THE MODERN DAY ANT AND THE CRICKET

THE ANT AND THE CRICKET (PAST)

Once upon a time… one hot summer, a cricket sang cheerfully on the branch of a tree, while down below, a long line of ants struggled gamely under the weight of their load of grains; and between one song and the next, the cricket spoke to the ants. “Why are you working so hard? Come into the shade, away from the sun, and sing a song with me.” But the tireless ants went on with the work… “We can’t do that,” they said, “We must store away food for the winter. When the weather`s cold and the ground white with snow, there’s nothing to eat, and we’ll survive the winter only if the pantry is full.”

“There’s plenty of summer to come,” replied the cricket, “and lots of time to fill the pantry before winter. I’d rather sing! How can anyone work in this heat and sun?”

And so all summer, the cricket sang while the ants laboured. But the days turned into weeks and the weeks into months. Autumn came, the leaves began to fall and the cricket left the bare tree. The grass too was turning thin and yellow. One morning, the cricket woke shivering with cold. An early frost tinged the fields with white and turned the last of the green leaves brown: winter had come at last. The cricket wandered, feeding on the few dry stalks left on the hard frozen ground. Then the snow fell and she could find nothing at all to eat. Trembling and famished, she thought sadly of the warmth and her summer songs. One evening, she saw a speck of light in the distance, and trampling through the thick snow, made her way towards it.

“Open the door! Please open the door! I’m starving. Give me some food!” An ant leant out of the window.

“Who’s there? Who is it?”

“It’s me – the cricket. I’m cold and hungry, with no roof over my head.”

“The cricket? Ah, yes! I remember you. And what were you doing all summer while we were getting ready for winter?”

“Me? I was singing and filling the whole earth and sky with my song!”

“Singing, eh?” said the ant. “Well, try dancing now!”

THE ANT AND THE CRICKET (MLM)

Once upon a time… one hot summer, a cricket sang cheerfully on the branch of a tree, while down below, a long line of ants struggled gamely IN OFFICES,BPO’S,WORK SITES; and between one song and the next, the cricket spoke to the ants. “Why are you working so hard? Come into the shade, away from the sun, and sing a song with me.” But the tireless ants went on with the work… ”We can’t do that,” they said, “We must work for our nation’s progress, for security of future . When their is no economical development and their is global insecurity, the people are unemployed, and we’ll survive as we have developed our own secure system of economic prosperity,we have all types of industries,people are employed and there is no food scarcity.”

“There’s plenty of summer to come,” replied the cricket, “and lots of time to fill the pantry before winter. I’d rather sing! How can anyone work in this heat and sun?”

And so all summer, the cricket sang while the ants laboured. But the days turned into weeks and the weeks into months. Autumn came, the leaves began to fall and the cricket left the bare tree. The grass too was turning thin and yellow. One morning, the cricket woke shivering with cold. An early frost tinged the fields with white and turned the last of the green leaves brown: winter had come at last. The cricket wandered, feeding on the few dry stalks left on the hard frozen ground. Then the snow fell and she could find nothing at all to eat. Trembling and famished, she thought sadly of the warmth and her summer songs. One evening, she saw a person with tie and white shirt(approaching towards him) in the distance, and she trampling through the thick snow, made her way towards it. The person introduced himself as a gentleman and a heighly recognised person from USA,who has come here to show them how to enjoy life,buy what you dream,get twice what you have dream of…..but  the gentleman with tie said”i will show you the way but before that you have to promise me something”.OK said cricket,as she had no other option.these are my conditions

1. YOU CANNOT GO ANYWHERE WHILE I AM GIVING YOU THE PRESENTATION
2. SWITCH OFF YOUR MOBILE PHONES AS NOTHING IN LIFE IS MORE IMPORTANT THAN YOUR SURVIVAL
3. CLAP WHERE YOU LIKE THE IDEA

4.CONCENTRATE IN THE PRESENTATION AS IT IS GOING TO CHANGE YOUR LIFE.

The gentleman in  tie continued the MLM presentation….you  just buy the product and just refer to your friends….then your friends refer it to their friends….and you go rich….just imagine you are in a luxury car…a house with a pool in front…most interesting part you get this without working…see its new to your nation and you are the choosen one who is going to be the upline of all…they work and you earn….the ant will grab the opputunity…so join before them…

What i have to do,said the cricket?

Gentleman in tie-just pay the product price and you get the home based business free!!!!!!!!!!….and see your life changing.

Cricket-i dont have any money.

Gentleman in tie-do you wanna be like this forever…steel,beg ,whatever you can ,as it will change your life forever…rearly retierment….!!!!!!

Cricket-ok..i will ask the ants(she goes to the ants)

“Open the door! Please open the door! i have a great business oppurtunity. Just help me!” An ant leant out of the window.

“Who’s there? Who is it?”

“It’s me – the cricket. I’m cold and hungry, with no roof over my head.But i have a plan which could change your life and my life forever”

“The cricket? Ah, yes! I remember you. And what were you doing all summer while we were getting ready for winter?”

“Me? I was singing and filling the whole earth and sky with my song!”

“Singing, eh?” said the ant. “Well, try dancing now!”

SORYYY………plzzzzzz listern to me…

ok,said the ant.get its cold outside.who is this gentleman with you in tie??

ya, he is frm USA and he the man who can change  our life forever.

your life >>>ha ha ha ha ..the ants laughed !!

the gentleman started giving thepresentation……you  just buy the product and just refer to your friends….then your friends refer it to their friends….and you go rich….just imagine you are in a luxury car…a house with a pool in front…most interesting part you get this without working…see its new to your nation and you are the choosen one who is going to be the upline of all.its team work…its smart work..

The ants refused to join

Gentleman with tie-ok ….if you dont join now you will feel bad for it later..my dear cricket god don’t want that these little creatures be part of our big dream.silly small people small dreams……………

3 YEARS HAVE PASSED………………………..

Open the door! Please open the door! I’m starving. Give me some food!” An ant leant out of the window.

“Who’s there? Who is it?”

“It’s me – the cricket. I’m cold and hungry, with no roof over my head.”

“The cricket? Ah, yes! I remember you. And what were you doing all summer while we were getting ready for winter?”

“Me? I WAS DOING mlm FOR THE WHOLE 3 YEARS!

ANTS-what…??????did’nt you gain  anything??

Cricket-i sold my only property that my mother left for me…

ANTS-what property?

Cricket-i sold my mothers golden bangles and ear rings to join and promote this MLM.she must be upset with me.

ANTS-ok…what has happened we cannot bring it back.we will talk to ur mother.

Cricket-you cant…see died after see got the bad news….

ANTS-bad new????what bad news

Cricket-after i left your house that winter….i approached my cricket friends to join me…many of them joined me..it was going great for few months…one fine day we got the news that the company is shut down…the cricket started crying.

Ant-what happened to your friends the gentleman….???

Cricket-most of my downline joined for money..they left as they coulDnot reap profits.the gentleman left us AS soon as he got the news of the shutting down of company.He also took the money of people without joining them…i have lied so many people…i am a fraud…the product were not genuine.

Ants-why didnt you leave the MLM before as you knew about its working.you knew very well that its a fraud..

Cricket-i wannted to…but i could not do that as i wannted to earn money…grow rich…and more over i did’nt wanted to be called as a looser by you and all those who did’nt join me…

Ant-ok ……my dear friend lets work hard from now onwards and promise  that we will not engage in get rich quick(MLM) frauds.

