Robert FitzPatrick explains why the growing-collection of close-up lawsuits filed against individual 'MLM' cultic rackets leaves the big picture out of shot or out of focus.

The Importance and Futility of Class Action Lawsuits against MLMs

May 1, 2019 | Ethics, False Profits, Legal, Legalities and Laws

Recently, yet another class action lawsuit has been filed against a “multi-level marketing” company, in this instance, “Young Living Essential Oils“. This Utah-based MLM company (are they all in Utah?) is a digital reproduction of so many other MLMs, that are themselves copies of earlier ones, all leading back to the seminal scam known as Nutrilite. Like the proverbial mouse-trap, MLM has not been significantly changed or improved as a financial-trap since its invention. It has only duplicated and geographically expanded. With its utopian promise of wealth and happiness, pseudo-science “health” products, concocted stories of visionary founders, pious claims to high ethics and global mission, it appears as enticing and beneficial to human victims around the world as the cheese-loaded mousetrap does to the ubiquitous mouse.

Reflecting the reality that MLMs are all alike – identical in essence and in consequences –  MLM class action lawsuits are worded and outlined very similarly. They might qualify as a subset of journalistic non-fiction literature. Characters in these stories include the villainous MLM companies factually described as disguised pyramid schemes. The schemes are led by charlatan founders, often with backgrounds in other MLMs (many, it seems, have worked in Amway) or in stock market scams or phony health remedies. Sometimes figures from the scheme’s inner circle are also named, as cunning henchmen. Then, there are a few victims in each class action suit whose names are publicly associated with the lawsuit but whose personal histories and circumstances are sparingly described. This is not because they are undeserving of respect and understanding but because the range of people affected by MLM is universal. Virtually every type of person is a mark. As this recent suit states, “Plaintiff’s claims are typical… in that each… was unsuspectingly induced to join the pyramid scheme.”

Being deceived is the only common factor among the universe of MLM victims. This is because virtually everyone is vulnerable to MLM’s brand of treachery.  First, MLM makes a mesmerizing, though utterly false, promise to meet real financial needs that virtually everyone faces. It then insinuates association with universally treasured values and beliefs, such as faith, family, entrepreneurship, patriotism, feminism, servant leadership, the American Dream, and personal freedom. Finally and equally important to its nefarious power  MLM employs the same tools to persuade, manipulate and control recruits that are used by Elmer Gantry type preachers, dictators and experts in propaganda. No one is truly immune to this dangerous weaponry, especially since it is treated as “legitimate” by corrupted regulators.

These tools include: dividing the world into binary realms, one heavenly and enlightened (winners/believers) and the other evil and ignorant (quitters and doubters); vilifying non-believers or defectors (losers, dream-stealers);  controlling information (always ask your upline, never critics, outsiders or the media); dominating people’s time (meetings, recruiting, phoning, websites, audios); claiming moral authority and piety (church, mission, charities); separating people from non-participating friends and family (get rid of anyone that does not “support”); imposing a mystifying proprietary vocabulary (downline, Diamonds, PV points, Ambassadors, flushing, compression); claiming mystical powers (infinite expansion, unlimited income); promising utopia and threatening hell (wealth beyond your imagination that is equated with human happiness and fulfillment and lack of wealth as total failure, shameful wasted life, despair); degrading critical thinking (Believe!) and employing confusing and mystifying structures and baffling explanations (corporate labyrinths, and incomprehensible pay formulas).

MLM class action lawsuits are important for publicly asserting and itemizing the verifiable facts of MLM’s pyramid scheme structure and detailing its methodologies of deception, cultism, and manipulation and the devastating financial and social consequences. They offer this vital information in readable, publicly available documents not found elsewhere, other than a rare government prosecution. The suits therefore serve as important educational sources for affected consumers and as historical references for anyone seeking the truth. Academia and the news media have access to exactly the same facts as the plaintiffs’ attorneys who write these class action documents, but in those respected fields, plainly stating or even pursuing the terrible truth about MLM is considered career-killing. 

