Anti-MLM Zealots

Anti-MLM Zea lots
Me Thinks Doth Protest Too Much!
Part I
By Leonard W. Clements © 2004
I love Multilevel Marketing. I've been involved, full time, for over 14 years, and I've
managed to make a very good living at it – and I've never front loaded anyone with product,
I've never flashed my check, I've never mislead anyone into attending an opportunity
meeting, I’ve never sold training or tools for a profit, I've never made an outrageous product
claim, and I've never lost a single friend in the process. I have, with hard work, commitment,
and patience managed to ethically and honestly build a downline sales organization that has
afforded me enough residual income to "exit the rat race."
However, according to some, I don't exist.
There are certainly some networkers among us who might be considered "zealous" as
well. Perhaps overly so. But for every person attempting to convince a jaded, wary world
that MLM is true, and good, there are at least an equal number who immediately dismiss it
with prejudice. And, yes, some of them can get a little overzealous as well.
Anti-MLM Zealots tend to come in two flavors: Ignorant or vindictive. In other words,
they've either never actually participated in MLM themselves (thus have adopted someone
else's opinion as their own, or simply guessed at their conclusions), or they have
participated and failed at it. Would you take marriage advice from a guy who was recently
divorced? Or, worse, has never even had a girlfriend? Would you take golf lessons from
someone who shot in the 120s, or who never played golf – no matter how much they
claimed they had "studied and analyzed" the game?
In fact, there are four individuals who have made it a point (and in some cases, it
seems, their life's mission) to be a thorn in the side of every MLMer in an effort to save the
other 283 million Americans from a fate such as mine. Although these Four Horsemen of
the Apocryphal are small in number, thanks to the internet their words are available to
millions, and they are doing some damage (do a Google search for "MLM" -- the top three
results are anti-MLM sites). Whether you realize it or not, many of those who are not
responding to your marketing campaign are victims of the anti-MLM propagandists. To
many they seem to make sense.
Do they? I certainly don’t think so, and I’ll be telling you why here in this publication
over the next several issues. I think it’s about time these naysayers be taken to task. Their
words have lingered unopposed long enough. They’re wrong, and here’s why...
What's Wrong With Multilevel Marketing? – Dean Van Druff
Dean Van Druff, the author of the well traveled, rambling, disjointed essay "What's
Wrong With Multilevel Marketing?", is perhaps the most prevalent of the four in spite of
making the weakest argument. Mr. Van Druff goes so far as to state that "MLM will never
work, even in theory" in the face of the blatant fact that MLM is a 64 year old industry with
numerous profitable companies and thousands of successful distributors.
The ignorance of most Anti-MLM Zealots is clearly evident in their reporting of basic
MLM related facts and figures, and Van Druff provides a litany of them. I should point out
that I am not at all implying he, nor anyone opposed to MLM, is dumb. Ignorant means to
ignore readily available information, thus resulting in a lack of knowledge, not intelligence.
For example, throughout Van Druff's 12 page essay he makes several observations about
MLM that are simply inaccurate, such as, that we are a 25 year old industry, which would
have been off by 30 years even in 1990 when his essay was originally written. This could be
explained by Van Druff's own reluctant but eventual admission that he has had no personal
experience with MLM and did little, if any, research into the subject previous to putting his
"theoretical analysis" on paper.
Besides the historical inaccuracies mentioned previously, Van Druff also claims "many
high level MLM promoters have been shut down, the 'executives' incarcerated." He later
claims that the founder of FundAmerica (which he misspells) was "arrested for having
generated some 90% of revenues selling 'distributorships' versus product." Although
FundAmerica was declared a pyramid scheme, the founder was actually arrested on fraud
charges. In fact, it is extremely rare for anyone promoting even a blatant pyramid scheme
to actually serve jail time, and most legal actions against MLM companies are civil, not
criminal. The few criminal cases involving incarceration (three that I know of over the last
25 years) did not involve multilevel marketing companies. They were, in fact, blatant
pyramid schemes.
Van Druff again shows his ignorance by asking the question "If (an MLM product) is so
great, then why isn't it being sold through the customary marketing system that has served
human society for thousands of years?" Yes, he actually said that in his article, and its
wrong on multiple levels. First, I can think of only one "marketing system" that has served
human society for "thousands of years" – word of mouth. The marketing system used by
MLM companies. Let's forgive his hyperbole and assume he meant store shelves. Has Mr.
Van Druff ever researched what is involved with getting a product on a store shelf?
Obviously not, for its a daunting, expensive, extremely competitive challenge. It also
involves millions of dollars in advertising to get those products off the shelf. Where as
word-of-mouth is not only the most powerful form of marketing, it’s the least expensive
(that's a pretty good combination). But then, this is one of the most fundamental, basic,
and most touted benefits in regard to marketing a product via MLM. Yet, Van Druff appears
oblivious to it. This is the epitome of ignore-ance.
