure. At this point they will be very vulnerable. They will be tired, stressed and financially stretched.  Concern and support are the best things you can offer at this point. Be there for them and show you care for them. Do not be tempted to buy anything.
  4. By now it will be painfully obvious to your friend that they are not going to make it in this MLM. They could well find that a piece of information at this time could be the straw that breaks the camel’s back. Tailor the piece of information you share with them to their own personal ethics or knowledge. Essentially here you are finding their ‘hot button’, the trigger that will get to them. Just like how they were targeted when they joined the company. There is plenty of information out there to chose from- facts about the top bosses, conduct of experts, targeting of vulnerable people, using sick children, illnesses and charities to sell products.

 

Presenting information to your friend.

 

Moments of doubt.

Your friend may express doubts about what they are doing. Don’t jump on this this and tell them you are glad they have found the truth and then proceed to tell them how dreadful you know the whole scam to be.  It is very common for people to have moments of doubt but then return to what they were doing. You will then be seen as a threat and will be avoided. Their defences will be up when they are around you. See it as a kind of bad relationship and they told you they have split up. Then they get back together again. Your relationship with your friend would be seriously damaged.

Instead, be supportive and gently questioning. Ask them why they are having a wobble. Help them explore their feelings. Help them navigate around the issues but don’t tell them what to do or think. If they ask for your opinion, say you are not sure and look for the answers together.

Having discussions with your friend.

 

Connecting with the non-bot part of your friend.

Your friend may be thinking and acting as Bot-Mary as discussed previously and your aim is to connect with the old Mary-Mary. Try to steer conversation to interests you used to share. Invite them to a film you know they would have liked before. Talk about shared memories. Ask them about something you once did together. Don’t let the old ‘Mary’ disappear and be taken over by ‘Bot’ where everything is all about the MLM. You could use this technique to steer conversation away from recruitment attempts or sales pitches. Show your friend that you still value them and want to connect with them.

Helping your friend see things from multiple perspectives.

This can be difficult but if it can be achieved, can be quite effective. They have been trained to see things from just one perspective- that of the MLM. They have lost the ability to see things critically anymore. If you can get them to see their situation from a different perspective, they may be able to start making connections and think their way out of their situation. You could ask them how their old selves might have perceived something. E.g.

Time- “Wow, Mary! What would your old self have said if she knew you would be up at 3am posting comments on social media trying to sell a face cream?”

Person- “How is your partner coping with all this working that you are doing?” Don’t get judgemental, just help your friend explore how their actions might be impacting on others. Has anyone said anything to them about how their MLM activity is negatively impacting on them? “Have you had much negativity?” Maybe explore what negative comments they have had and where these might have stemmed from. Try to leave your friend with something to think about.

Non threatening but relevant topics.

Your friend may have been programmed to shut down and stop listening when their MLM is being criticised. You may be able to discuss other relevant issues though that they do not see as threatening to their ideals. Typically people will be able to see flaws in other MLMs. They feel able to criticise and listen to criticism of other MLMs because theirs is not being targeted. You could try to present information about other MLMs and get their take on it. Show them an income disclosure for another MLM and see what their thoughts are on it. They might agree that the MLM in question does indeed have a dreadful pay structure. They may well be left wondering what their own income disclosure looks like. Plant that seed. Pursue it as far as you feel able. It doesn’t have to be an income disclosure, it could be an issue you have seen on Bot Watch or Timeless Vie.

 

Conclusions

I apologise for not being able to give you a simple, step-by-step account of how to help someone in an MLM. Instead, all I have been able to do is give you some understanding and principles to work with. I hope that some of these tactics can be used to help your friend. Remember, your aim is to support your friend and gently try to guide them towards being able to make decisions for themselves.

I wish you luck in supporting your friend.

If you have lost someone to an MLM and you are concerned about them and have been unable to help them, would you consider talking to us to add your voice to the growing number of people who are telling their stories? You will be treated in confidence and your concerns taken seriously.

Please feel free to comment below with any insights you have on how to talk to people in these situations. What have your experiences been? Have you come out of an MLM? What was it that made you see the truth? There are so many people out there looking for ways to help their loved ones, any insights would be useful, thank you.