As the BBC’s The One Show recently covered, the collapse of Thomas Cook has brought the scammers out in force. But what ‘scammers’ are they referring to?
Apparently, they’re talking about MLMs, and the representatives who attempt to recruit people into their schemes, sometimes on the pretence of offering them a job or business opportunity.
Some MLMs go as far as advertising jobs with salaries on recruitment websites. But there is no salary nor genuine business opportunity. Instead, what they want you to do is invest upfront to become an unpaid sales rep, often by assuring you you’ll easily make back your investment and more. These claims are often backed up with social media posts boasting about the income, lifestyle and material possessions their MLM has brought them.
But their claims and promises are a lie. According to thorough research conducted by the Federal Trade Commission (FTC) in the US, an average of 99.6 per cent who participate in MLM schemes will lose money after expenses are taken into account.
This is something that is backed up by our own investigations into the MLM industry as a whole, and companies in particular. We have analysed the income disclosure statements published by the companies, and every single one shows the same depressing truth: most people make very little to no money at all.
MLM participants also have a significant number of expenses to cover before making any profit – from their initial starter pack, to monthly sales targets (usually covered from the participant’s own purchases), general business expenses, and requirements to attend company events and mindset training.
InteleTravel, for example, a travel MLM whose members are apparently currently approaching ex-Thomas Cook employees, charges a sign-up fee of £142, and monthly membership fee of £32 to access its commercial rates and booking engine.
With most MLMs it’s just not possible to make an income from retail sales. There’s too much competition, and the margins are too small. Instead, you’re often encouraged and incentivised to recruit people under you; the larger team you build under you, the more you earn. Often the only way you can progress up the company and earn larger commissions and bonuses is by building a team.
This puts MLMs dangerously close to being defined as illegal pyramid schemes. It’s worth noting that US company Advocare has been named as a “pyramid scheme” and was forced to change from its MLM structure this year by the FTC. They must also pay $150million towards consumer payments.
There is little difference we can see between the structure of Advocare and any other MLM, and we hope that the FTC will start to look at other companies, if they’re not already doing so.
So what should you do if you’re approached by an MLM rep with a sounds-too-good-to-be-true job or business opportunity? According to the BBC, “if people want money from you, it’s not an opportunity you need.” And it’s certainly not what you need if you’ve already suffered from the disappointment and financial shock of losing your job at Thomas Cook. Because, as lovely as it is to think there may be an easy answer to the situation you’re in, an MLM is not it. So please beware.
By Hannah Martin from Talented Ladies Club. You can read more about the MLM industry and investigations into individual companies on the Talented Ladies Club website.