The Ethics of Multi-Level Marketing - Why it IS a Scam

The Ethics of Multi-Level Marketing - Why it IS a Scam

This page discusses the ethical problems with Multi-level Marketing. Also see these pages for:

Greed and Ethics in Multi-Level Marketing

Materialism and greed are universally condemned by every major religion, and even by most of the nonreligious. This does not mean people are not materialistic or greedy; in fact, the fact that the ethical call to not be so is actually strong evidence that we are.

For most people, this means if we are going to be materialistic or greedy, we would rather not be obvious about it. Thus, Madison Avenue has subtle, highly polished marketing and advertising ways of appealing to these vices without being heavy handed. We don't mind so much... as long as it is "veiled." This hypocrisy, while sad, is the status quo. So, Madison Avenue is trying to be ever more subtle in appearing not to be manipulating our immoral "bent" towards greed and materialism.

But this is not so with the MLM crowd. Pick up any brochure or videotape for an MLM and you are more than likely to see a cheesy, obvious, and blatant appeal to greed and materialism. This is offensive to everyone, even die-hard materialists. Typical is an appeal to "the American dream." Usually there will be a mood shot of a large new home, a luxury car, a boat, perhaps a beautiful couple boarding a Lear jet, and so on. Isn't odd that while they claim the product or service they sell is so great, but so little attention is given to the product, and so much to the wealth of the sellers and "distributors"?

Such a transparent appeal ought to make people suspicious. "Why the bait?" "Are they trying to 'get my juices going' so that my brain turns off?" "Couldn't they show people doing more wholesome things with the money they make?" "Why do we see so little about the product, the manufacturing, the waulity control, the business planning, etc?" "If this is really a legitimate opportunity, why not focus on the market, product, or service instead of people reveling in conspicuous greed and materialism?"

The distraction is needed because unbridled greed suspends good judgment. When the eyes gloss over in a materialistic glaze, common sense is a stranger.

You must push values that are contrary to your own

In most MLMs you will have no choice. You are going to have to sit through meeting after meeting after meeting after meeting. You are going to be "motivated" to coerce your friends and family to hear "the pitch." This is the way the "dream" is planted and fertilized. Get used to it.

If you are a materialist, you only have to get over the painfully obvious greedy appearance of the presentation. But if you do not wish to promote such ideas, if you consider them sinful, then this puts you at the focal point of a moral dilemma. Do you wish to be a salesperson for materialism?

Personality Cults

In typical MLM's , the "approved materials" showed what a great man the founder is, depicted the depth of his management experience, showed him in mood shots, etc, showing how wealthy he is and how many other "successful" business he started. It is easy to swoon in admiration of such a powerful, visionary man, dedicated to bringing this wonderful opportunity to common Americans like us. This is the essence of a personality cult.

In one case (Fund  America) it turned out that the founder was a criminal on the lame from Australia, where he had been run out of town for doing the same. But you would never guess it from the company material. There is was "a great man".

It does pay to do some research here. Are the idols you are being asked to worship in MLM worthy of respect, or contempt? Have they been prosecuted or sued for exploiting people in the past? Have they done prison time? Check them out in Google! Do not expect to hear the full truth in the MLM video.


Pride plays a role in the ethics of MLM's. "Mr. Prospect, now you aren't required to buy more than three product units, but why bother joining unless you plan to succeed? Besides, all of our products are 100% money back guaranteed."

"Hmmm... To ask for a refund, then, is to admit defeat. Others appear to be doing O.K. at this. I'm no failure! Perhaps I should go to another motivational seminar or strong-arm and alienate one more friend to join. I wasn't fooled! I'm no failure!"

So, the "inventory" and "recruitment kits," never viable, collect dust. They become a pile in the back closet or attic, a trophy to pride being unable to admit that greed seized the moment.

So why doesn't the government shut down all MLM's?  They must be legitimate!

A few large MLMs have survived despite the best efforts of law enforcement officials to shut them down.  The MLM's spend millions of dollars to protect, lobby, and insulate themselves. But the same could be said for any organized crime. It is difficult to stop once it becomes so large.

And MLMs look so legitimate to the public, so decent. So many nice people are involved. Surely, it can't be illegal! The people lower down may even defend the very organization that is robbing them, hoping that they might get their chance to make "the big money" later.

But if it looks like a duck, walks like a duck, and quacks like a duck, it probably is a duck. Unless it is an MLM, and then it is NOT a pyramid.

The Feds generally see it differently... when the ML (multi-level) aspect begins to eclipse the M (marketing) of products or services.

People can make money in an MLM, undeniably. The moral issue is: Where is the money coming from? Selling product? Then why not sell the same product in the "real world"?

But everyone knows that the real incentive is the pyramid aspect, and the product just the excuse to make it legal, or at least the MLM promoter would like you to believe it is legal.

Regardless of all the vehement denials, MLMs are all to some extent pyramid schemes, and pyramid schemes are illegal. Sure, some are "getting away with it," but so did the Mafia for decades. It is hard to stop a juggernaut, especially one that has taken such pains to look legitimate and misunderstood, that is highly organized, and that has so much money from its victims to propagandize, lobby, and defend itself. And so the exploitation goes on.

If these guys show up in your neighborhood, you are either "in" or "out," family or target, friend or foe. Suspicion rules the day; everyone has an "angle"; greed supplants innocence. The "neighborhood" is turned into a marketplace, and may never recover from the blow.

The ethical questions remain: Are MLMs a morally acceptable way to make money? Are they--and will they continue to be--legitimate?

The ethics of selling MLM products

If money is needed that badly, why not simply ask friends and family for help rather than taking money from them under false pretenses--and also selling them a bill of goods? By "sponsoring" them, you have not only conned them and profited at their expense, you have made them feel like losers, since they are not able to make a success of the hopeless MLM concept.

Once seen, only the morally blind, or consciously criminal, could continue in such a "business."

But wait, perhaps you could recruit... your mother!

Summary of Ethical Problems with MLMs

  • Do I want to be involved in encouraging people to be more materialistic?
  • Do I want to sell a product that perhaps couldn't be sold any other way?
  • Do I want to be a part of an enterprise famous for slander, libel, and rumor?
  • Do I want to be a part of a company that may employ criminals as marketing experts?
  • Do I want to make money off my ability to convince people that an unworkable marketing system is viable?
  • Do I want to be known among my friends and family as a person who tried to con people with a thinly veiled pyramid scheme?
  • Do I want to push friends and family to buy expensive products, whether they are good or not, that they may not want or need, and for which less expensive alternatives are readily available?

Finally: How you can lose your friends through the miracle of MLM

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