The Hidden Costs of MLM Diet Products

Have you ever been on the receiving end of a sales pitch for a multi-level marketing (MLM) diet product? Chances are, if you’ve used any social media platform at all, you've been a recipient of those "Hey Hun!" messages leading to an endless spiel about how the MLM diet products can help you to lose weight quickly and make a ton of money in the process.

These pitches and products are the results of MLM businesses that have taken the health and wellness industry by storm. Every day more and more people sign up to become distributors of dietary supplements and other products.

The promise of quick weight loss and financial success is enticing, but before you jump in head first, it’s important to be aware of the hidden costs associated with these products that many sales reps don’t discuss. Here, we'll explore why you should think twice before investing your hard-earned money into MLM supplements and diet products.

What is an MLM?

Multi-Level Marketing businesses are a form of direct selling in which sales representatives earn money by selling products directly to customers and recruiting other participants to join them as part of the MLM.

These “upline” distributors, as they’re called, generate commissions from the product’s direct sales and a percentage of the sales their recruits make. The MLM direct sales structure can be attractive to those looking for a side gig, as it offers what seems like a guarantee of financial success.

Unfortunately, there is often much more to MLM health products than meets the eye. Many companies create the illusion that you can make money quickly and easily. Still, they are hard to sustain and require significant time investments for minimal returns. Many MLM diet products come with hefty price tags that can quickly eat away at your profits.

How Does Multi-Level Marketing Work?

The MLM business structure works by having sales representatives recruit distributors to join their “downline” and sell products directly to customers.

Upline distributors then earn commissions from their product sales in addition to a percentage of the sales made by their recruits. This system is meant to generate profit for the company and its participants; however, the reality is often much different.

There are a number of companies that use the MLM direct sales business model to sell products across a wide range of industries. Some examples of multilevel marketing companies include Tupperware, Amway, Mary Kay, Dot Dot Smile, LuLaRoe, and Avon.

While these MLM companies may have been successful in the past, we have a better understanding now of the ethics of MLM companies and the harm they can cause.

MLMs in the Health Industry

The diet industry has been a major target for MLM businesses, as the promise of quick and easy weight loss is an attractive one that draws in hundreds of thousands of unsuspecting consumers every year. The prevalence of multilevel companies in the health and wellness industry is undeniable.

Some of the larger, well-known multilevel marketing companies include Herbalife, Beachbody, Isagenix, Optavia, and Arbonne. But smaller, less recognizable supplement brands also use the MLM model to promote their products, such as Plexus, JuicePlus+, and It Works!.

Unfortunately, the products sold by most MLM companies are often overpriced and not backed up by scientific evidence. Combined with the risk of health misinformation from the distributors, this can be a dangerous combination.

The Initial Investment in Network Marketing Companies

Many of these multilevel marketing businesses require prospective distributors to purchase a starter kit or inventory of products to begin selling. This fee can range from a few hundred dollars to thousands, depending on the company and type of products sold.

This initial investment is often compared to the cost of someone starting their own business, but there is a big difference between them. Multi-level marketing distributors are not small business owners. They are the company's salespeople and their success is entirely dependent on sales made through the company’s marketing and recruiting efforts.

In contrast, a small business owner would own the business and have control over all aspects of its operation and access to potential funding from investors or traditional lending sources. They would control their product suppliers, retail pricing, and other variables that go into managing overhead business costs. On the other hand, distributors are often left with little control over their costs and pricing.

Recurring Investments in Network Marketing Companies

In addition, many MLM companies require distributors to continually invest in new products, training, or marketing materials - regardless of how their sales are going. This creates a cycle of spending to stay on top of the latest trends or product offerings and can quickly add up to be a huge expense for someone just looking to make a few extra bucks on the side.

For example, According to Dr. Jon M. Taylor's analysis for the Federal Trade Commission (FTC), individuals fully committed to succeeding in an MLM company may incur expenses totaling over $25,000 within a year. Those expenses include incentives, products, technology, training events, advertising, and travel.

That’s no small chunk of change and an amount that many people could easily find other ways to invest in or use for their own business ventures.

