Multi-Level Marketing Groups Operate Much Like Cults

Most people know that certain religious and political cult groups manipulate and control members. In addition, there are other types groups that recruit millions of people all over the world that use deception and coercive influence with cult-like features. Many are multi-level marketing schemes (MLMs). It is important to recognize the warning signs so as to avoid being caught in their trap.

MLMs have been called many names, including network marketing, social marketing, pyramid schemes, Ponzi schemes, product-based sales, referral marketing, and direct sales. MLMs are pyramid schemes that focus on recruiting people to recruit others, presumably giving a cut of the income up the chain.

According to research by the FTC, a whopping 99% of recruited sellers lose money in an MLM venture. That means just 1% actually turn a profit. An article on MagnifyMoney.com, reporting a survey involving 1,049 multi-level marketing scheme participants from a variety of MLMs, found that most people were making less than 70 cents an hour (before deducting business costs) and 60% of participants said they had made less than $500 in the past five years. That anybody would stay in an MLM for five minutes let alone five years for an annual profit of about $100 seems ridiculous.

MLMs Adopt Cult Techniques

To understand how MLMs recruit and maintain participants requires examining them as cults. Most MLMs use tactics of recruitment, financial manipulation, and the promise of large profits. But, like all cults, they employ thought control, magical thinking, thought-stopping, and self-blame. Failures are blamed directly on the consultants, for lack of hard work or competence. The group has no accountability, and the leaders do not allow questions or criticism.

Massachusetts lawyer Douglas Brooks, an expert on marketing frauds, has said of MLMs, “…you’re trained to avoid people who question whether this is a viable business or not. Which is exactly the same technique that cults use—they try to isolate you from people who question your belief system.”

Recruiters can be very convincing. They use deception in all its forms (withholding vital information, distorting information, and outright lying) to ensnare people who have not learned about cult mind-control techniques. There is no such cultish recruiting in a regular sales job.

Direct selling to consumers is not per se a negative business model. Relationships between seller and buyer, a feature of direct selling, can often be very positive. Direct sales, in person or online, can be particularly important in reaching underserved communities.

Multi-level marketing has been a problem for a long time, but the scope and severity have grown over the past several years. The fear and anxiety created by the COVID-19 pandemic restricted in-person shopping, leading to a major increase in direct-to-consumer online sales. Products like essential oils and nutritional supplements were advertised as effective against COVID.

How Do Multi-level Marketing Groups Recruit and Retain?

Direct selling depends on social interaction and development of relationships. Recruitment of new distributors is even more dependent on the perception of friendship, caring, and other socially positive images.

Social aspects of recruitment often involve large seminars or other types of scripted events. Successful distributors—they are a very small minority—present their inspiring rags-to-riches stories. Couples may appear together; the husband talking proudly about providing for his family, his wife swearing their marriage has become so much more fun and loving.

One recruitment event was held at a casino, complete with loud music and good food. All of the recruitment is done in specifically designed small increments. A recruit becomes “hooked” before being made fully aware of what they are buying into.

When product distributors experience doubt and ask questions, they are subjected to emotional manipulation. Pressure to stay in the MLM group also comes from within. Social media plays a large part in the selling and recruiting process. Distributors spend a great deal of time, effort, and money to establish their presence on social media sites. The social media “community” is a source of support. Giving it up is frightening. People have often recruited close friends and family into the organization and suffer a great deal of shame and guilt when it falls apart. There is legitimate fear of retaliation from the organization itself.

Informed Consent

I believe that every individual has the right to make their own decisions. Individuals and organizations should be free to recruit. What is patently wrong and should be illegal is undue influence over a recruit’s decision-making process. The recruitment and retention tactics of MLMs are prime examples of undue influence. They rely on false representations, appeals to emotion, and very limited disclosure of the reality of multilevel marketing. Informed consent should be the driving force behind development and enforcement of regulations. Only then can free decisions be made.