Unquestioningly, the lawsuits are valuable as a last defensive measure against mass fraud and as front-line truth-tellers. Beyond that educational and symbolic service, and its annoyance and costs to the MLMs, however, there is little to recommend the class action suit against MLMs. In the big picture, they are futile. Here’s why:

• By implication and sometimes explicitly stated as part of the case, the suits uphold the conventional falsehood that, while the MLM-defendant in the case is characterized as a calculated scam and a racket, its wrongdoing is depicted as a contradiction of the MLM model which is characterized as “legitimate.” Consumers are, therefore, merely redirected away from one mousetrap possibly to  another with different cheese. 

• Before going to trial, MLM class action lawsuits are almost always “settled”. No real or useful change occurs. Money is paid, a pittance in the scheme of things; the schemes admit no wrongdoing; those consumers covered in the settlement surrender rights to make further claims. An impression is cultivated of closure, remedy, even an improved MLM “business” which is actually a strengthening of the trap and an update of the quality of cheese. This largely meaningless (except to the attorneys and the MLM scheme itself) outcome is dictated by the class action model. The lawsuits are part of the business of lawyering. They are entrepreneurial ventures.  Most cases are well intentioned but outcome scenarios are determined by the business model, not aspirations. The costs of pursuing the cases are significant, highly risky, and the time frame can be measured in years or decades. The settlements constitute an exchange of commercial value, a business transaction within the lawyer industry, not necessarily an expression of justice. The attorneys are compensated for their time with a handsome profit, if successful, or suffer a big loss if not; either way, the defendant-MLM gets back to the “MLM” business, since the case never argued that “MLM” is illegal or inherently deceptive; the victims are thrown some financial crumbs; there is usually some empty rhetoric of reform; federal regulators are not disturbed from their blissful and well-paid sleep.
• It is unlikely the suits serve as any deterrent whatsoever since MLMs cannot reform or fundamentally change without destroying their money-generating capacity, which is entirely based on deception. What is described as wrongdoing and harmful actions in the lawsuits is merely the classic structure and behavior of the MLM “model” and all enterprises that utilize it. Battling class action lawsuits is therefore viewed by MLMs as merely a cost of doing business, not an existential threat. 

To view the MLM class action lawsuits as significant forces of change, as justice, or even practical consumer protection measures requires a delusional segmenting of reality. First the ineffectual outcomes of past cases must be forgotten. Then, a blind faith in the legal system to protect the public and address wrongdoing is maintained while the corrupt inaction of law enforcement is ignored or tolerated. An inescapable question looms over any reading of these MLM class action documents. If all of this or even some of it is true, why aren’t the police, the FBI  or at least the FTC interested? In fact, MLM class action lawsuits on their own, and despite their facts, analyses or even settlements involving payments to victims, do not provoke any interest or action from the SEC, FTC or FBI in recent years. Even in the rare case of a government prosecution, the wrongdoing is classified merely as “unfair and deceptive business“, not criminal fraud. It is like calling 911 to report that your home has just been robbed by a serial burglar who is well known to the police and the break-in was clearly witnessed by multiple neighbors, and you are advised to hang up and contact a lawyer. 

As non-fiction literature, I have observed a few interesting developments in the MLM-class action suit genre. The aspect of cultism and references to the defendant-MLMs as engaging in “racketeering” are more common and better detailed now. Also, perhaps in recognition of the limited impact that even the plaintiffs’ attorney know the suit will have, an element of ironic humor is slyly introduced. Noting multiple outrageous deceptions and laughable absurdities in reference to claims and narratives of the MLM,”Young Living Essential Oils”, the lawsuit’s attorney-authors inserted this wry notation :

“According to Mr. Young’s (company founder) biography, while working as a logger in the State of Washington, Mr. Young was struck by a falling tree, which resulted in a fractured skull, ruptured spinal cord, and nineteen broken bones. After being told he would never walk again, Mr. Young claims to have healed himself through a 252-day dietary regimen of nothing but water and lemon juice. By comparison, the medicinal qualities and potential for financial rewards ascribed to essential oils by Young Living are not nearly as believable.” 

