Multi-level means multi-risk

It was with concern that I’ve seen through social media a friend of mine becoming very closely involved with a multi-level marketing

Throughout my career in journalism, I’ve tended to focus on local fraud. By that, I mean the way in which fraud can show up in rural Alberta and how it can affect the readers of the newspaper that employs me. I don’t like to think about my readers being ripped off by anyone.

It was with concern that recently I’ve seen through social media a friend of mine becoming very closely involved with a multi-level marketing group, and many people in my hometown apparently also seeking their fortunes with a “MML” group. I’m very concerned because, from what I know and from my experiences, what the owners and recruiters of an MML group infer or allude to and what actually happens to those recruited into an MML are invariably two different things.

A multi-level marketing scam (I will refer to MML as a “scam” because it feels so comfortable to do so) is, in essence, a type of pyramid scheme that happens to be legal. One person at the top of the pyramid sells the lipstick, body wraps, cooking supplies, motor oil, investment advice or other products to people at the next “level,” the sellers he or she has recruited. After purchasing these products, the second level is encouraged to re-sell products to a third level. What third level, you ask? Well, therein lies the crux of the situation. The second level is strongly encouraged and even trained to recruit the third level.

And then the third level is trained and encouraged to recruit and sell to a fourth level; then the fourth level recruits, trains and sells to a fifth level, ad nauseum. Obviously, as the products trickle down the multiple levels of the pyramid, profit flows back to the top person. Levels two and onward have to increase effort drastically as they try to sell product, but, by recruiting more people to the pyramid, are actually increasing their competition; only the leader at the top makes a clear profit, especially as the pyramid increases in size. More members mean, ultimately, more product being sold down the chain.

Why, you ask, is MML legal and a true pyramid scam illegal? Technically, because MML members get something for their money (lipstick, motor oil, investment advice etc.) it is not inherently illegal. A pyramid scam, on the other hand, generates money for he or she at the top, while providing nothing to recruits. That’s why a pyramid scam is a no-no.

Some MML groups or companies actually sell products of decent quality. Some sell products of questionable quality, while some peddle junk. Regardless of the quality, recruits on levels two and below think they’re going to get rich selling this stuff, but don’t think about the time and effort they’ll have to put in to recruit more sellers and convince people to buy their products on top of the fact they’ve already been shelling out their own money to buy products from the top level. Sales isn’t an easy job. It’s stressful and time consuming.

But there’s something else that bothers me about MML. The recruitment pitch always seem to involve a charismatic leader or spokesperson, who seems more intent on whipping the recruits into a frenzy than giving them advice on how to become a successful businessperson. A lot of the MLL training and motivation feels creepy to me, very similar to a crazy-eyed fanatical cult. I’m sure it’s no mistake; there’s an entire industry of self-help books, videos and speakers out there peddling platitudes and easy answers to the lonely lost souls of our communities.

I have a feeling anyone who has been convinced that MML is going to make them rich has a painful and disappointing revelation coming their way.

Stu Salkeld is the new editor of The Leduc/Wetaskiwin Pipestone Flyer and writes a regular column for the paper.

 

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