It gets worse.
Van Druff also claims that some MLM companies attempt to address the saturation
issue "by limiting the number of people you can sponsor, say, to four." Really? Actually, no.
No such limitation has ever existed in any of the several hundred MLM programs I've
reviewed over the last 20 years, nor do I suspect it has ever existed. He's probably talking
about matrix plans where you are limited to the number of people you can place on your
first level, but not the total recruited, and he just doesn't understand what he's talking
about.
He also claims MLM distributors "usually sell through prefab parties or home demos."
Of course, anyone with any actual experience in MLM would know that such activity is
uncommon today in all but a few old-school MLM programs (although it is making a
comeback).
He goes on to describe a "shadow pyramid" where people are induced into buying
"motivational tapes, seminars, and videos" Of course, we all know he's talking about only
one, albeit very large, MLM company. And even then its upline distributors (not the
company) who are making the profit, and on a direct sales basis, not MLM, and such
purchases are clearly stated by the company as being totally voluntary.
He also claims the MLM company itself profits by "conning" recruits with a "distributor
fee." What he is ignorant of is the easily obtainable and verifiable fact that, by law, MLM
companies must sell their sales aids, promotional tools, training, and distributor kits/fees at
cost! No significant profit can be made from these items, and they can not be
commissioned as part of the MLM compensation plan. Sure, some MLM companies push the
envelope a little on this, and yes, some push it a lot. But the vast majority do not.
Furthermore, that $25-$50 annual distributor fee we all are "conned" out of typically covers
such things as maintaining our sales organization, the paying of commissions to our downline
sales reps, the paying of sales taxes to all 50 states, data entry services, customer support,
warehousing, and various other administrative functions that would likely cost hundreds, if
not thousands of dollars per month if we were to hire someone to do them for us.
Van Druff then takes on "loony product claims." While I concur with his overall
criticism (some are pretty loony), his theory as to how MLMers "effectively skirt the Federal
Trade Commission" is by using "word of mouth testimonials, supposed 'studies' done by
scientists, fabricated endorsements (etc)...". If Van Druff would have invested even ten
minutes of research into this topic, he could have easily discovered that, indeed, the FTC
already prohibits curative or treatment claims by all of the means he lists, including personal
testimonials. In fact, the FTC has made available (for years) guidelines for product claims in
their document "Dietary Supplements: An Advertising Guide for Industry (see
http://www.ftc.gov/bcp/conline/pubs/buspubs/dietsupp.htm for entire text). We are just
as forbidden from promoting our products in all the ways Van Druff describes as any other
marketer of products.
Van Druff arrogantly professes that "the law generally condemns MLM" and even goes
so far as to claim that all MLMs are illegal! Of course, Mr. Van Druff is utterly and completely
wrong. Our state and federal government makes those laws, and our courts decide who
breaks them. And, based on decades of legal precedent involving hundreds of cases, our
government and our courts have ruled that MLM is legal. Van Druff's opinion, much to his
chagrin I'm sure, doesn't count.
Van Druff then borders on the absurd by implying there is some grand conspiracy by
MLM "experts" to "propagandize, lobby and defend" MLM. (Defend ourselves? How dare
we?!!!). He theorizes (but states as a matter of fact) that the MLM industry has used "so
much money from it's victims" to hire these nameless lobbyist experts who have managed
to pull the wool over the eyes of state and federal regulators. Considering, once again,
there are over 1,500 MLM companies in the United States, over 7 million distributors, and
MLM has existed for over half-a-century, those must be darn good lobbyists! Of course, the
truth is, few MLM companies or distributors are involved in defending the industry on a
regulatory level. That job is left to the MLMIA and the Direct Selling Association, which is a
national trade organization representing all direct sales companies (MLM or otherwise).
When I inquired as to whether or not Van Druff has had any experience with MLM, he
responded by directing me to a section of his web site (which I had read) where he states
his analysis was "theoretical." He then mockingly attacked my intelligence and investigative
skills for not understanding that this meant he had no experience (of course, he could have
just said "no"). I guess, in Mr. Van Druff's world, you can’t have any actual experience with
things you theorize about.
Van Druff references me in his article as a "lucid reformer within the MLM industry."
Flattery will get him nowhere.
Near the end of Van Druff's diatribe, he states "Anyone who has any experience with
an MLM has strong feelings, either for or against..." Its even worse when people develop
strong feelings about it who have no experience at all.
Mr. Van Druff was just a warm up. Next issue I’ll be cleaning up the mess made by Dr.
Robert FitzPatrick, author of the books "False Profits" and "Pyramid Nation." He's also the
founder of the "Pyramid Scheme Alert" organization. Naturally, he believes all multilevel
marketing companies are illegal pyramids. He's wrong - on multiple levels. Stay tuned. This
is going to be fun!