Robert FitzPatrick (copyright 2019)

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'Multi-Level Marketing' warning:

The following deconstructed analysis has been formulated to sharpen the critical and evaluative faculties of all unwary persons approaching so-called 'Multi-Level Marketing' from the dangerous (subjective) point of view that it must be a business/industry, rather than from the safe (purely-objective) point of view that they don't really know what it is.

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More than half a century of quantifiable evidence (the latest being a BBC television documentary linked below), proves beyond all reasonable doubt that:

• the widely-misunderstood phenomenon that has become popularly-known as 'Multi-Level Marketing' (a.k.a. 'Network Marketing') is nothing more than an absurd, non-rational,  cultic, economic pseudo-science maliciously-designed to lure unwary persons into de facto servitude, dissociate them from external reality and not only steal their money, but also deceive them into unconsciously acting the role of bait to lure other unwary persons (particularly their friends and family members) into the same trap. 

• the impressive-sounding made-up jargon term, 'MLM,' is therefore, the misleading title for an enticing structured-scenario of control which has been developed, and constantly acted out as  reality, by the instigators, and associates, of various copy-cat, major and minor, ongoing organised crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim 'Long Cons*'  - comprising self-perpetuating rigged-market swindles**, a.k.a. pyramid scams (dressed up as 'legitimate direct selling income opportunites') and related advance-fee frauds (dressed up as 'legitimate: training and motivation, self-betterment, programs, recruitment leads, lead generation systems,' etc.).

• Apart from an insignificant minority of shills (whose leading-role in the 'Long Con' has been to pretend that anyone can achieve financial freedom simply by following their unquestioning example and exactly-duplicating a step-by-step-plan of recruitment and self-consumption), the hidden overall net-loss/churn rate for participation in so-called 'MLM income opportunities,' has always been effectively 100%.

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*A 'Long Con' is a form of fraud maliciously designed to exploit victims' existing beliefs and instinctual desires and make them falsely-believe that they are exercising a completely free-choice. 'Long Cons' comprise an enticing structured-scenario of control acted out as reality over an extended period. Like theatrical plays, 'Long Cons' are written, directed and produced. They involve leading players and supporting players as well as props, sets, extras, costumes, script, etc. The hidden objective of 'Long Cons' is to convince unwary persons that fiction is fact and fact is fiction, progressively cutting them off from external reality. In this way, victims begin unconsciously to play along with the controlling-scenario and (in the false-expectation of future reward) large sums of money or valuables can be stolen from them. Classically, the victims of 'Long Cons' can become deluded to such an extent that they will abandon their education, jobs, careers, etc., empty their bank accounts, and/or beg, steal, borrow from friends, family members, etc.

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** The enticing structured-scenario of control fundamental to all 'rigged-market swindles' is that people can earn income by first contributing their own money to participate in a profitable commercial opportunity, but which is secretly an economically-unviable fake due to the fact that the (alleged) opportunity has been rigged so that it generates no significant, or sustainable, revenue other than that deriving from its own ill-informed participants. For more than 50 years, 'Multi-Level Marketing' racketeers have been allowed to dissimulate rigged-market swindles by offering endless-chains of victims various banal, but over-priced, products, and/or services, in exchange for unlawful losing-investment payments, on the pretext that 'MLM' products/services can then be regularly re-sold for a profit in significant quantities via expanding networks of distributors. However, since 'MLM' products/services cannot be regularly re-sold to the general public for a profit in significant quantities (based on value and demand), 'MLM' participants have, in fact, been peddled infinite shares of their own finite money (in the false expectation of future reward). 

Thus, in 'MLM' rackets, the innocent looking products/sevices' function has been to hide what is really occurring - i.e The operation of an unlawful, intrinsically fraudulent, rigged-market where effectively no non-salaried (transient) participant can generate an overall net-profit, because, unknown to the non-salaried (transient) participants, the market is in a permanent state of collapse and requires its non-salaried (transient) participants to keep finding further (temporary) de facto slaves to sustain the enticing illusion of stability and viability.

