The Big 'MLM/Direct Selling Income Opportunity' Lie - Robert FitzPatrick's 'Tupperware' prediction is coming to pass.

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This week (September 17th 2024) 

 'Tupperware' has filed for bankruptcy.

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Tupperware: Embattled food container firm files for bankruptcy (bbc.com)

Tupperware Voluntarily Initiates Chapter 11 Proceedings (prnewswire.com)

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Almost two years ago, Robert FitzPatrick published the article below.

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 Extinction Alert: The Plight of Avon and Tupperware | Pyramid Scheme Alert

Extinction Alert: The Plight of Avon and Tupperware

MLM is not and never was “direct selling” (door-to-door retailing). Mass merchandising, big box stores, mail-order and then the internet, among other societal changes killed off the old “direct selling” model generations ago. MLM promoters stole the revered old identity of “direct selling” to disguise the newly invented pyramid recruiting scheme, turning the salespeople into unwitting “customers” and recruiters.

As part of that disguise, MLMs frequently pointed to two long established and respected direct selling companies, Avon and Tupperware, as “proof” that MLM is “direct selling.” Both companies were members of the Direct Selling Association (DSA), which had been taken over almost entirely by Amway-type MLMs, as real direct sellers went out of business or closed sales operations (e.g., Fuller Brush, Encyclopedia Britannica).

Both were cultural icons, Avon for its “ladies” and Tupperware for its “parties.” In the distant past, both had differentiated products with real consumer demand. If someone argued that MLM was not direct selling but a pyramid scheme, MLMers would counter, “Are you calling Avon and Tupperware pyramid schemes?“

Walking Dinosaurs

The truth for both companies was very different from the MLM-version. In fact, Avon and Tupperware were vestiges of the pre-MLM – and mostly extinct – era of “direct selling”. They were walking dinosaurs. They still tried to base their businesses on their historical brands and on person-to-person retail sales to real customers, as all direct selling companies used to do.

Despite MLM’s false portrayal of Avon and Tupperware as “typical” MLM, the sharp distinction between them and the MLM “industry” burst into public view in 2013-14 when the two companies publicly quit the Direct Selling Association, charging ethics violations and DSA connections to pyramid schemes.

Avon’s Long Good-Bye

Avon had been a true door-to-door direct seller for decades before MLM was invented. But as the door-to-door model faded and “MLM” emerged as its counterfeit legacy, Avon began a long decline. In 2000, Avon shifted its focus from paying for retailing to “incentivizing” salespeople to recruit more salespeople and getting them to buy inventory, MLM-style. In 2009, during the Great Recession, Avon ran its most expensive ad in history, on television during the Super Bowl. The ad never mentioned any Avon products! It only solicited “salespeople.” Actual lipstick was replaced by a fake “income opportunity.” Still, global revenue dropped continuously over the next 10 years. Avon stock value fell from over $30 to just over $3.

Finally, Avon split off its faltering North American business and sold it to the Korean company, LG Household & Health Care. Avon claimed to have 250,000 sales representatives in North America. LG paid $125 million for the company, equivalent to just 500 bucks per salesperson. The remaining global business was later sold to the Brazilian MLM, Natura, which also owns the retailer, Body Shop. Though Avon global was much larger, its shareholders traded 3 shares of Avon for just one in Natura.

The Korean-owned segment in North America is now classic MLM, selling “health” supplements, make-up, jewelry, clothing, scented candles, even toothpaste, and, always, the proverbial MLM “income opportunity.”

On the Canadian Avon website, Avon advertises its “opportunity”, urging prospects in large bold black type:

“Think big. Sell Avon part-time, full-time, you decide how much! It’s your business, your way!” A disclosure (legally required in Canada, but not in the USA) appears midway down a long webpage in tiny, barely visible gray lettering: “The 2020 earnings of a typical Avon Leadership Representative was between $0 and $2,620 in commissions and bonuses.” That’s $0 to $50 a week, before subtracting all costs!

Avon quietly rejoined the Direct Selling Association, expressing no further public concerns about ethics or pyramid schemes. The Brazilian company, Natura, which took over Avon’s global business in 2020, has lost 66% of its stock value in the last year. The old “Avon” is now long gone.

Tupperware on the Brink

Tupperware was one of the first “party plan” companies, which are technically a subset of MLM, employing an “endless” recruiting chain, but still more rooted in retail transactions at “parties.” Tupperware used to have a popular brand with innovative, differentiated products. But, as true direct selling began to disappear, Tupperware went into decline. It added MLM-type “health and beauty” commodities to bolster recruiting appeal but recently stopped offering them. Its core product line of kitchen-related goods are generally no different from types now available in stores or online. A 10-months “Income disclosure” for Canada showed that half the “party planners” are classified “inactive”, earning less than $30 for the period on average. 94% of the “active” ones reportedly received about $12 a week on average, before expenses.

In the last 5 years, the stock value of Tupperware dropped 94%. This year, it began also selling its products in Target department stores. Its latest financials revealed significant losses and warned investors the company may violate loan agreements, setting off speculation Tupperware might declare bankruptcy.