Cricket-i have leared from my bad jugements.MLM means MEN LIES MEN…

Ant- ha ha ha ha ha…..their is no short to sucsess…hard work pays

 

 BY:MANOJ KUMAR NAYAK

EBIZ MYTH AND TRUTH

 

Do you wanna see India bleed???

Let the whole population of India be 100.suppose the cost of the course is Rs1.suppose everyone in this country joins Ebiz.what will happen?3 to 4 people will get Rs7 to Rs8 and 85% will be hoping to get commission like their upline n loose Rs3,thats 3 times they have paid for the course.the govt,will get a little tax.And the most interesting thing zero % growth in economy.My dear friends entrerpruner is a person who creats wealth.I have listern to a lot of ebizers comparing themself with that of MNC’s like TCS,WIPRO,INFOSYS etc.They even dont feel to describe working in MNC as slavery.It should be noted that a large part of national income is due to these companies,our skills are being sold.we are selling value added products.Remember that these company are the backbone of our growth.Ebiz neither creates income nor exports any products(its sale is ban outside India,thats why they dont give the CD pack to outside students or associates to stay away from litigation),it just distributes the wealth of the people among the people.its contribution towards the growth of India’s GDP is zero.poor people are always crushed in this circle.

JAI HIND

Books and films released on MLM

MANY BOOKS HAVE BEEN RELEASED BY PEOPLE AROUND THE GLOBE FOR A WANT GLOBAL CONSCIOUSNESS.

A RECENT FILM CALLED BELIVE IS A HIT AMONG YOUNGSTERS IN USA.MLM HAS BECOME A WORD OF LAUGH.IN INDIA THESE BOOKS ARE ALSO A HIT.ALL OF YOU CAN LOG ON TO http://www.falseprofits.com/ FOR MORE DETAILS ON THESE BOOKS.

 

 

MLM books that hooks

Comments Needed on the FTC’s

MLM loots

Stephen Barrett, M.D.

The Federal Trade Commission is proposing a rule to protect consumers from bogus business opportunities and enhance law enforcement efforts in this area. The rule is intended to cover business opportunities commonly touted by fraudsters, while minimizing compliance costs for legitimate businesses [1]. The proposed rule defines business opportunity as a situation that includes (a) a solicitation to enter a new business, (b) payment or a promise of payment to a third party, and (c) an earnings claim or an offer to provide business assistance. The FTC uses the Franchise Rule and theFTC Act to attack fraudulent business opportunities. However, neither is specifically designed for the typical scams that occur with these schemes. The FTC’s Notice of Proposed Rulemaking states that “unlike most franchises, business opportunities are permeated with fraud.” [1] A strong and vigorously enforced Business Opportunity Rule could protect millions of Americans from being swindled.

This article focuses on the rule as it applies to the opportunity to earn money in multilevel marketing (MLM), in which independent distributors sell products, recruit more distributors, and theoretically profit from both their own sales and those of the people they recruit. The Direct Sales Association, whose members include many MLMs, estimates that 13 million Americans are involved in MLMs today and that the sales of products and services through MLMs totaled more than $29 billion in 2003. Since 1980, I have examined the offerings of more than 150 MLMs that sell health-related products and found that all of them have misrepresented their products, their income opportunity, or both.

The proposed rule would include MLMs by eliminating the $500 minimum investment requirement from the Franchise Rule. The proposed rule would also eliminate many of the disclosures (such as trademarks) that are required for franchises but do not currently apply to business opportunities. Instead, it would require a one-page disclosure that includes:

• Whether or not sellers make earnings claims
• A list of any criminal or civil legal actions against the seller or its representatives that involve fraud, misrepresentations, or deceptive or unfair trade practices
• The terms of any cancellation or refund policies
• The total number of purchasers in the past two years
• The number of those purchasers seeking a refund or to cancel in that time period
• Names of people who can provide references

The proposed rule would also prohibit unfair or deceptive practices that are common among business opportunity sellers, including misrepresentations about the material terms of the business relationship, misrepresentations of endorsements or testimonials, and failure to honor refunds.

 

 

what you see is not what you do

 

 

Earnings Claims

The FTC’s current proposal in intended to require all sellers of business opportunities to provide sufficient information to enable prospective buyers to make an informed decision about their probability of earning money. As far as I know, no health-related MLM has ever voluntarily disclosed such information. The proposed rule would not require any seller to make an earnings claim. However, those that do would be required to have a reasonable basis and written substantiation and provide a printed “Earnings Claims Statement” that includes:

• The title ‘‘EARNINGS CLAIM STATEMENT REQUIRED BY LAW’’ in capital, bold type letters
• The name of the person making the earnings claim and the date of the earnings claim
• The earnings claim
• The beginning and ending dates when the represented earnings were achieved
• The number and percentage of all purchasers during the stated time period who achieved at least the stated level of earnings
• Any characteristics of the purchasers who achieved at least the represented level of earnings, such as their location, that may differ materially from the characteristics of the prospective purchasers being offered the business opportunity
• A statement that written substantiation for the earnings claim will be made available to the prospective purchaser upon request

I believe this proposal should be strengthened in several ways:

• Because the promise of high income is the cornerstone of MLM recruiting, all MLMs should be required to comply with the earnings-claim disclosure rules and no MLM company should be permitted to make “no earnings claims.” Second, great care should be taken in constructing the details of the rule so that MLM disclosures are clear, meaningful, and conspicuous. All MLMs should be required to disclose in a clear and understandable format (such as easily interpreted percentile columns), and separate from all other materials furnished to prospective distributors:
  • Total company revenue from distributors based in the United States
  • The total number of distributors in the United States involved in the company for at least three years or since the company’s founding if the company is less than three years old.
  • The number of terminations and the number of new recruits for each of the past three years in the United States.
  • The net increase (new ones less those who drop out) in the number of distributors in the various ranks of the upline as a percent of all who have been distributors for three years
  • The percentile incomes of all who have signed up for a distributorship in the United States. (In other words, “the top 10% averaged $_____, the next 10% averaged $_____, etc.”) Percentile income is far more meaningful than “average” income (total company income divided by the number of distributors) because including the income of top distributors would make the “average” higher than most distributors make. Income data should not be limited to those a company would describe as “active distributors.”
  • Income as described above should be defined as money the company pays to distributors minus all money the distributors pay to the company. However, it should be disclosed that this does not take into account distributor expenses such as advertising, exhibiting, travel, purchase of sales aids from non-company sources, or other overhead.
  • The percentage of U.S.-based distributor income derived from sales outside of the United States
• To ensure that the rules are conspicuous and to help the FTC monitor compliance, copies of all disclosures should be given to each distributor and posted on each company Web site. In addition, all distributor Web sites that solicit new distributors should either post the earnings claim statement or link to it on the company Web site. 
• To facilitate comparison and further consumer education, the FTC should maintain a separate Web site that contains the final Business Opportunity Rule, the individual company disclosures, and other information that would assist prospective business opportunity investors.

How to Comment

Commission is seeking public comments on the proposed rule. The FTC has published a list of questions it would like addressed, but comments are welcome any aspect of the rule. The comment period will close on July 17, 2006, and rebuttal comments are due by August 7th. Comments can besubmitted online or on paper. Online comments are limited to 4000 characters in the body of the message, but additional documents can be attached. Those filed in paper form should refer to “Business Opportunity Rule, Matter No. R511993″ both in the text and on the envelope, and should be mailed or delivered to: Federal Trade Commission; Office of the Secretary; Room H-135 (Annex W); 600 Pennsylvania Avenue, NW; Washington, DC 20580. If a comment contains any material for which confidential treatment is requested, it must be filed in paper form and the first page of the document must be clearly labeled “Confidential.” Comments filed in paper form should be sent by courier or overnight service, if possible, because postal mail in the Washington area and at the Commission is subject to delay because of heightened security precautions.