Even on a smaller scale, by the time a distributor has paid for their membership fees, product inventory, marketing materials, training materials, and travel expenses - it can be hard to make a profit or even break even.

A good example of this is seen in the income disclosure statement for Rodan+Fields, an MLM that sells beauty products. In order to qualify for commissions, the compensation plan dictates that distributors must purchase $100 worth of products every month. 45% of Rodan+Fields distributors do not make their quota and earn nothing. Furthermore, of the participants who do, 67.1% earn less than $1000 a year - that means they're losing at least $200 a year.

You can see this same pattern repeated in any income disclosure statement you can find from an MLM.

88% of Arbonne Independent Distributors earned $0 before expenses were accounted for.

MLM Supplement Pricing is Expensive

Aside from the initial and ongoing investments, MLM companies are notorious for their inflated product pricing. This is because most of these products are sold at a premium price due to the commissions and bonuses that individual distributors receive for each sale.

For example, one popular MLM company’s protein powder retailed for $130, while a similar non-MLM brand retailed for less than $70. Both of these products are of inferior quality protein compared to a simple whey protein powder purchased from your local Target for $25.

Since MLM companies rely heavily on recruiting and building their salesforce, they often use high prices to encourage new distributors to join the team. This kind of pricing can be a major turnoff for potential customers and make it hard to justify the costs, especially when there are much more affordable alternatives on the market. However, you might be surprised to learn this is by design.

Known as "dummy distributors," these people often end up marketing the products solely to their friends and family in an effort to fund their personal use of these products or earn discounts. In the long run, this only drives up costs for everyone involved and keeps prices artificially inflated.

Because there is so much emphasis on recruiting within the MLM business model, it creates a culture of competition and high-pressure sales tactics that can damage people’s relationships.

This culture also shifts the focus away from providing quality products and services. Instead, it puts it on building a marketing scheme - one that begins to closely resemble a pyramid scheme.

Pyramid schemes, by definition, are illegal, and it’s important to understand the difference between a legitimate MLM business and a pyramid scheme in disguise.

Several MLM companies have been investigated and sued for acting like a pyramid scheme by the Federal Trade Commission (FTC), including Herbalife, Amway, and LuLaRoe, for their illegal pyramid schemes and predatory business practices.

At any moment, the FTC could come knocking on the door of any MLM business and close them down, leaving distributors and their stockpiles of inventory high and dry.

The Low Product Quality and Efficacy of MLM Supplements

In addition to the financial costs of getting involved with an MLM company, there is also the questionable quality and efficacy of many MLM diet products.

The Food and Drug Administration (FDA) has limited regulatory control over dietary supplements meaning companies are not required to submit their products for FDA approval before they can be sold. This loophole opens the door for unethical companies to take advantage of gullible consumers with false health claims and harmful ingredients.

To make matters worse, individual distributors are not usually educated or trained in nutrition or healthcare, making it difficult for them to accurately answer questions about the ingredients and efficacy of these products. That means consumers are often relying on anecdotal evidence instead of peer-reviewed research when deciding about whether or not to purchase an MLM product.

Many of these anecdotal stories are highly exaggerated success stories that make it seem like these products can do things they simply cannot. Distributors spread false health claims and health misinformation rampantly, putting consumers at risk of potentially grave harm from using unproven nutritional supplements.

Finally, there are potential side effects associated with using some of these unproven dietary supplements. For example, a popular Advocare supplement was pulled from shelves for containing ephedra - a substance banned by the FDA for its potentially dangerous side effects, including heart failure. The FTC later shut down the MLM side of Advocare for operating as an illegal pyramid scheme.

Herbalife also had dietary supplement formulations containing ephedra pulled from the market and have recently been in hot water regarding accusations of their popular meal replacement powder causing acute liver injury.

Not to mention there are risks beyond physical harm as many of the MLM salespeople feel pressured to constantly be dieting in order to look their best and promote the products. This pressure to diet can take a serious toll on their mental health, leading to pathological and disordered eating patterns. It also increases the risk of developing body image disturbance and eating disorders.

