Multi-level marketing schemes appear to offer financial freedom and the ability for women to be their own bosses after the insecurity of the pandemic. But critics who compare them to “cults” accuse them of exploiting the financially vulnerable.
Amazon’s explosive LuLaRich documentary shocked viewers with its investigation into the murky world of apparel company LuLaRoe (which became Facebook famous for its highly patterned leggings), which plunged thousands of millennial women into crippling debt. Despite the fact that some distributors got hundred thousand dollar pay cheques and exclusive LuLaRoe cruises, filmmakers called it a cult of “mass delusion” that led to dozens of lawsuits.
But flashy multi-level marketing schemes (MLMs) like LulaRoe aren’t just an American phenomenon. Indeed, particularly since the pandemic, women across the UK are becoming increasingly involved.
Statistics from the Direct Selling Association, whose members include well-known beauty and wellbeing brands, reveal growth across many of their members’ figures as a result of lockdown, seeing a 32% growth in the first quarter of 2021.
Hattie Rowe, a UK TikToker whose account devoted to researching MLMs boasts nearly 70,000 followers, tells Stylist that lockdown and increased job cuts have been used as a recruitment drive for these companies.
“I’d go on Facebook and be bombarded by posts and messages about how I can be a ‘boss bitch’ and earn money from home. But during the pandemic, the amount of recruitment messages I received increased massively,” she explains. “That’s when I started to do more research into these companies and found the whole anti-MLM community.”
That was nearly a year ago, and now Rowe regularly shares advice and her research on social media to warn others of the potential risks associated with MLMs.
Pyramid schemes v MLMs
Though the terms are often used interchangeably, there are some key differences between MLMs and pyramid schemes.
Action Fraud defines a pyramid scheme as “an unsustainable business which rewards people for enrolling others into a business that offers a non-existent or worthless product.” These are illegal in the UK under the Consumer Protection from Unfair Trading Regulations 2008.
As Action Fraud explains: “In a pyramid scheme, your money is not actually invested in any product, but is instead simply passed up the chain of investors. You’re required to pay a fee to enter and then pressured to recruit friends or family members to enter the scheme.”
MLMs have a similar structure, but involve a product. They are also legal in the UK, as long as they comply with disclosure laws and provide customers with an actual product in exchange for their money.
However, many sceptics consider them one and the same. Indeed, Rowe believes that although entirely legal, MLMs are “just product-based pyramid schemes, because the products are kind of irrelevant because there’s such an emphasis on recruitment.”
The danger of MLMs
MLMs are often referred to as “cult-like” by critics, with upline managers who are constantly pushing for more recruitment and investment to keep the chain going.
Though Rowe herself has never been involved with an MLM, she says that her research has given her insight into how financially, mentally and socially damaging MLMs can be for women.
“I’ve spoken to people that have had marriages and relationships ruined because of the financial stress caused by the constant pressure to enlist,” she tells Stylist.
Rowe explains that MLMs can be particularly dangerous as, unlike the US, the UK doesn’t have a federal trade commission to regulate and investigate these companies. “In the UK, there’s a massive lack of regulation because there’s nobody stopping them. Just because something is legal, doesn’t make it right.”
Ruby* has experience of being in an MLM. “I had dropped out of university and felt like a bit of a failure because I didn’t know what I wanted to do,” she tells Stylist. “But when I joined an MLM and started getting involved with the idea of being my own boss and having the freedom to work from anywhere, I really thought I was going to make it.”
Ruby worked her way up to having over 60 people in her team by the time she left, something she says she feels guilty about. “I was that person that used to say: ‘It isn’t a pyramid scheme, it isn’t a pyramid scheme’ and I’d never intentionally scam people. But I’m the reason those people got involved, some of them my family and friends, and when they lost money, I felt like it was partly because of me.”
Ruby stresses that her problem with MLMs lies within the industry itself, not the people involved. “There are some lovely people that work in MLMs and I respect them and their decisions; I just want to share the truth of my experience.”
“If people are happy and want to remain in one, that’s fine. But if you’re losing money and are thinking about getting out, there are people to talk to.”
Stylist reached out to a number of MLMs but received no comments on the allegations of exploitation and steep financial losses being experienced by members.
The cult of “positivity” in MLMs
Indeed, MLMs are characterised as much by their products as the lifestyle they promote alongside them. Distributors are encouraged to utilise social media to engage with a community of other sellers, often sharing idyllic family home snapshots as well as the vitamin, beauty tool, lotion or household item that has “changed their life”.
“These companies claim to be supporting feminism and empowering women, but they’re actively doing the complete opposite,” says Rowe. “They use this tacky feminist jargon of “lady boss” and “mumtrepreneur” to entice women, particularly those who are financially insecure.”
One experience Rowe says will always stay with her is a woman who contacted her wanting to leave the MLM she was involved in. “She told me that she was in hospital having a miscarriage, and her upline manager was messaging and calling her saying, ‘Why aren’t you posting on Facebook? You haven’t posted anything today?’ That’s when it becomes clear what this is: pure financial exploitation.”
Despite this, many women find it hard to leave the close-knit MLM community. “Sometimes when people do leave, they’re alienated and blocked on social media by the rest of the community. These companies prey on people’s loneliness too. That way, you’re not just leaving behind the job, but your friends.”
Ruby agrees, and shares that since she left her MLM over a year ago, she’s been unfollowed and blocked by people she once considered close friends, including her mentor and people she’d been on holiday with.
“I think people are scared to leave because they don’t want to come across as failures,” she says. “There’s so much pressure to keep growing your team and recruiting more people to become more like your mentor. You’re supposed to just be a regurgitation of her and the company.”
How to leave a pyramid scheme or MLM
In the case of pyramid schemes, Action Fraud advises reporting the fraud immediately. If you think you’re actively participating in a pyramid scheme, break off contact with the fraudsters immediately and don’t invest any more money. Keep any written communications you’ve received from the pyramid scheme – they may help you give evidence to the authorities.
If you are involved in an MLM and want to leave, financial advice website Finder suggests distancing yourself from your upline and any pressure they may place on you to remain in the company, as well as being honest with your downline about your decision. “You’re not at fault for failing to reach the six figures your upline claims they make,” it advises.
Further advice and support can be found at actionfraud.com. Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.