Meanwhile an insignificant (permanent) minority direct the 'Long Con' - raking in vast profits by selling into the rigged-market and by controlling/withholding all key-information concerning the rigged-market's actual catastrophic, ever-shifting results from its never-ending chain of (temporary) de facto slaves.

Although cure-all pills potions and vitamin/dietary supplements, household and beauty, products have been most-prevalent, it is possible to use any product, and/or service, to dissimulate a rigged-market swindle. There are even some 'MLM' rackets that have been hidden behind well-known traditional brands (albeit offered at fixed high prices). Some 'MLM' rackets have included 'cash-back/discount shopping cards, travel products, insurance, energy/communications services' and 'crypto-currencies' in their controlling scenarios.

No matter what bedazzling product/service has been dangled as bait, in 'MLM' rackets, there has been no significant or sustainable source of revenue other than never-ending chains of contractees of the 'MLM' front companies. These front-companies always pretend that their products/services are high quality and reasonably-priced and that for anyone prepared to put in some effort, the products/services can be sold on for a profit via expanding networks of distributors based on value and demand. In reality, the underlying reason why it has mainly only been (transient) 'MLM' contractees who have bought the various products /services (and not the general public) is because they have been tricked into unconsciously playing along with the controlling scenario which constantly says that via regular self-consumption and the recruitment of others to do the same, etc. ad infinitum, anyone can receive a future (unlimited) reward.

I've been examining the 'MLM' phenomenon for around 20 years. During this time, I've yet to find one so-called 'MLM' company that has voluntarily made key-information available to the public concerning the quantifiable results of its so-called 'income opportunity'.

Part of the key-information that all 'MLM' bosses seek to hide concerns the overall number of persons who have signed contracts since the front companies were instigated and the retention rates of these contractees. 

When rigorously investigated, the overall hidden net-loss churn rates for so-called 'MLM income opportunites' has turned out to have been effectively 100%. Thus, anyone claiming (or implying) that it is possible for anyone to make a penny of net-profit, let alone a living, in an 'MLM,' cannot be telling the truth and will not provide quantifiable evidence to back up his/her anecdotal claims.

Although a significant number of 'MLM' front-companies (like 'Vemma', 'Fortune Hi-Tech Marketing', 'Wake Up Now') have been shut-down by commercial regulators, some of the biggest 'MLM' rackets (like 'Amway' ,'Herbalife', Forever Living Products' ) have continued to hide in plain sight whilst secretly churning tens of millions of losing participants over decades.

The quantifiable results of the self-perpetuating global 'Long Con' known as 'Multi Level Marketing,' have been fiendishly hidden by convincing victims that they are 'Independent Business Owners' and that any losses they incurred, must have been entirely their own fault. 

Blog readers should observe how (in the above linked-videos) chronic victims of 'MLM' cults are incapable of describing what they were subjected to in accurate terms. Even though they are no longer physically playing along with the 'Long Con's' controlling-scenario, they unconsciously continue to think, and speak, using the jargon-laced 'MLM' script - illogically describing themselves as 'Distributors.' 

Chronic victims of blame-the-victim cultic rackets who have managed to escape and confront the ego-destroying reality that they’ve been systematically deceived and exploited, are invariably destitute and dissociated from all their previous social contacts. For years afterwards, recovering cult victims can suffer from psychological problems (which are also generally indicative of the victims of abuse):

depression; overwhelming feelings (guilt, grief, shame, fear, anger, embarrassment, etc.); dependency/ inability to make decisions; retarded psychological/ intellectual development; suicidal thoughts; panic/ anxiety attacks; extreme identity confusion; Post-Traumatic Stress Disorder; insomnia/ nightmares; eating disorders; psychosomatic illness, fear of forming intimate relationships; inability to trust; etc.  

David Brear (copyright 2019)