8 Controversial MLM Schemes You Should Avoid

Watch out for tempting chances to make fast money with multilevel marketing (MLM) schemes. These work-from-home options, especially popular during the pandemic, often end up being scams or not making much money.

In fact, according to the FTC, 99% of participants make no profit, with many losing money while a select few profit.

Time magazine even compared the odds of making a profit in an MLM to winning the lottery.

In this article, we’ll reveal eight well-known MLM companies that have turned the usual direct-selling model into something more dishonest.

1. Primerica

Primerica, a well-known insurance MLM company, often faces questions because it heavily relies on intense sales tactics and recruitment as its main way of doing business. It’s kind of like Beachbody, another legit company, but Primerica’s past makes people wonder if it’s a scam.

Unlike regular insurance companies, Primerica brings in people with no insurance background. These folks are then pushed into a high-pressure situation where they have to quickly sell complicated insurance stuff. On top of that, they’re constantly pushed to recruit new members and offer them the same “opportunity.” Sadly, recruiting is the main way to make good money, but very few actually manage it.

In 2010, Primerica got a lot of attention when Business Insider ran a story titled “Meet Primerica, the Wall Street IPO That’s Really A Multi-Level Marketing Scheme.” Since then, they’ve been sued a bunch of times and played a role in starting the Anti-MLM Coalition. Despite all this, Primerica is still going strong, with impressive stats as of December 31, 2022, like over 5.7 million insured lives and more than 2.8 million investment accounts held by clients.

Even though Primerica is considered legit and has a ton of customers, it’s important to know about the issues and controversies linked to its MLM way of doing business. Making smart choices about getting involved in these things is crucial to avoid potential problems.

2. Beachbody

If you’ve ever checked out your social media, you’ve probably seen posts about Beachbody, promising weight loss and a fit body while working out at home. But there’s a darker side to Beachbody’s MLM (multi-level marketing) setup, as one woman’s story in a Time article reveals.

She joined Beachbody, wanting to share her weight loss success and help others. But things got tough financially. To stay a Beachbody fitness coach, she had to pay $135 monthly. That wasn’t all – she had to find new clients, coach existing ones, and handle all the responsibilities that came with it.

Under the pressure, she sacrificed her own fitness goals, regained lost weight, and lost time with her kids. Plus, she lost thousands of dollars. Sadly, her story isn’t rare. Time, the Anti-MLM Coalition, and the Economic Secretariat have shared stories of people with no fitness coaching experience pushed to sell supplements and workout programs. The system relies heavily on upfront costs, making it hard for individuals to find clients and make sales.

In 2023, Beachbody became Beachbody on Demand Interactive (BODi). While BODi is a legit company, many who join its MLM team leave within 24 months, often disappointed and with financial losses.

3. LuLaRoe

In a surprising twist, LuLaRoe, the women’s clothing brand, made big news in 2019 when Buzzfeed News revealed that the company had suddenly fired all its warehouse workers just before Christmas. This move hinted at the serious legal problems the brand was dealing with because of its controversial multi-level marketing (MLM) business model.

But this wasn’t the first time LuLaRoe had legal issues. Two years earlier, a group of unhappy former “consultants” filed a class-action lawsuit, claiming the company was running a pyramid scheme disguised as a real business. These people had put a lot of money into starting up, thinking they’d make it back quickly as their businesses took off.

Unfortunately, success didn’t come as expected, leading many to go bankrupt. To make matters worse for LuLaRoe, a supplier sued them for $49 million for not paying, and another class-action suit accused the company of shady practices.

LuLaRoe’s rocky history didn’t go unnoticed, and in August 2021, a Netflix documentary called “LuLaRich” came out. The documentary went deep into the company’s troubled past and present, highlighting the controversies around its operations.

Considering all the legal problems and the bad experiences shared by former consultants, it’s a good idea to stay away from LuLaRoe. The brand’s history raises serious concerns about its business practices and the financial risks for anyone thinking of becoming a consultant.

4. Amway

Amway, a company that sells health, beauty, and homecare products through a multi-level marketing (MLM) model, recently addressed the question, “Is Amway a pyramid scheme?” On their website, they firmly stated, “No, Amway is not a pyramid scheme.” However, the need to address this question suggests some concerns, especially among their “independent business owners” (IBOs) who participate in Amway’s sales and recruitment.