The reality is that I have yet to see an MLM weight loss program be evidence-based and safe, even when marketed as such. It’s important to remember that there is no shortcut to improving your well-being or reaching a healthy weight; the only way to do this safely is by eating a healthful diet, exercising regularly, and prioritizing self-care - not by purchasing overpriced supplement packages and adhering to dangerous starvation diets.

Time Commitment and Work-Life Balance in Network Marketing

MLM businesses require a huge time commitment. Working in the MLM industry requires recruiting other people into the business and dedicating your spare time to selling products, hosting and attending demos, and promoting events.

Although it may seem like an easy way to make money, and distributors often advertise the "time freedom" they have, many people end up throwing their efforts into what is essentially a full-time job.

This can lead to serious struggles with work-life balance as many independent distributors work full-time jobs in order to fund their “side hustles.” This makes it difficult to set and stick to healthy boundaries between work and personal life, ultimately leading to tension with family and friends who may feel neglected.

Even though MLM recruiters promise you can "work in pockets of your time" or "fit it around your full-time job,” this is rarely true. Once you're involved in a multilevel marketing company, you may feel obligated to work all of your spare time towards achieving minimal success.

Additionally, with a significant time commitment, the reality of making money in an MLM is very different from the exaggerated stories that distributors often tell.

Despite what is promised, the vast majority MLM distributors make little to no money, and many actually lose a significant amount of money due to various factors, including the cost of inventory, training materials, hosting events, etc.

According to a survey conducted by MagnifyMoney, the majority of MLM participants make less than 70 cents per hour on average -- before expenses. This means that most MLM distributors are not making enough money to support themselves or their families, let alone pay for expensive MLM programs and diet and wellness products.

Multilevel marketing participants must be aware of these facts before investing in a business opportunity like this. The time, money, and energy put into direct sales companies could be better spent elsewhere.

75% of people who joined an MLM made no or lost money according to a recent AARP survey.

The Impact of Network Marketing on Relationships

Apart from the financial and physical risks associated with MLM diet products, there is also a potential impact on personal relationships.

Being involved in an MLM business requires you to recruit other people into the business – friends, family members, neighbors, and colleagues. This can lead to some serious conflict if they do not share the same enthusiasm or investment as you.

MLM companies often teach their recruits that if someone doesn't show interest in their product or opportunity, they should be considered unsupportive and avoided. This can isolate people from their loved ones, making it difficult to maintain good relationships with family and friends.

MLMs thrive on social exploitation, making this a difficult ethical dilemma for many participants. It can be hard to reconcile the idea of convincing family and friends to invest in a product or opportunity that may not benefit them.

Many MLM recruiters will claim that "you don't have to recruit to be successful," –– but this is rarely the case. The truth is, the entire multi-level marketing business structure is dependent on just that -- multiple levels of participants buying into it. This can only be achieved by recruiting other people into your downline.

Americans generally view MLMs and their participants negatively according to a survey by Upgraded Points.

Legal and Regulatory Concerns for Multilevel Marketing

Finally, despite the many positive claims made by MLM companies about their businesses, growing legal and regulatory concerns need to be taken seriously.

The FTC has warned MLMs of potential violations of federal law if they continue to promote deceptive practices such as false or exaggerated earnings claims and exaggerating the income potential of their business opportunity.

The Fine Line Between MLMs and Pyramid Schemes

It's important to note that a fine line exists between an MLM and an illegal pyramid scheme. Both are multilevel marketing businesses, but the difference lies in how much money is made by recruiting versus product sales. In an MLM, most of the profits should come from selling products. Whereas in a pyramid scheme, profits primarily come from recruiting new members.

Many call MLMs "legal pyramid schemes" because they often have the same characteristics, such as focusing heavily on recruitment, making money primarily from recruitment, and having a "top-heavy" structure where profits are concentrated at the top.

They manipulate the law by pressuring or even outright requiring new distributors to purchase product packages. This creates the illusion, on paper, that their profits are driven by product sales.

As such, consumer protections are in place, albeit often ignored by independent distributors.

False Income Claims by MLMs

MLM companies should not falsely claim how much money people can make.