The specious MLM-defense, claiming historical direct-selling icons, Avon and Tupperware, as proof that MLM really is “direct selling” is as extinct as those companies’ old business model.

Robert FitzPatrick (copyright 2022)

UK Law Enforcement's Chronic and Catastrophic Failure to Recognize 'MLM/Business/Income Opportunity' racketeering

Recently, I had a telephone conversation with a man who identified himself as being an agent of the UK's 'National Fraud Intelligence Bureau.' However, this person refused to give me his name or identify exacly what his position is, or his qualifications for occupying it. I had made contact with the 'National Fraud Intelligence Bureau,' at the suggestion of an employee of 'Action Fraud.' However, these tax-payer-funded organizations require further explanation. 

Thus, in recent years, Britain has become submerged by fraud, to the extent that the police (outside of Scotland) no longer accept reports of fraud from the public. For the last several years, this task has been outsourced to a 'service' known as 'Action Fraud.'  In my experience, the persons who answer the phones for this 'service,' have little idea what is the legal status of 'Action Fraud.'  Indeed, the 'service's' own Website does not make this clear, even though it contains a page entitled 'What is Action Fraud?'

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What is Action Fraud? | Action Fraud

What is Action Fraud?

Action Fraud is the UK’s national reporting centre for fraud and cybercrime where you should report fraud if you have been scammed, defrauded or experienced cyber crime in England, Wales and Northern Ireland.

We provide a central point of contact for information about fraud and financially motivated internet crime. People are scammed, ripped off or conned everyday and we want this to stop.

The service is run by the City of London Police working alongside the National Fraud Intelligence Bureau (NFIB) who are responsible for assessment of the reports and to ensure that your fraud reports reach the right place. The City of London Police is the national policing lead for economic crime.

Report fraud and cyber crime crime

You can report fraud or cyber crime using our online reporting service any time of the day or night; the service enables you to both report a fraud and find help and support. We also provide help and advice over the phone through the Action Fraud contact centre. You can talk to our fraud and cybercrime specialists by calling 0300 123 2040.

When you report to us you will receive a police crime reference number. Reports taken are passed to the National Fraud Intelligence Bureau. Action Fraud does not investigate the cases and cannot advise you on the progress of a case.

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'Action Fraud' lists the various common types of Fraud that UK citizens might fall victim to, including 'Business Opportunity Fraud.' Business opportunity fraud | Action Fraud

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'Business opportunity fraud involves an offer to become financially independent, or to generate extra income, by setting up your own business.'

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To date, it has been impossible for me to discover who exactly compiled 'Action Fraud's' feeble attempt to describe 'Business Opportunity' fraud. I assume that the page was, in fact, compiled by an agent, or agents, of the UK's 'National Fraud Intelligence Bureau.' Indeed, it is quite possible that the unidentified person whom I spoke to, was the author, or one of the authors, of the page.

Who are the National Fraud Intelligence Bureau? | Action Fraud

Laughably, there has been absolutely no mention of 'Multi-Level Marketing/Direct Selling' on 'Action Fraud's' Website. Furthermore, as far as I'm aware, there has never been a single, well-informed criminal investigation, let alone a successful criminal prosecution, of an 'MLM/Business Opportunity' fraud in the UK. 

All this begs the not unreasonable question: 

Why on Earth have agents of the UK's 'National Fraud Intelligence Bureau' via 'Action Fraud' been warning the UK public about a form of largely-foreign-controlled organized crime that, by their own chronic and catastrophic failure to identify it accurately, has become effectively authorized and, therefore, widespread in the UK?

David Brear (copyright 2024)

The Tragicomedy of the Federal Trade Commission's recent 'Multi-Level Marketing Report'

 FTC Report on MLM “Earnings Claims” Rule Confirms Views of Dr. Lasdwun N. Luzes, Legendary MLM Economist | Pyramid Scheme Alert

FTC Report on MLM “Earnings Claims” Rule Confirms Views of Dr. Lasdwun N. Luzes, Legendary MLM Economist

Sep 14, 2024 | Economics / Financial, Humor, News

Note: The published comments of Dr. Lasdwun N. Luzes may be found on the FTC website: https://www.regulations.gov/comment/FTC-2022-0020-0028
The published comment is also archived HERE.

The recent report by staff of the FTC Consumer Protection Bureau related to a proposed rule on MLM “Earnings Claims” confirms the economic analysis of Dr. Lasdwun N. Luzes that such a rule would be useless and unworkable. Dr. Luzes is the author of the ground-breaking booklet, In Defense of the Pyramid Scheme.

Dr. Luzes argues that multi-level marketing (MLM) is an obvious pyramid scheme, and that pyramid schemes are now conventional businesses and should be legalized. He points to other areas of the economy also based on “robbing Peter to Pay Paul”, including crypto, real estate flipping, the banking system, the stock market, consumer credit, and the federal budget.

In the case of MLM, which he views as the most obvious pyramid scheme directly affecting the most people, the extreme loss rates, he has shown, are consistent with trends in the general economy today for the rate of “losers.” In his view, “deception” in a MLM pyramid scheme is not different or worse than blatant lies told every day in general advertising and in political campaigns. Most importantly, he notes that pyramid schemes are extremely lucrative for founders and top recruiters, and so pyramid schemes are very good businesses.

