Multi-level marketing is a scam — here's why people fall for it

Most Americans have been aware for some time that multi-level marketing schemes are bad — either through recent books or documentaries like LuLaRich. But did you know exactly how bad?

Bridget Read, author of "Little Bosses Everywhere: How the Pyramid Scheme Shaped America," wasn’t satisfied with their answers or explanations of what it was, why they’ve become so influential and how they are able to continue exploiting so many of the most vulnerable Americans with little transparency and government oversight. 

Our conversation was timely not only because of the history of multi-level marketing which, it turns out, has ties to right-wing free market ideology and anti-communism of the post-war era — the intellectual roots of the second Trump era.

It’s also pertinent because Trump 2.0 has unleashed a growing number of crypto scams, which Read sees as the continuation and the latest evolution of multi-level marketing ethos and methodology. 

Read discussed her research into the history of the 80-year-old industry, her firsthand experience of the MLM seminar event as an attendee and why Congress is unlikely to do anything about these practices anytime soon. 

This interview has been edited for length and clarity.

There have been several books like Vitamania that you mention in the book and several other works that explore MLMs, including the recent documentary about LuLaRoe. What was the moment that made you want to dive in more and take another look at this topic?

I wrote a short article about multi-level marketing during the height of the pandemic in 2021 for New York Magazine, because these companies experienced a little bit of a boom with all kinds of people, especially women stuck at home and looking to supplement their income. And I just couldn't really figure it out; so many things didn't make sense. And the work that was out there, including that LuLaRich documentary, really didn't get to the bottom of where it came from. Well, why is it so controversial? Where does it come from? Why is this thing legal? So there really just wasn't something definitive, and that's what I was searching for myself as a journalist. And then when I started digging into the story of MLM, it went so far back — because it was invented in 1945 — that it seemed like only a book enables you to tell such a  big story and to dig as much as you need to dig.

I had no idea that the MLM industry was 80 years old. What surprised you the most in your research for the book? 

The most surprising thing right away was that, once you really look at the primary source material on multi-level marketing, which at the time was called pyramid selling, they really didn't hide how it worked. It was a system where people were rewarded for buying in — that was the innovation at the time. Instead of just buying products and then being rewarded on how much you actually sold, you could get rewarded on just how many people you brought in under you, which they called purchase volume. And of course, now in the United States we consider legally a pyramid scheme to be just that — a system in which you're rewarded based on how much you're paid to bring in other people to also buy into the system. Legally, that's our precedent for a pyramid scheme. So when you look into the company itself, Mytinger & Casselberry, which eventually was neutralized and then was bought by Amway. And the industry wants to distance itself from multiple marketing, from a pyramid scheme. Again, there's so much evidence that there really isn't any difference. So the story that we've been telling in the U.S. for several decades, by this point that there's pyramid schemes and there's legitimate multi-marketing, right away that broke down for me.

Do you feel like the MLM concept is reinventing itself with the new technology, with social media, with crypto?

Yes, and it always has done that. That's a historical pattern over the last 20 years, in the 2008 Great Recession. MLM businesses pivoted from traditional marketing to calling themselves internet-based businesses, or work-from-home businesses. Many of them did away with the door-to-door aspect entirely, and it was all about recruiting people on the internet. Maybe they're coaches or they're having access to your proprietary program. Maybe they're learning how to do digital reselling anytime they have to buy something, and they get rewarded based on how many other people they're inducing to buy. That's how multi-marketing operates, and that's a pyramid scheme. In the olden days, you might have to lie about how rich you are and maybe borrow a car. But now you can just pose in front of a car or in front of a fancy house and make it seem like you live that lifestyle really easily.

In January, the Federal Trade Commission proposed a new rule on deceptive earnings claims. Is that a step in the right direction?

So FTC rules themselves are a little tricky, because they're not laws. This is not legislation, and so actually trade regulations can be rejected by Congress. So that's another kind of obstacle. There are two rules that were initiated: One is called a business opportunity rule, and that would bring MLM into a different category of business opportunity where they would be subject to more just financial disclosure. And the other one is an earnings rule that would require MLM recruiters to be very upfront about how much you can really make an MLM. The rulemaking process was stalled by the new FTC administration under Trump, and they have signaled that while the FTC remains active on some issues, the industry has signaled that they aren't as worried. They feel that they'll be able to really mount a robust defense if these rulemakings do get through the process. Even if they even make the rules, they'll lean on their members in Congress to resist the actual rulemaking. So it's a step in the right direction. I think, unfortunately, there's still a huge amount of resistance to actually doing anything this way.

One big part of the problem that your book is helping me understand a little bit more is just the lack of transparency. We have no idea how big this industry really is.

If those companies were really transparent about how many of those people there are, and then how many people are actually seeing any success in the company, then their numbers would be even worse than when they are forced to disclose it. I think that it would show a lottery. It would show hundreds of thousands of people paying in and a tiny fraction winning. And so that's why they don't do it.

In the book you discuss deep roots between the MLM industry and the right wing,  free market conservative thought leaders. Was that surprising?

We've always known, especially if you know anything about Amway, that multi-level marketing has tended to have a real right-wing bent politically and its free market, pseudo-populist rhetoric has long been associated with multiple marketing. And of course, you could draw that line to Donald Trump, but I really didn't know how far back that went, and that that predated the Amway founders with Leonard Read, who is a very influential free enterprise ideologue. You know, you could call him a libertarian; he was very influential in the free market, purist movement that rose with Ronald Reagan over the course of the 1970s and 1980s. And he showed up at the 10-year anniversary of the first multi-level marketing company, before the Amway founders were real political figures. So already MLM had this seed of a political movement. And what I've discovered in my research is that it really was an anti-communist project. Ideologically, it was a way to spread person to person on a grassroots level, real anti-communist views, a really anti-collectivist kind of model of thinking, where really the only way one can achieve success and even democracy is through ruthless, sort of capitalist accumulation and having every single individual be a deeply unregulated economic actor in a pure free market that's not impeded at all by the state.

You actually got to attend one of the MLM events in person, the Mary Kay convention in Dallas. What was that experience like?

It felt really important to me to try to be really as close as possible to the actual companies themselves and people involved in them, and not only speak to people who'd already been in and out. The conventions are really the high point for almost all distributors you talk to who do it long term, it really is the thing that makes a whole year of really hustling and hustling worth it. It was a moving experience. It was emotionally stirring. And I think that made me really understand how emotionally manipulative it is to be with all other people who are equally, if not more invested financially and emotionally with you, and to have everybody almost recommit every year together. That's what the convention does, if you were maybe feeling badly about how you were doing, should I really be spending money on this every year? The convention helps you keep going, because you're like, "Oh, I love my sisters, and we're having so much fun." So, yeah, it was a really important thing to do. And journalists don't get to be inside these spaces because they're closed to the public, so it was a priority for me to try to.