An income claim disclaimer is a statement that provides potential MLM participants with realistic expectations about the earning potential of an MLM business.

The FTC requires MLM companies to include such disclaimers in their promotional materials because they want people to understand that not everyone will make money from the opportunity.

The disclaimers should provide accurate information about the average earnings of participants and any restrictions such as time limits or qualifications. This way, consumers have realistic expectations before joining an MLM business.

These income claims include implications like, “You can get rich quickly with our products!” or “Be your own boss and make unlimited amounts of money.” These claims are misleading because they give the wrong impression that anyone joining an MLM business can make a lot of money quickly.

Truth in Advertising, a consumer protection organization, has warned that MLM businesses regularly violate federal laws. They have also stated that many MLM businesses make false or exaggerated claims about their products and services, which can lead to consumer harm. In 2021, they assisted in an FTC penalty offense campaign that found more than 630 MLM companies violating advertising laws.

The FTC has made it clear that income disclaimers should be clearly visible and easy to find so that consumers don't have false expectations when considering joining an MLM business. The FTC also requires companies to make potential earnings claims as accurate as possible, providing evidence to back up their statements if necessary.

False Health Claims by MLMs

In addition to false income claims, the FTC and the FDA have cracked down on MLM companies for making false statements about health claims of their products. A health claim is a statement or suggestion that a product can prevent, treat, diagnose, alleviate symptoms, or cure diseases.

MLM distributors often make false and misleading claims about the overall health benefits of their products. They may also downplay potential adverse effects or exaggerate the efficacy of their products. This is both unethical and illegal.

Unfortunately, false income claims and health claims are common among many MLM participants. They’re told to share their success stories without being given training on accurately representing their product's health benefits.This can lead to people making false health claims and exaggerating the health benefits of their products for the sake of making a sale.

The FTC and FDA are constantly monitoring MLM companies for false and misleading claims made by distributors, and they have become increasingly aggressive in their enforcement efforts.

During COVID, the FTC had to issue warnings to multiple MLM companies about their sales force making false claims about the ability of their products to prevent, treat or cure coronavirus.

In 2023, the FTC had to send penalty offense letters to almost 700 companies that were marketing homeopathic products, dietary supplements, or functional foods without substantiation.

These infractions can lead to fines, legal action, and the company’s closure. But what’s worse is these false health claims can cause harm to people who believe them and put themselves at risk by placing their trust in a friend.

Conclusion

All in all, there are numerous hidden costs associated with MLMs - both personal and financial. If you’re serious about changing your lifestyle and losing weight, it’s important to do the research to choose an appropriate and affordable program that suits your needs.

Don’t let flashy marketing tactics and promises of easy money draw you into a multi-level marketing scheme where you may lay out more money than expected or even get into legal trouble.

Avoid MLMs, especially their diet products, and programs altogether! Plus, the odds are you won't even receive the desired results you're looking for. So save yourself the time, effort, expense--and likely disappointment--and stick to more evidence-based methods of pursuing health and wellness goals.

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• References

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  FTC Warns Almost 700 Marketing Companies That They Could Face Civil Penalties if They Can’t Back Up Their Product Claims. (2023, April 12). Federal Trade Commission. https://www.ftc.gov/news-events/news/press-releases/2023/04/ftc-warns-almost-700-marketing-companies-they-could-face-civil-penalties-if-they-cant-back-their

  Miller, A. (2021, June 22). MLMs: Scams or Legitimate Side Hustles? [2021 Study]. UpgradedPoints.Com. https://upgradedpoints.com/finance/mlm-scams-legitimate-side-hustles/

  MLM Participants Earn Less Than 70 Cents an Hour—MagnifyMoney. (n.d.). Retrieved May 26, 2023, from https://www.magnifymoney.com/news/mlm-participants-survey/

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  Penalty Offense Authority: MLMs. (n.d.). Truth in Advertising. Retrieved May 25, 2023, from https://truthinadvertising.org/industries/mlm-5m1b/

  Rodan + Feilds | Income Disclosure Statement. (2019). https://www.rodanandfields.com/en-us/images/Archives/RF-Income-Disclosure-Statement.pdf

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