Additional Information

• Overview of Multilevel Marketing
• Complete Federal Register Notice of Proposed Rulemaking
• Copy of Proposed Rule (just the rule itself)
• Suggestions for Supportive Comments
• Statement from Pyramid Scheme Alert
• Statement from Douglas Brooks, Esq.
• Statement from Consumer Awareness Institute
• Industry Plan to Defeat MLM Regulation

Becoming Wealthy With MLM: A Myth

A General Letter to the 
Nikken Distributors in Holland

© Gerard Nederpel
Tineke Verton
August 2004

After much soul searching, Tineke and I have decided to put our Nikken activities on hold. Our decision is in itself nothing extraordinary. Hundreds, if not thousands of people before us have, ever since Nikken started their activities in 1997 in Holland, stopped their activities in the meantime. What is perhaps not so ordinary is the fact that we have decided to put our story on paper and to share this with others. We don’t do this out of disappointment or spite, but simply so that others may gain from our experience.

We have discovered that the promise that one can become financially independent with Nikken is no more than a myth. The 99.3% of the Nikken Distributors who are not financially successful at the moment (or who have not been successful in the past) will be able to ascertain that their lack of success was not because of them but because of Nikken’s marketing system. We are able to show that the chances to earn a “reasonable income” with Nikken is less than ONE PERCENT, let alone that one can become financially independent. Once again that is simply a myth.

Our Own Background

Tineke is a mother of three student sons of 16, 19 and 21. She became a Nikken Distributor in 2001. After 4 successful 21 clubs she eventually achieved the rank of Silver in November 2002. Gerard was during 20 years Chairman and Managing Director of a successful International Shipping Company in London. He became a Nikken Distributor at the end of 2002.

In February 2003 we met each other in a wonderful way. When we also discovered that we were both Nikken Distributors we regarded this as a special sign. Since that time Nikken became our joint passion and we tried to build up our business with a lot of enthusiasm. After 1-1/2 years of hard work we started to wonder why success kept eluding us. Were we really so incompetent? At the same time we were also amazed as to why so many of the other Nikken Distributors were similarly unsuccessful. We decided to find out why this was.

Searching for the Cause

The many American books written on the subject of MLM all indicate that the biggest problem in MLM is the constant attrition of people. It appears that many people who join a MLM organisation stop after a short while. We wondered what the cause of that might be. We could not accept that the thousands of Nikken Distributors who ceased their activities during the past eight years in Britain and the other European Countries were all lacking in talent.

On the face of it the sale of generally good quality products and the building up of a marketing organisation does not appear to be too difficult. Everyone with a bit of common sense, enthusiasm and perseverance must be able to do this. Why is it then that so few Distributors are able to create a reasonable income?

All MLM authors are unanimous in their opinion that if a Distributor is not successful that this is purely due to a lack of vision and perseverance. We doubted this viewpoint and we made a completely different assumption. We assumed that the lack of success was not because of the people, but because of the marketing system. If that assumption was correct, what was then the precise reason why people failed? We started to look at Nikken’s marketing methods very critically. After a while certain matters became clear to us.

We arrived at the following conclusions:

1. Nikken does not concern itself with sales but is predominantly interested in the recruitment of people
2. The customers are primarily the Distributors themselves
3. The Nikken products are not officially approved and also expensive. This combination means that the products are very difficult so sell to ordinary consumers.

Recruitment of People

It started to dawn on us that Nikken does not sell products but that their marketing methods are purely directed towards recruitment of people. The reason for that became now also clear to us.

People who join as a club member can be more easily influenced. Nikken is then in a position to tell Distributor members about their ‘great vision’. How they wish to improve the world, how they want to expand to 100 countries by the year 2010 and that they want to create 10.000 millionaires by that time and so forth.

Nikken’s marketing is further based on their 5 ‘Pillars of Health’ viz. ‘A Healthy Body’, ‘A Healthy Mind’, ‘A Healthy Family’, ‘A Healthy Society’ and ‘ Healthy Finances’. The background stories of each Pillar are so convincing that it appeals to almost everyone. Under ‘Healthy Finances’ the Business Opportunity is being presented as the most important Pillar of all.

The Method

When someone becomes interested in the Business Opportunity and signs up to become a Distributor, a carefully planned scenario begins.

One gets encouraged, preferably within 48 hours, to make a list of at least 100 names of family, friends and acquaintances. Under guidance of the Sponsor those people are then approached for an appointment. This meeting is carried out according to the special ‘ABC’ method with the Sponsor as leader. In this way everything possible is tried in order to convince the potential client to either buy something, to persuade the person to come to the next ‘Opportunity Meeting’ or (of course) to become a Distributor.

Thereafter the new Distributor is encouraged to go for the rank of Silver soonest possible by holding a series of 21 Clubs. A 21 Club means that 21 different people will, within a period of one week, be told the Nikken story and be given a free magnetic massage. Each of those meetings must last at least one hour. The purpose is to create a turnover of €5000.00. Failure to do so means that one misses out on a special financial reward and neither does one receive official recognition.

Compulsory Investments

In order to obtain the rank of Silver one has to have a turnover within one month of €20.000,00. One is also allowed to do this in four months but then the turnover has to be €25.000,00. Apart from this one must recruit minimum three people, each of which has to buy products for at least €1500,00. It is furthermore compulsory to follow a two day personal training course ‘Humans Being More’ and one has to purchase a Demo Pack and a Career Pack. Finally one must commit to purchase healthcare products for a fixed period of 12 months. All added together the compulsory investment comes to roughly €3200,00. It doesn’t stop there. Distributors are being pressurised to purchase extra products “in order to gain experience.” This means that most people invest at least €5000,00 of their own money.

Having achieved Silver is being presented as something very special. The truth is that people have worked very hard during sometimes very long days and weekends for very little income. We are certain that most Silvers invest more money in purchasing products than they earn in profits on sales or in commissions and bonus payments. 3

The Financial Reality

We estimate that only about 20% of the Silvers in Holland are active and we reckon that those earn about €800,00 to €1200,00 per month. The income of an active Gold we estimate at between €3000,00 and €4000,00 per month and a Platinum about €5000,00 to €7000,00 per month with perhaps an odd month where €10,000.00 or so may be reached. From this it will be clear that a ‘reasonable income’ only applies to the ranks of Gold and Platinum (and higher).

During our investigation we came across the following figures:

Number of Nikken Distributors in the Netherlands

	April 2003	May 2004
Total Number	1929	2911
Silver	111	165
Gold	3	11
Platinum	7	8

After more than 7 years of Nikken activities in Holland, only 19 of 2911 people (a mere 0.7%) earned a “reasonable income.” The figures show that whilst the total number of Distributors between April 2003 and May 2004 increased by 50.1%, the number of Distributors with a ‘reasonable income’ increased by only 0,.2%. This percentage would be even lower if we would apply the total number of people which have dropped out since 1997.

We suspect that the percentage of Distributors with a “reasonable income” in Holland is very similar to those in the other European countries.