These IBOs have raised valid concerns, and Amway’s legal standing is not entirely solid. In 2010, the company settled a $54 million class-action lawsuit, acknowledging deceptive business practices and misleading IBOs about potential earnings and expenses. This legal challenge wasn’t an isolated incident; in the past year, a lawsuit in California made similar accusations, challenging Amway’s classification as a pyramid scheme despite the company’s denials.

Despite these legal hurdles, Amway remains in operation, though its sales have seen a decline. In 2022, their financial report showed sales of $8.1 billion, down from the previous year’s $8.9 billion.

Given these facts, it’s advisable to be cautious about getting involved with Amway. The company’s legal troubles and declining sales suggest potential risks for independent business owners. You should take this factors into account before deciding to participate.

5. Herbalife

Herbalife, a popular supplement company, got into big trouble in 2016, leading to a $200 million deal with the FTC. They were accused of running an illegal pyramid scheme, where most of their sellers struggled to make money. The lawsuit targeted top-level distributors, or TOPPs, who did training and recruitment.

Jump to 2023, people in Illinois aren’t happy with the settlement. They protested at the Thompson Center, saying the deal didn’t fairly compensate them for their losses. This ongoing unhappiness shows that doubts about Herbalife’s actions and the fallout from the alleged wrongdoing are still around.

Even though Herbalife said it would change its business in the settlement, more issues came up. In 2019, Herbalife settled for $20 million with the SEC for misleading investors. Then, in 2020, it paid $123 million for a Chinese bribery case.

All these legal problems with Herbalife raise serious questions about how ethical the company is and the risks of getting involved with MLMs. It’s a warning for anyone thinking about joining such businesses to be careful and thoroughly check things out before committing time and money.

6. Neora

In 2019, the Federal Trade Commission (FTC) took legal action against Neora, a company selling wellness, skincare, and supplements through a multi-level marketing (MLM) model. The FTC accused Neora of running an illegal pyramid scheme, tricking people with false promises of financial success, as mentioned in an official statement by the FTC.

After the Supreme Court’s AMG Capital Decision in April 2021, which limited the FTC’s power to recover money, Neora made three specific arguments.

First, they asked to dismiss the whole case due to improper federal court procedures.

Second, they argued that a permanent injunction was unnecessary.

Lastly, they used the AMG Capital Decision to reject requests for monetary relief. The court agreed to dismiss the monetary relief requests but didn’t accept Neora’s other arguments. This means the FTC can still use legal tools in the future against companies like Neora.

Like other MLMs that border on pyramid schemes, Neora focused on recruiting new members rather than selling actual products. The FTC complaint highlighted a company training video listing the keys to success as “Number one: Recruit. Number two: Recruit. Number three: Recruit.”

It’s crucial to be careful if you’re thinking about getting involved with Neora or any MLM company. The allegations and legal actions against Neora suggest potential risks related to their business practices.

7. Younique

The Guardian recently talked about the challenges in the MLM-based beauty industry, focusing on the experiences of Younique “presenters,” mainly women facing difficulties. Many were attracted by the idea of making money, but they ended up stuck in a familiar pattern. To keep their presenter status, they had to keep buying Younique products.

Younique has eight different status levels. The higher your level, the more money you can make. But for many, moving up proved too hard. They got overwhelmed with buying products, dealing with rising costs, and feeling constant pressure from the company. In 2019, Younique even settled a different lawsuit for $3.25 million.

While Younique can offer a chance to make money, it’s crucial to know about the potential challenges and problems linked to the company.

8. AdvoCare

In 2019, AdvoCare, a company that sells supplements through a multi-level marketing (MLM) setup, got into big trouble. The Federal Trade Commission (FTC) said they were running an illegal pyramid scheme, and AdvoCare had to settle for a whopping $150 million in 2022.

The problem was that AdvoCare was more into recruiting people than actually selling products. They were accused of faking their profits to trick investors and lying to new recruits about how much money they could make.

On top of that, recruits were given the wrong picture about the initial costs—they had to spend thousands of dollars on products they had to buy upfront before they could even start selling.

Because of all this, AdvoCare’s way of doing business came under serious doubt. It’s crucial to know about these issues and think carefully before getting involved with the company.

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