MLM Companies Are Holding Women Back

Have you ever received a message from someone you went to high school with, inviting you to look at this new business opportunity they have? They promise you can lose weight, remove toxins from your home, AND all while making money being your own boss!

It's a familiar story to almost all of us. MLM companies have a way of infiltrating our social circles. It doesn’t seem to matter how hard we try to keep them out. The reality is that MLM companies are scams and an absolute nightmare for women and everyone they know. Enough is enough. If we want feminism to move forward, we have to move on from MLM scams.

What is an MLM?

The term MLM specifically stands for Multi-Level Marketing. MLM companies have independent contractors that promote and sell a product instead of selling in a store-front. Multi-level marketing companies are also often called Network Marketing, Direct Sales Marketing, and Social Selling. 

On the surface, direct selling seems harmless. However, the MLM business model is designed to profit off of recruiting people instead of off the products they sell. 

According to the Federal Trade Commission (FTC), most people who join MLMs make little or no money. Many of them lose money. Many people have believed they've joined a legitimate MLM which turned out to be a pyramid scheme that took everything they put in and left them in debt.

These companies exist heavily in the health and wellness space and include but aren't limited to Beachbody, Herbalife, Optavia, and Arbonne. Many people don’t even realize that these big companies are all MLM scams.

How Do MLM Companies Work?

MLMs work by relying on personal relationships to spread the word about their products. MLMs use a "multi-level" marketing structure, which allows people at different levels to make money off of the people below them in the pyramid.

MLMs often prey on people's dreams of making money from home or becoming their own boss. Convincing women that they can have it all - a perfect body, a toxin-free home, and a great career - if only they sign up for this MLM. And once you're in, it's almost impossible to get out.

The problem with MLMs is that they are designed to keep women in a cycle of poverty. In order for anyone to turn a profit in the mid to top levels, the women at the bottom of the scheme must be losing money. In other words, for the MLM business structure to work, MOST women involved must be losing money.

How Do MLM’s Affect Women?

Companies that sell products through a multi-level marketing structure are known for their aggressive recruiting tactics. This is because MLM companies rely on recruiting to turn a profit. They recruit by targeting vulnerable populations from the workforce: especially women.

Women are heavily targeted by MLMs because of their desire for more autonomy and financial freedom. Common targets include:

• Military spouses who struggle with underemployment due to their transience.

• Stay-at-home moms who want to increase their income but cannot or do not want to enroll their children in childcare.

• Women in underpaid careers looking to pay down debts or improve their financial status.

• College students looking to offset the financial burden of school between classes.

The promise of “making money in your spare time” seems appealing to these women, but the claims are too good to be true. According to research by the FTC, 99% of recruited contractors lose money trying to sell these products and you have a better chance of profiting off of gambling roulette at Ceasar's Palace in Las Vegas than you do joining an MLM.

The reality is that MLM companies take time and money away from women who are genuinely attempting to better their financial situations.

Shouldn’t We Support Small Woman-Owned Businesses?

MLMs are, by definition, not small businesses and neither are their distributors. Supporting large MLM companies through their distributors takes away from supporting small businesses that offer comparable products and services.

According to the Small Business Association (SBA), a small business is a business with fewer employees and/or less annual revenue than a medium-sized business. The number of employees and amount of revenue required to meet the definition of a small business varies depending on the classification of the business as set by the North American Industry Classification System (NAICS).

Generally speaking, MLM companies have the classification code of "454390: Other Direct Selling Establishments" where a company needs to have less than 500 employees to be considered a small business.

• Beachbody has over 800 employees and over 400,000 independent contractors.

• Herbalife has almost 10,000 employees and over 2.3 million independent contractors.

• Arbonne has over 600 employees and over 174,000 independent contractors.

• Optavia has over 1200 employees and over 52,000 independent contractors.

MLM's are not small businesses and are not usually woman-owned. Most MLM companies are large multi-million dollar companies, owned by men, with hundreds of thousands - if not millions of employees and contractors combined.

MLM companies and their independent contractors are not small businesses according to the size standards set my the U.S. Small Business Association (SBA).

Why MLM Independent Contractors Are Not Small Business Owners

Many women who are recruited into MLM's are led to believe they are small business owners (this idea is a manipulation tactic I will address later).

There is a difference between being a business owner and being a self-employed person.  Being self-employed means that you are either a sole proprietor, in a business partnership, or an independent contractor.

Women who distribute products for MLM companies are independent contractors for that company. An independent contractor is someone who works for another person or business but they are not hired as an employee. Furthermore, they are not considered the owner of that business.

An independent contractor can be registered as a sole proprietor for the purpose of completing self-employment taxes. As a sole proprietor, you are fully responsible for all financials, including any potential debt.

The best example of this is Uber. Uber is the business, and the Uber drivers are independent contractors for that business.

An Uber driver is not the business owner of Uber. As of the writing of this article, the owner of Uber is Dara Khosrowshahi. However, as paid independent contractors for Uber, it is the drivers are responsible for their own expenses (gas, car maintenance, car insurance, etc), not the owner of the company.