Nikken’s Network Marketing System Is a Self-Propelled Pyramid That Moves Across Quicksand

The 0.7% of the Nikken Distributors in Holland who receive a ‘reasonable income’ owe this to the investments of the other 99.3% of Distributors. This proves that Nikken’s Network Marketing system is a self propelled pyramid which moves across quicksand. As long as new Distributors continue to be seduced to invest money, the pyramid keeps moving and the tiny top of the pyramid will continue to earn money. However, when the recruitment of new people were to stop, the pyramid would come to a halt and disappear into quicksand. This does not only apply to Nikken but applies equally to all MLM Companies, irrespective of the products they market.

The Nikken Company

Furthermore we have some doubts about Nikken itself. The story goes that in February 1998 Nikken received a Dun & Bradstreet rating of 5A1. We wonder whether Nikken would receive this rating today. It is a well known fact that due to market circumstances turnover and profits can change rapidly. Nikken gives us the impression that they are a closed and a somewhat mysterious company which doesn’t disclose anything about their turnover and business strategy. The only thing we ever read about their turnover was in their magazine of January 2004 when they talked about 1,5 billion dollar. Was that the t/o for 2003 and what has the t/o been for the other years? Who are actually the shareholders (stockholders) of Nikken? How big are the cash reserves they have built up since 1975? Those must be substantial, mustn’t they?

Those are a number of things we reckon that a Distributor should know so that he or she can arrive at a considered decision whether Nikken is the right company for them. In “Nikken shows the way” in their magazine of November 2003 Distributors are described as “business partners.” Why should business partners not be entitled to this kind of information?

Another big disadvantage of a MLM company such as Nikken is that they hold all the power. Apart from the fact that they can alter their prices and assortment of products at any moment, they can remove a Distributor from their computer system without any reason. One has no protection nor any rights and cannot therefore fight such a decision.

Nikken arbitrarily decides what the prices of their products should be. Not only that. They have created an ingenious system whereby each product is allocated Qualification Points (in order to reach a certain rank) and Commission Volume (CV) over which commissions and bonuses are being calculated. We have established that in Europe Nikken reduces the CV value by 10%, 25% and in some cases even 50% (Pi-Mag Watersystem, Optimiser, Cardio-Strides, Greenzymes etc.). Nikken does this in order to reduce the amount which they have to pay out in commissions and bonuses. In America the CV is equal to the wholesale price so why not in Europe? Is this the reason why Distributors on Nikken’s website can see what their turnover is in Qualification Points but not what their CV is? Has this deliberately been done so that Distributors cannot check whether their commissions and bonuses have been calculated correctly?

Finally we are of the opinion that, since Nikken receives their money in Europe mainly in Euro’s and given the fact that the Euro has shown an increase of 29% versus the Dollar during the past two years, the CV should have been increased by 20% to 25% instead of decreased.

Final Conclusion

According to Nikken, they were successful in Japan and the Far East between 1975 and 1989. Apparently this was on the basis of using a network of traditional agents. In 1989 Nikken decided to expand to the USA and then chose to change to the MLM system.

The psychology of their marketing plan is so subtle and sophisticated that it is frightening. Everything is deliberately aimed at the goodness of human beings. Their deepest emotions are being stirred. Nikken talks about a better world, a cleaner environment, a ‘new economy’ in which everyone has an equal and honest chance to become financially independent. Moreover Distributors are being told that they will have more time to spend with their family, that they will be able to do more for society etc. etc. Who wouldn’t get attracted by such ideals?

However, our investigation shows a completely different picture. People are led to believe that as long as they believe in the vision of Nikken, that if they are willing to change, that if they develop a tougher mental attitude and show a great persistence that they can become financially independent. Alas, Nikken’s Business Opportunity is no more than a mirage. From afar it looks attractive, but as one gets close it evaporates.

As already mentioned Nikken’s Marketing system is particularly geared up to push people to the rank of Silver. Once attained one discovers that this rank does not mean very much. The arsenal of family, friends and acquaintances has meantime been exhausted, trying to interest new people outside one’s own circle is harder than thought and the products are difficult to sell. For a while Silvers continue to do their utmost but in the end most of them cease their activities, believing that they are to blame for having failed.

It is clear that the constant recruitment of new people and trying to get them to become Silver is where Nikken’s turnover comes from. This is what keeps Nikken alive. This is the growth which the pyramid needs in order to keep moving. Once recruitment stops Nikken will be finished.

Many thousands of people in Holland and in Europe are being misled by various MLM Companies in a similar way. They get lured with the “American Dream” of financial freedom, but only the owners and shareholders of a MLM organisation together with a minute number of their top Distributors become wealthy. For more than 99% of the people this “American Dream” becomes a “European Nightmare”.

Our Challenge

In the article ‘Healthy Millionaires’ of Nikken’s magazine of August 2004 Nikken’s President Mr. Kendall Cho confirms that financial freedom is being used as a bait and that the key is recruitment of people.

We say that his ‘Vision 2010’ is absolute nonsense and we would like to ask him the following questions:

1. How many Distributors are there worldwide and how many of those are Millionaires?
2. How many Distributors are there in each of the 15 European Nikken countries and how many of those have the ranks of Silver, Gold, Platinum, Diamond, Royal Diamond and Royal Ambassador?
3. What is the average monthly amount that Nikken pays to the Silver, Gold and Platinum ranked people?

Only an honest answer to those questions will make it clear how realistic or unrealistic the chances are which Nikken offers on what Mr. Cho calls: ‘a life-changing business opportunity which will make your dreams come true’.

Finally

We are aware that we may cause quite a stir with this letter. Especially with those who have been connected with Nikken for some time. We can only say that is has been difficult for us too having had to face this reality. Or as Tineke said ‘We felt as if we were married with Nikken’. We wished that it were different but we cannot deny these facts. If you have not been successful financially than you now know that this was not due to any fault of yours. The people who are Gold and Platinum will have to consider whether enticing people with beautiful but unattainable promises agrees with their own integrity or not.

Postscript (July 2006)

Nikken did not officially acknowledge seeing our letter, but they responded by terminating our distributorship! We received quite a bit of written abuse by several of the leading Dutch Nikken distributors (as one would expect) but no one has been able to refute any of our claims. Probably because they cannot. Figures don’t lie.

Typical MLM Misrepresentations

MLM is just another name of deception

John Taylor, MBA, PhD.

Law-enforcement agencies do not require honest disclosure of essential information to MLM prospects. I have examined the compensation plans of more than 250 leading MLMs and found that virtually all hide the near-zero odds of making a profit. Here are the typical ways they exaggerate to new recruits.