Dr. Luzes points out that more than 40 years ago, the FTC legalized the MLM “business model”, which is definitively a pyramid scheme, and the FTC has consistently endorsed the MLM pyramid as it grew to global proportions. In all that time, the FTC never monitored loss rates or deceptive “earnings” claims. Yet, the FTC also, on rare occasion, prosecutes an MLM as a “pyramid scheme”. Dr. Luzes believes the FTC should drop the pretense and just openly support pyramid schemes as businesses, which it is doing anyway in practice.

The FTC report confirms that a workable, enforceable “rule” on MLM “earnings claims” is impossible, as Dr. Luzes has explained. After studying “data” from 70 MLMs – which they characterized as incomplete, sometimes incomprehensible and inaccurate – the FTC staff was led, as Dr. Luzes predicted, to an erroneous and misleading “conclusion,” portending a useless, misleading “rule.”

The “take-away” of the report is that the vast majority of MLM participants earn “less than a thousand dollars in a year.” This is like saying “not many” people win lotteries, or “most people live less than 200 years.” It misrepresents reality. The FTC “conclusion” erroneously implies most recruits gain, or could gain, some “earnings”, up to $1,000, per year. In fact, almost no one gains even one-cent in net profit. It also implies most MLM recruits continue for a year or more. Most new recruits quit and are replaced within a year, every year, making “annual” data invalid.

In plain language, as Dr. Luzes explains in his provocative book, there are no “earnings” in MLM. There are financial gains for those at the extreme top, owners, founders, and early recruiters, based on the losses of all others, That is the nature of the pyramid scheme “business.” The losses for new recruits are “by design,” and can never change. So, there is nothing to “regulate.” A “rule” on “earnings claims” is a pretense that there are “earnings.”

MLM’s unique “business model” – consistently endorsed by the FTC since 1979 – is based on the “endless chain”. This model, as Dr. Luzes eloquently explains in his book, permits MLMs – only MLMs – to make the electrifying promise of “unlimited income potential” for all recruits, regardless when they are enrolled or how many others are already enrolled. This FTC-approved “plan” authorizes MLMs to claim to be “the greatest income opportunity in the world,” even if data show more than a 99% loss rate, every year. Because MLM is based on the metaphysical concept of “infinite expansion,” it can claim it is not bound by markets or math. Recruits are told they succeed with “belief” (as long as they also pay and recruit).

In his book, Dr. Luzes shows that what MLMs actually promote is not “earnings,” but the “opportunity” to be part of an “endless” money-chain that “transfers” money, the opposite of “earnings.” Promises and claims of an “unlimited opportunity” could never be regulated.

Dr. Luzes further backed his recommendations by citing the FTC’s official view that “earnings claims” by MLMs don’t have to be true. He quotes what the FTC wrote about MLM earnings claims in 1979 when it legalized the MLM “endless recruiting chain” model:

“References to the achievement of one’s dreams, having everything one always wanted, etc. are primarily inspirational and motivational; to the extent that they dangle the likelihood of financial security and material success before the potential distributor, they constitute vague ‘puffs’ which few people, if any, would take literally.” 

Dr. Luzes also notes, since an “earnings claims rule” would imply systemic deception, it insults and discredits all the FTC officials who now work or may in the future work for MLMs or MLM law firms or for the Direct Selling Association.

Robert FitzPatrick (copyright 2024)

The FTC's latest 'Multi-Level Marketing Report' is morally and intellectually feeble.

 FTC Staff Issue Report on Multi-Level Marketing Income Disclosures | Federal Trade Commission

Multi-Level Marketing Income Disclosure Statements (ftc.gov)

The document (linked above) tells us nothing that we don't already know.

One thing is certain, the regulators and academic advisors who compiled this report, have not examined, or even tried to find, independent quantifiable evidence (in the form of income-tax payment receipts) proving that any 'MLM' contractor has generated an overall net-income lawfully (i.e. after the deduction of all start-up and operating costs) from regularly retailing goods/services for a profit to members of the general public (i.e. persons who were not fellow 'MLM' contractors) based entirely on value and demand.

The FTC's report is morally and intellectually feeble, because a collection of copy-cat so-called 'income opportunities' which, over decades, have produced effectively 100% overall net-loss/churn rates for countless millions of ill-informed participants around the globe, cannot, by any stretch of the imagination, be described as, 'income opportunities,' in the traditional sense of these words. On the contrary, they have quite obviously been pernicious fakes based on the same, self-perpetuating design, and which have been maliciously instigated by criminals to deceive, rob and enslave vulnerable persons. 

The FTC's report also confirms that the criminals peddling these copy-cat fakes have all been maliciously hiding/mystifying the truth, whilst pumping out their Big 'MLM income opportunity' Lie. 

Furthermore, the chronic failure of law enforcement to recognize this vast, ongoing criminogenic phenomenon, has made it appear to both victims and casual observers, that so-called 'MLM income opportunities' have been part of a lawful industry.

David Brear (copright 2024)