Some sole-proprietors are business owners and maybe this is where the confusion stems from, however being registered as a sole-proprietor doesn't inherently make you a business owner. It is just a classification of being self-employed.

Small business ownership is defined as being able to have others work for you either as contractors or employees.

As a business owner, you oversee the taxes of your employees. You are also responsible for having business insurance, and managing employee working rights to meet your state's requirements.

Independent contractors for MLM companies are not responsible for any of this. Legally, these women are independent contractors acting as sales representatives for the MLM company they work under. They are not business owners and do not work for a small business.

MLM “Boss Babe” Culture is Toxic

MLM "Boss Babe" culture is a term often used to describe the empowering rhetoric used by MLM companies in order to convince women to sell their products. This culture is built on the idea that women can "become their own bosses" by becoming MLM independent contractors.

The truth is, being an MLM "Boss Babe" is not owning your own business or being in control of your career. MLM companies rely on keeping their distributors in a state of constant need so they are more likely to remain active members of the company and continue to buy products.

MLM reps are often manipulated into staying in the company longer than they can financially afford through statements like:

"You earn as hard as you work. If you aren't earning, you aren't working hard enough."

or

"You have the same 24 hours in a day as Beyonce"

This shifts blame on the rep and is gaslighting them from the broken business model. Statistically, the harder you work in an MLM the greater potential for losing money.

According to the FTC, the failure and loss rates of legitimate small businesses are not comparable to MLMs. Small businesses have a 39% chance of being profitable over the course of their existence. Meanwhile, less than 1% of MLM participants are able to create a profit.

Encouraging contractors to work harder or spend more money to overcome their challenges is a form of manipulation called toxic positivity. This type of manipulation instills the hope they can overcome the odds and turn a profit, without disclosing the reality of impending failure.

But I Just Want to Support My Friend…

Support, don't encourage.

The best way to support a friend in an MLM is to not buy from or engage with her MLM.

I know that sounds unsupportive BUT think of it this way...

If she were in a new relationship where her partner was clearly manipulating her for financial gain, would you encourage that behavior to continue to happen? Hopefully not.

Supporting your friend means keeping her safe from exploitation and financial ruin. Not buying shampoo or protein powder.

What Else Can I Do to Fight MLMs?

Aside from not engaging in them, to begin with, the best way to fight back against MLM companies is to address the issues that allowed women to be targeted in the first place:

• Fight for equal pay so women aren't financially vulnerable.

• Fight for affordable childcare and paid maternal/paternal leave, so new and single moms aren't financially vulnerable.

• Share inspirational stories of legitimate female entrepreneurs and support female professionals.

• Share MLM deprogramming materials (like this one!) to help get people out.

How To Get Out of An MLM

It is very important to understand that leaving an MLM does not make you a failure. Multi level marketing scams are designed to make you spend more money than you earn. You are not a failure, you're a victim of social exploitation.

There are steps you can take to safely get out of an MLM and possibly recoup your losses.

I encourage you to use the FTC guidebook on The Case Against Multi-Level Marketing, specifically "Chapter 12: ACTIONS NEEDED – What MLM victims can do to recover losses," and follow the steps to report your case to the appropriate agencies.

It is crucial to not stay quiet about your experience. Oversight agencies depend on receiving large volumes of complaints to gather evidence and be able to take action against these companies. Every story matters.

If you have an MLM story, I want to hear from you! Featuring stories about current MLM scams on social media and in my articles has helped women make the decision to get out and prevent further loss. If you have had any negative experiences with an MLM or from being an MLM rep, click here to share your story! Submissions will be kept anonymous.

• References

  1. Bureau, U. S. C. (2021, October 8). The majority of U.S. businesses have fewer than five employees. Census.gov. Retrieved January 27, 2022, from https://www.census.gov/library/stories/2021/01/what-is-a-small-business.html

  2. Business guidance concerning multi-level marketing. Federal Trade Commission. (2020, October 22). Retrieved January 27, 2022, from https://www.ftc.gov/tips-advice/business-center/guidance/business-guidance-concerning-multi-level-marketing

  3. Chapter 12: Actions needed what MLM victims can ... - ftc.gov. (n.d.). Retrieved January 27, 2022, from https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00016%C2%A0/00016-57320.pdf

  4. Chapter 7: MLM’s abysmal numbers - ftc.gov. (n.d.). Retrieved January 27, 2022, from https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00008%C2%A0/00008-57281.pdf

  5. Multi-level marketing businesses and Pyramid Schemes. Consumer Information. (2021, December 2). Retrieved January 27, 2022, from https://www.consumer.ftc.gov/articles/multi-level-marketing-businesses-and-pyramid-schemes

  6. Self-employed vs. Small Business Owner: How your status affects your profit. Next Insurance. (2021, February 12). Retrieved January 27, 2022, from https://www.nextinsurance.com/blog/self-employed-vs-small-business-owner-status-affects-profit/