Misrepresentations	The naked truth
A great “income opportunity,” with huge incomes reported for many.	Nearly all new recruits lose money. A few at the top of a pyramid of participants are enriched at the expense of the many downline participants, at least 99% of whom lose money.
Everyone can do this and earn a good income.	Holding up top earners as examples of what others can do is deceptive. It is unfair to sell tickets when—for nearly everyone—the ship has left the port.
“Average earnings” statements on official reports may make MLM’s appear highly profitable.	Such reports are full of deceptions.
Products can purchased wholesale and be resold at retail prices for a handsome profit.	The actual retail market is likely to be small. Products are high-priced and sold primarily to recruits rather than to consumers who are outside of the distributor network.
This is a legitimate business—not a pyramid scheme	Product-based schemes are the most extreme type of pyramid scheme, with the highest loss rates approximately 99.9%— far worse than most games of chance in casinos.
Work for only an hour or two a day, and build up a “residual income” that will allow you the “time freedom” to quit your job and spend more time with your family or do whatever you want.	Recruiting MLMs are multi-level marketing programs that reward aggressive recruitment far more than direct sales of products to legitimate customers. To profit in a recruiting MLM, one must work long hours and be willing to continue to recruit to replace dropouts. One must also be willing to deceive large numbers of recruits into believing it is a legitimate income opportunity. Recruits primarily fatten upline commissions.
The job market is not secure. The stock market is even shakier. MLM offers a much more secure and permanent (residual) income.	Quite the contrary. MLM is far more risky than either the stock market or the job market. It even makes gambling look like a safe investment by comparison. Very few recruits will sell enough to generate residual income.
Standard jobs are not rewarded fairly. In MLM, you can set your own standard for earnings.	Fair? Most MLM compensation plans are weighted heavily towards those who got in early or who frantically scrambled to the top of a pyramid of participants.
If not legal, the program would have been shut down long ago. MLM’s have survived legal challenges. The fact that they are still around tells you they are legitimate.	Consumer protection officials are reactive, not proactive. Since victims rarely file complaints, law enforcement seldom acts against even the worst schemes. Victims don’t complain because they blame themselves, and they fear self-incrimination or consequences from or to their upline or downline.
If you fail at this program, it is because you failed to properly “work the system.”	The system itself is inherently flawed, requiring an endless chain recruitment of participants as primary customers. The vast majority will always lose money.
In any business, one must invest time and money to be successful.	Committed MLM participants may continue investing thousands, and even tens of thousands of dollars, over many years before running out of money or giving up. The more invested, the greater the loss, unless you are willing to deceive enough people to rise to the top of a pyramid of victims. In legitimate companies, salespeople are not expected to stock up on inventory or subscribe to monthly purchases. But in recruiting MLM’s, incentivized purchases (required to participate in commissions and/or advancement) usually turn out to be disguised or laundered investments in a pyramid scheme.
MLM is the wave of the future. In fact, ours is experiencing phenomenal world-wide growth. So get in on the ground floor of this great opportunity.	MLM’rs have been saying this for twenty years, but MLM still accounts for less than 1/2 of 1% of consumer purchases—even though MLM companies have numbered in the thousands. MLM’s come and go, as do new recruits, 99.9% of whom drop out. Long-term MLM growth is a myth.
Saturation never happens. Turnover, as in any business, is a reality that assures an ample supply of available prospects.	With few real customers, MLM products are sold by recruiting a revolving door of new “distributors” who buy products to “do the business.” And since people perceive the opportunity as dwindling with each new “distributor,” market saturation requires promoters to recruit elsewhere. So MLM’s quickly evolve into Ponzi schemes that require new markets and/or new product divisions to repay earlier investors. It’s not turnover, but continuous churning of new recruits to replace dropouts
The demand for these MLM products is growing at a rapid rate. They literally sell themselves.	The sale of products is distributor-driven, not market driven. Most products are sold to new participants to get in on this “ground floor opportunity.”
It takes time to build any business. This is not a get-rich-quick scheme, but a “get-rich-slow” program. Don’t expect instant success.	Promoters tell recruits that their programs as a business, but defend it to authorities as a direct selling opportunity. However, in legitimate direct sales programs, salespeople earn commissions right away and don’t have to wait months or years for them to exceed expenses.
Take advantage of momentum and windows of opportunity.	This kind of appeal has been used for twenty years. In any endless chain scheme, the momentum cannot continue indefinitely, leaving those who come in later in a loss position.
In this new (MLM) program, you can be the master of your destiny.	You will be a slave to the phone, to meeting the qualifications for commissions and bonuses, and to continual pressure to recruit new participants to replace dropouts. You will also be caught in a money trap of hyper-consumption.
Unlike franchises, business startups, or sales of existing businesses, you can start an MLM business with very little capital.	MLM’s typically urge new recruits to buy products on a subscription basis, invest in sales materials, and pay for ongoing training until they run out of money or give up.
The fear of losing potential income by not recruiting aggressively is a great motivator.	If participants understood what was happening to them, they would fear accumulating further losses by continuing to invest in the MLM.
You will belong to a great support team. In MLM, you have a whole network of people willing to help you succeed and be your friends.	Some MLMs operate like a cult with an us vs. them mentality. Watch how quickly the team ostracizes you if you quit or discover contrary information about the legitimacy of the program.
You will be offering people you care about the very best products available for promoting their health and well being.	No matter how high the quality of the products, investment in products for which you do not have orders in hand is the hallmark of a product-based pyramid scheme.
Our products are unique and consumable—perfect for repeat business.	MLM products are typically potions and lotions. Their purported uniqueness is an attempt to conceal the fact that they are priced too high to compete in standard markets.
Products are less expensive through MLM because you cut out the middleman.	MLM creates thousands of middlemen, with few real customers outside a bloated network of distributors, agents, consultants, and demonstrators, The products are typically expensive and not priced competitively.
Build your business by duplication. Buy five of these business in a box packages now, sell them to five people, and ask each to do the same, etc. Be a product of the products by signing up for monthly shipment of these items. Soon you will be reaping huge commission checks.	This is how recruiting MLMs earn fortunes for their top recruiters. Commissions from initial and ongoing purchases by new distributors (in hopes of profiting) is the life blood of their business. The promised rewards never come, except to those who recruit their way to the top of a pyramid of participants. Take away inducements for participant purchases and these companies would collapse like a house of cards.
Our tools for success are unbeatable. Sign up for our seminars and conferences, and buy our books and tapes to assure your success in this business.	In at least one major MLM, the tools business is a pyramid within a pyramid. Hardly anyone makes money selling products, so a lucrative source of income for those at the top is the sale of success tools to supposedly assure the success of their downline – who are in fact only further victimized when they buy these motivational items.
MLM is like insurance, investing, inventing, acting, and writing in that hard work at the outset yields residual income for the rest of your life. This is done be leveraging the efforts of your downline. So you can retire early, travel, etc.	MLM is more like gambling than legitimate residual income. It appeals to the something for nothing mentality. MLM addiction has been observed in some true believers. The large residual incomes reported are more the result of time of entry and willingness to deceive prospective recruits than of payoff for hard work. To succeed in MLM, one must leverage one’s deceptive recruiting through others who can be persuaded to do the same..
Some very reputable people are involved in MLM.	This credibility argument is used with many scams. Notables can be bought.
Some MLM companies invest in very worthy (and visible) causes.	The mafia supported local charities. If a bank robber donates some of his take to charity, does that excuse the robbery?
You will be helping your friends and family by recruiting them into your downline.	For potential personal gain, you would be exploiting those you care about the most. In other words you would be squandering your social capital.

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Dr. Taylor is president of the Consumer Awareness Institute. He has taught college classes on entrepreneurship, ethics, and communications and founded more than 40 home businesses, focusing on sales and marketing. His experience in MLM; communications with top MLM executives, law enforcement, and thousands of inquirers; consumer advocacy; and wide-ranging research on MLM/network marketing make him a premier consultant and expert witness on chain-selling and product-based pyramid schemes. His Web site contains a wealth of material about MLM pitfalls and deceptions.

Ten Big Lies of Multilevel Marketing

Robert L. Fitzpatrick

The multilevel marketing (MLM) field grows, and its member companies multiply. Solicitations to join seem to be everywhere. Its promoters would like you to believe that it is the wave of the future, a business model that is gaining momentum, growing in acceptance and legitimacy, and will eventually replace most other forms of marketing. Many people are led to believe that success will come to anyone who believes in the system and adheres to its methods.

Unfortunately, the MLM business model is a hoax that is hidden beneath misleading slogans. Calling it a “great business opportunity” makes no more sense than calling the purchase of a lottery ticket a “business venture” and winning the lottery a “viable income opportunity for everyone.” MLM industry claims of distributor income potential, its glorified descriptions of the “network’” business model, and its prophecies of dominating product distribution have as much validity in business as UFO sightings do in the realm of science.

The very legality of the MLM system rests tenuously upon a single 1979 court ruling on one company. The guidelines for legal operation set forth in that ruling are routinely ignored by the industry. Lack of governing legislation or oversight by any designated authority also enables the industry to endure despite occasional prosecutions by state attorneys general or the FTC.

MLM’s economic scorecard is characterized by massive failure rates and financial losses for millions of people. Its structure in which positions on an endless sales chain are purchased by selling or buying goods is mathematically unsustainable, and its system of allowing unlimited numbers of distributors in any market area is inherently unstable. MLM’s espoused core business — personal retailing — is contrary to trends in communication technology, cost-effective distribution, and consumer buying preferences. The retailing activity is, in reality, only a pretext for the actual core business, which is enrolling investors in pyramid organizations that promise exponential income growth.

As in all pyramid schemes, the incomes of those distributors at the top and the profits to the sponsoring corporations come from a continuous influx of new investors at the bottom. Viewed superficially in terms of company profits and the wealth of an elite group at the pinnacle of the MLM industry, the model can appear viable to the uninformed, just as all pyramid schemes do before they collapse or are prosecuted by authorities.

The growth of MLM is the result of deceptive marketing that plays upon treasured cultural beliefs, social and personal needs, and some economic trends, rather than its ability to meet any consumer needs. The deceptive marketing is nurtured by a general lack of professional evaluation or investigation by reputable business media. Consequently, there is widespread belief that MLM is a viable business investment or career choice for nearly everyone and that the odds of financial success in the venture are comparable or better than other employment or business ventures.

MLM’s true constituency is not the consuming public but hopeful investors. The market for these investors grows significantly in times of economic transition, globalization, and employee displacement. Promises of quick and easy financial deliverance and the linking of wealth to ultimate happiness also play well in this market setting. The marketing thrust of MLM is directed to prospective distributors, rather than product promotions to purchasers. Its true products are not long distance phone services, vitamins, or skin creams, but the investment propositions for distributorships which are deceptively portrayed with images of high income, low time requirements, small capital investments, and early success.

Here are ten lies I have identified during more than 20 years of observing the MLM marketplace:

Lie #1: MLM offers better opportunities than all other conventional 
business and professional models for making large amounts of money.

Truth: For almost everyone who invests, MLM turns out to be a losing financial proposition. Fewer than 1% of all MLM distributors ever earn a profit and those earning a sustainable living at this business are a much smaller percentage still.

Extraordinary sales and marketing obstacles account for much of this failure, but even if the business were more feasible, sheer mathematics would severely limit the opportunity. The MLM business structure can support only a small number of financial winners. If a 1,000-person downline is needed to earn a sustainable income, those 1,000 will need one million more to duplicate the success. How many people can realistically be enrolled? Much of what appears as growth is in fact only the continuous churning of new enrollees. The money for the rare winners comes from the constant enrollment of armies of losers. With no limits on numbers of distributors in an area and no evaluation of market potential, the system is also inherently unstable.

Lie #2: Network marketing is the most popular and effective new way to bring products 
to market. Consumers like to buy products on a one-to-one basis in the MLM model.

Truth: Personal retailing — including nearly all forms of door-to-door selling — is a thing of the past, not the wave of the future. Retailing directly to friends on a one-to-one basis requires people to drastically change their buying habits. They must restrict their choices, often pay more for goods, buy inconveniently, and engage in potentially awkward business relationships with close friends and relatives. In reality, MLM depends on reselling the opportunity to sign up more distributors.

Lie #3: Eventually all products will be sold by MLM. Retail stores, shopping malls, 
catalogs and most forms of advertising will soon be rendered obsolete by MLM.

Truth: Fewer than 1% of all retail sales are made through MLM, and much of this is consists of purchases by hopeful new distributors who are actually paying the price of admission to a business they will soon abandon. MLM is not replacing existing forms of marketing. It does not legitimately compete with other marketing approaches at all. Rather, MLM represents a new investment scheme couched in the language of marketing. Its real products are distributorships that are sold through misrepresentation and exaggerated promises of income. People are buying products in order to secure positions on the sales pyramid. The possibility is always held out that you may become rich if not from your own efforts then from some unknown person (“the big fish”) who might join your “downline.”

MLM’s growth does not reflect its value to the economy, customers, or distributors, but the high levels of economic fear, insecurity, wishes for quick and easy wealth. The market dynamics are similar to those of legalized gambling, but the percentage of winners is much smaller.

Lie #4: MLM is a new way of life that offers happiness and fulfillment. 
It provides a way to attain all the good things in life.

Truth: The most prominent motivational themes of the MLM industry, as shown in industry literature and presented at recruitment meetings, constitute the crassest form of materialism. Fortune 100 companies would blush at the excess of promises of wealth, luxury, and personal fulfillment put forth by MLM solicitors. These appeals actually conflicts with most people’s true desire for meaningful and fulfilling work at something in which they have special talent or interest.

Lie #5: MLM is a spiritual movement.

Truth: The use of spiritual concepts like prosperity consciousness and creative visualization to promote MLM enrollment, the use of words like “communion” to describe a sales organization, and claims that MLM fulfills Christian principles or Scriptural prophecies are great distortions of these spiritual practices. Those who focus their hopes and dreams upon wealth as the answer to their prayers lose sight of genuine spirituality as taught by religions. The misuse of these spiritual principles should be a signal that the investment opportunity is deceptive. When a product is wrapped in the flag or in religion, buyer beware! The “community” and “support” offered by MLM organizations to new recruits is based entirely upon their purchases. If the purchases and enrollment decline, so does the “communion.’”

Lie #6: Success in MLM is easy. Friends and relatives are the natural prospects. 
Those who love and support you will become your life-time customers.

Truth: The commercialization of family and friendship and the use of”‘warm leads” advocated in MLM marketing programs are a destructive element in the community and very unhealthy for individuals involved. People do not appreciate being pressured by friends and relatives to buy products. Trying to capitalizing upon personal relationships to build a business can destroy one’s social foundation.

Lie #7: You can do MLM in your spare time. As a business, it offers the greatest flexibility 
and personal freedom of time. A few hours a week can earn a significant supplemental income 
and may grow to a very large income, making other work unnecessary.

Truth: Making money in MLM requires extraordinary time commitment as well as considerable personal skill and persistence. Beyond the sheer hard work and talent required, the business model inherently consumes more areas of one’s life and greater segments of time than most occupations. In MLM, everyone is a prospect. Every waking moment is a potential time for marketing. There are no off-limit places, people, or times for selling. Consequently, there is no free space or free time once a person enrolls in MLM system. While claiming to offer independence, the system comes to dominate people’s entire life and requires rigid conformity to the program. This is why so many people who become deeply involved end up needing and relying upon MLM desperately. They alienate or abandon other sustaining relationships.

Lie #8. MLM is a positive, supportive new business that 
affirms the human spirit and personal freedom.

Truth: MLM is largely fear-driven. Solicitations inevitably include dire predictions about the impending collapse of other forms of distribution, the disintegration or insensitivity of corporate America, and the lack of opportunity in other occupations. Many occupations are routinely demeaned for not offering”unlimited income.” Working for others is cast as enslavement for “losers.” MLM is presented as the last best hope for many people. This approach, in addition to being deceptive, frequently discourages people who otherwise would pursue their own unique visions of success and happiness. A sound business opportunity does not have to base its worth on negative predictions and warnings.

Lie #9. MLM is the best option for owning your own 
business and attaining real economic independence.

Truth: MLM is not true self-employment. “Owning” an MLM distributorship is an illusion. Some MLM companies forbid distributors to carry other companies’ products. Most MLM contracts make termination of the distributorship easy and immediate for the company. Short of termination, downlines can be taken away arbitrarily. Participation requires rigid adherence to a “duplication” model, not independence and individuality. MLM distributors are not entrepreneurs but joiners in a complex hierarchical system over which they have little control.

Lie #10: MLM is not a pyramid scheme because products are sold.

Truth: The sale of products does not protect against anti-pyramid-scheme laws or unfair trade practices set forth in federal and state law. MLM is a legal form of business only under rigid conditions set forth by the FTC and state attorneys general. Many MLMs are violate these guidelines and operate only because they have not been prosecuted. Recent court rulings are using a 70% rule to determine an MLM’s legality: At least 70% of all goods sold by the MLM company must be purchased by nondistributors. This standard would place most MLM companies outside the law. The largest MLM acknowledges that only 18% of its sales are made to nondistributors.

Accountability Needed

An FTC trade regulation rule that forces honest disclosure of potential MLM distributor income is desperately needed. Toward this end, Pyramid Scheme Alert has launched a petition drive urging the FTC to force multilevel companies to disclose the true income of their distributors. The requested data would include: (a) the total number of distributors involved in the company for at least three years (or since the company’s founding if less than three years); (b) the average incomes of all distributors who have signed up for a distributorship by percentiles, not just the ones deemed “active”; and (c) a “weighted” overall average income of all distributors so that the extraordinary high incomes of the small number at the top are not calculated in with vast majority so as to give a more statistically valid figure.

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Mr. FitzPatrick consults and writes about trends in manufacturer/distributor relationships. He founded and is president of Pyramid Scheme Alert, a consumer advocacy group focused on exposing and preventing pyramid schemes. He has served as an expert witness in several cases involving pyramid schemes and MLM companies. He writings include False Profits (a book about MLM deception) and “Pyramid Nation” (a booklet that laments the growth and “legalization” of pyramid schemes.)

ebiz the Indian version of skybiz

SkyBiz

It was launched in around 1997 in the U.S promising the citizens a great oppurtunity of earning quick and easy money through Pyramid schemes.

Products of SkyBiz

• online computer tutorials
• 35 MB webspace
• earn money through recruitement

Eventually the people of the United States realised it was a fraud company which was robbing people of their money, time and peace of mind. The US Govt. was quick in taking actions and a Judicial Enquiry was ordered.
The US Judicial Court fined SkyBiz a massive $20 Million and ordered it to pay to its members. The company was permanently shutdown.

Here’s a statement issued by the Federal Trade Commission (FTC).

SkyBiz settlement
After this fatal blow to Pawan Malhan he settled down in Canada. But suddenly in 2001 he came to India and Established eBIZ.com Pvt. Ltd. with a Website under the domain name ebizel.com which is the exact replica of SkyBiz.

The FTC’s Consumer Alert on Multilevel Marketing

Multilevel or “network” marketing plans are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you’ll receive commissions—for your sales and those of the people you recruit to become distributors. These recruits sometimes are referred to as your “downline.”

Some multilevel marketing plans are legitimate. However, others are illegal pyramid schemes. In pyramids, commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors – not to consumers in general. The underlying goods and services, which vary from vitamins to car leases, serve only to make the schemes look legitimate.

Joining a pyramid is risky because the vast majority of participants lose money to pay for the rewards of a lucky few. Most people end up with nothing to show for their money except the expensive products or marketing materials they’re pressured to buy.

If you’re thinking about joining what appears to be a legitimate multilevel marketing plan, take time to learn about the plan. What’s the company’s track record? What products does it sell? Does it sell products to the public-at-large? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the plan? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?

Be skeptical if a distributor tells you that for the price of a “start-up kit” of inventory and sales literature – and sometimes a commitment to sell a specific amount of the product or service each month – you’ll be on the road to riches. Often consumers spend a lot of money to “build their business” by participating in training programs, buying sales leads or purchasing the products themselves. Too often, these purchases are all they ever see for their investments.

Your Responsibilities

If you decide to become a distributor, you are legally responsible for the claims you make about the company, its product and the business opportunities it offers. That applies even if you’re repeating claims you read in a company brochure or advertising flyer. The Federal Trade Commission advises you to verify the research behind any claims about a product’s performance before repeating those claims to a potential customer.

In addition, if you solicit new distributors, you are responsible for the claims you make about a distributor’s earnings potential. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.

Evaluating a Plan

The FTC suggests that you use common sense when evaluating a multilevel marketing opportunity and consider these tips as you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids in disguise.
3. Be cautious of plans that claim you will make money through continued growth of your downline, that is, the number of distributors you recruit.
4. Beware of plans that claim to sell miracle products or promise enormous earnings. Ask the promoter to substantiate claims.
5. Beware of shills—”decoy” references paid by a plan’s promoter to lie about their earnings through the plan.
6. Don’t pay or sign any contracts in an “opportunity meeting” or any other pressure-filled situation. Insist on taking your time to think over your decision. Talk it over with a family member, friend, accountant or lawyer.
7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you’re considering—especially when the claims about the product or your potential earnings seem too good to be true.
8. Remember that no matter how good a product and how solid a multilevel marketing plan may be, you’ll need to invest sweat equity as well as dollars for your investment to pay off.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

The Mirage of Multilevel Marketing

Stephen Barrett, M.D.

Don’t be surprised if a friend or acquaintance tries to sell you vitamins, herbs, homeopathic remedies, weight-loss powders, or other health-related products. Millions of Americans have signed up as distributors for multilevel companies that market such products from person to person. Often they have tried the products, concluded that they work, and become suppliers to support their habit.

Multilevel marketing (also called network marketing) is a form of direct sales in which independent distributors sell products, usually in their customers’ home or by telephone. In theory, distributors can make money not only from their own sales but also from those of the people they recruit.

Becoming an MLM distributor is simple and requires no real knowledge of health or nutrition. Many people do so initially in order to buy their own products at a discount. For a small sum of money—usually between $35 and $100—these companies sell a distributor kit that includes product literature, sales aids (such as a videotape or audiotape), price lists, order forms, and a detailed instructional manual. Most MLM companies publish a magazine or newsletter containing company news, philosophical essays, product information, success stories, and photographs of top salespeople. The application form is usually a single page that asks only for identifying information. Millions of Americans have signed up, including many physicians attracted by the idea that selling MLM products can offset losses attributable to managed care.

Distributors can buy products “wholesale,” sell them “retail,” and recruit other distributors who can do the same. When enough distributors have been enrolled, the recruiter is eligible to collect a percentage of their sales. Companies suggest that this process provides a great money-making opportunity. However, it is unlikely that people who don’t join during the first few months of operation or become one of the early distributors in their community can build enough of a sales pyramid to do well. In July 1999, the National Association of Attorneys General announced that complaints about multilevel marketing and pyramid schemes were tenth on their list of consumer complaints.

A recent analysis of Quixtar’s reported income figures indicates how poorly most MLM distributors do. In a declaration filed in a suit by two former Quixtar distributors, he concluded:

A statistical sample of distributors revealed that 99.4% of the IBOs [independent business owners] earned on average just $13.41 per week—before product purchases, all business expenses, and taxes. This average income is far less than the costs of the business, resulting in 99% of victims of Quixtar making no net profit. Fewer than 1 person in 10,000 are at the “Diamond and above” levels, the upper ranks of the Quixtar chain that every new recruit is urged to aspire to. . . .

The massive loss rates among Quixtar victims that are revealed in Quixtar’s own data are the inevitable mathematical result of the endless chain business model. In this model, the success of the IBO is based on continuous recruiting of additional distributors (IBOs), who are induced to make monthly purchases for their own consumption, rather than on making retail sales in the open marketplace. In the recruitment model, only those participants at the top levels of the pyramid can earn true profits, since the source of a participant’s real income is the expenditures of individuals below them on the pyramid, and only a small percentage can be in those top positions. The untenable model result in approximately 70% of IBOs quitting Quixtar within the first year. The mission of this deceptive business model is to continuously enroll losing investors (IBOs) and replace them as they suffer losses and quit the program.

Many distributors who stock up on products to meet sales goals or increase their hoped-for commissions get stuck with unsold products that cost thousands of dollars. Some companies permit direct ordering of their products, which avoids this problem, but the risk of failure is still high.

Dubious Claims

More than a hundred multilevel companies are marketing health-related products. Most claim that their products are effective for preventing or treating disease. A few companies merely suggest that people will feel better, look better, or have more energy if they supplement their diet with extra nutrients. When clear-cut therapeutic claims are made in product literature, the company is an easy target for government enforcement action. Some companies run this risk, hoping that the government won’t take action until their customer base is well established. Other companies make no claims in their literature but rely on testimonials, encouraging people to try their products and credit them for any improvement that occurs.

Every company I have looked at has done at least one of the following.

• Made misleading statements that could frighten people into taking dietary supplements they do not need.
• Made misleading statements of product superiority that could induce people to buy products that retail stores sell more cheaply.
• Made unsubstantiated claims that their products would prevent or remedy health problems
• Uses research findings to promote products without noting that the findings are not sufficient to substantiate using the products.
• Uses deception by omission by making statements about the biochemical properties of various substances without placing them in proper perspective. An example would be stating that a certain nutrient is important because it does this or that in the body but omitting that people who eat sensibly have no valid reason to take a supplement.
• Exaggerated the probability of making significant income.

Most multilevel companies tell distributors not to make claims for the products except for those found in company literature. (That way the company can deny responsibility for what distributors do.) However, many companies hold sales meetings at which people are encouraged to tell their story to the others in attendance. Some companies sponsor telephone conference calls during which leading distributors describe their financial success, give sales tips, and describe their personal experiences with the products. Testimonials also may be published in company magazines, audiotapes or videotapes. Testimonial claims can trigger enforcement action, but since it is time-consuming to collect evidence of their use, government agencies seldom bother to do so.

Government enforcement action against multilevel companies has not been vigorous. These companies are usually left alone unless their promotions become so conspicuous and their sales volume so great that an agency feels compelled to intervene. Even then, few interventions have substantial impact once a company is well established.

Motivation: Powerful but Misguided

The “success” of network marketing lies in the enthusiasm of its participants. Most people who think they have been helped by an unorthodox method enjoy sharing their success stories with their friends. People who give such testimonials are usually motivated by a sincere wish to help their fellow humans. Since people tend to believe what others tell them about personal experiences, testimonials can be powerful persuaders.

Perhaps the trickiest misconception about quackery is that personal experience is the best way to tell whether something works. When someone feels better after having used a product or procedure, it is natural to give credit to whatever was done. However, this is unwise. Most ailments are self-limiting, and even incurable conditions can have sufficient day-to-day variation to enable bogus methods to gain large followings. In addition, taking action often produces temporary relief of symptoms (a placebo effect). For these reasons, scientific experimentation is almost always necessary to establish whether health methods are really effective. Instead of testing their products, multilevel companies urge customers to try them and credit them if they feel better. Some products are popular because they contain caffeine, ephedrine (a stimulant), valerian (a tranquilizer), or other substances that produce mood-altering effects.

Another factor in gaining devotees is the emotional impact of group activities. Imagine, for example, that you have been feeling lonely, bored, depressed or tired. One day a friend tells you that “improving your nutrition” can help you feel better. After selling you some products, the friend inquires regularly to find out how you are doing. You seem to feel somewhat better. From time to time you are invited to interesting lectures where you meet people like yourself. Then you are asked to become a distributor. This keep you busy, raises your income, and provides an easy way to approach old friends and make new ones—all in an atmosphere of enthusiasm. Some of your customers express gratitude, giving you a feeling of accomplishment. People who increase their income, their social horizons, or their self-esteem can get a psychological boost that not only can improve their mood but also may alleviate emotionally-based symptoms.

Multilevel companies refer to this process as “sharing” and suggest that everyone involved is a “winner.” That simply isn’t true. The entire process is built on a foundation of deception. The main winners are the company’s owners and the small percentage of distributors who become sales leaders. The losers are millions of Americans who waste money and absorb the misinformation.

Do you think multilevel participants are qualified to judge whether prospective customers need supplements—or medical care? Even though curative claims are forbidden by the written policies of each company, the sales process encourages customers to experiment with self-treatment. It may also promote distrust of legitimate health professionals and their treatment methods.

Some people would argue that the apparent benefits of “believing” in the products outweigh the risks involved. Do you think that people need false beliefs in order to feel healthy or succeed in life? Would you like to believe that something can help you when in fact it is worthless? Should our society support an industry that is trying to mislead us? Can’t Americans do something better with the billion or more dollars being wasted each year on multilevel “health” products?

Physician Involvement

Many physicians are selling health-related multilevel products to patients in their offices. The companies most involved have included Amway (now doing business as Quixtar), Body Wise, Nu Skin (Interior Design), Rexall, Juice Plus+. Doctors are typically recruited with promises that the extra income will replace income lost to managed care. In December 1997, the American Medical Association Council on Ethical and Judicial Affairs(CEJA) advised against against profiting from the sale of “non-health-related products” to their patients. Although CEJA’s policy statement does not mention products sold through multilevel marketing, CEJA’s chairman said the statement was triggered by the growing number of physicians who had added an Amway distributorship to their practice.

Recommendations

Consumers would be wise to avoid health-related multilevel products altogether. Those that have nutritional value (such as vitamins and low-cholesterol foods) are invariably overpriced and may be unnecessary as well. Those promoted as remedies are either unproven, bogus, or intended for conditions that are unsuitable for self-medication.

Government agencies should police the multilevel marketplace aggressively, using undercover investigators and filing criminal charges when wrongdoing is detected. People who feel they have been defrauded by MLM companies should file complaints with their state attorney general and with local FDA and FTC offices. A letter detailing the events may be sufficient to trigger an investigation; and the more complaints received, the more likely that corrective action will be taken. If you possess a distributor kit that you no longer need, I would be pleased to add it to my collection. If you would like to help Quackwatch gather information on MLM companies on the Internet, click here.

This article was revised on January 21, 2008.