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Leonard Clements has concentrated his full-time efforts over the last 15 years on
researching and analyzing all aspects of MLM and is a court certified expert in the field of
Network Marketing. He is the author of the controversial book "Inside Network Marketing"
and the best selling cassette tapes "Case Closed! The Whole Truth About Network
Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for
more information on Len and his generic MLM products.
Len is also the co-founder and CEO of Epic Network International, a new MLM company
based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02.
Anti-MLM Zea lots

Part II
In case you missed part one of this series – get the back issue! If you are one of the
many thousands of honest, rationally thinking folks who supplement their income, or make
their living, from a good network marketing opportunity, you are not going to want to miss a
single word of this multi-part series. You see, there are four individuals who believe, and are
trying desperately to get you and everyone else you know to believe, that MLM is an illegal,
unethical scam, and you are one of its ignorant, gullible "victims."
These Four Horsemen of the Apocryphal are small in number, but thanks to the
internet their words are available to millions, and they are doing some damage. Whether you
realize it or not, many of those who are not responding to your marketing campaign are
victims of the anti-MLM propagandists. Having heard only their side of the story, and with
no ability for us to rebut their otherwise easily rebuttable rants, our prospects become their
victims.
I've made a good, honest living at this business for 14 years now. I sleep in as late as
I want in the morning, take a day (or week) off when ever I feel like it, paid off the mortgage
of a four bedroom home in less than three years, and even better, I was afforded the ability
to buy a nice home near me for my elderly mother after my dad passed away last year. I
certainly don't feel like a victim. And I've never front loaded anyone with unwanted
products, never made ridiculous medical or income claims, never mislead anyone into
attending an opportunity meeting, and never sold any training or tools for a profit. And I
never lost a single friend in the process. Yet, there are surely tens-of-thousands of people
who have shunned the opportunity to experience all that network marketing has given me,
and so many others, because of the anti-MLM propaganda machine. Yes, there are people
who have been victimized by a few bad MLM companies, or more likely bad pyramid schemes
disguised as MLM companies. But as many, if not more, are "victims" of those that would
have you believe there is no good in network marketing.
I’ll be telling you why they're wrong here in this publication over the next several
issues. The subject of Part One was Dean Van Druff, the author of the well traveled article
"What's Wrong With Multilevel Marketing" (my article could have been titled "What's Wrong
with Van Druff's article!"). I think it’s about time these naysayers be taken to task. Their
words have lingered unopposed long enough.
False Profits – Dr. Robert FitzPatri ck
Another prominent MLM opponent, Robert FitzPatrick, has gone so far as to co-author
two books on the subject. His primary work is a 216 pager called False Profits, and subtitled
"Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Scheme." I
think Mr. FitzPatrick mistitled his book. It should have been called "An Expose' of the
Airplane Game." Indeed the first half of the book is nothing more than an elegant rant about
the classic pyramid scheme of the 70's and 80's. Even when MLM is discussed it is usually
within the context of our alleged "capitalization on New Age, Mysticism and
Transcendentalism." Dr. FitzPatrick often blurs the lines between present day network
marketing and the New Age influence of 80's style pyramid schemes, which in my over 14
years of full time study and participation, I have never seen practiced by anyone (although
New Age philosophy did permeate a small number of legal MLM organizations in the 70’s and
80’s). FitzPatrick, himself an avid student of "New Thought philosophy" and a graduate of
several personal development and enlightenment courses, focuses heavily on "New Age
philosophy" in False Profits, which he claims plays a "central and defining roll" in enrolling
and inspiring distributors. He claims that all MLMs rely on the "core beliefs" of the New Age
community. That being, "wealth comes not from frugality, hard work or ingenuity, but from
being in the right place at the right time. And faith will take you to this mystic and magical
place." So, what if we (like I, and so many of my peers) apply frugality, hard work and
ingenuity to their MLM business? If FitzPatrick was only denouncing the way many of us
promote and conduct our MLM business I’d have to agree with him, to an extent. I don’t like
the way some people pitch and practice MLM either. But why throw away the present just
because you didn’t like the wrapping paper?
FitzPatrick accuses MLM of wrecking the American Dream of millions of would be
entrepreneurs. "It (MLM) leaves in it’s wake a trail of cynicism and disempowerment, no
small wonder as recruits observe billions of dollars landing in the laps of tiny elite groups at
the top." Where, I wonder, does FitzPatrick get this stuff? Most MLM recruits are in and out
of the business so fast that their experience could have little impact on their psyche, and
the majority of those I’ve known who’ve spent some time working their MLM business, gave
it their all, and failed, simply moved on to other entrepreneurial ventures. And what about
all those thousands of people like me who are making only supplemental or good living
incomes and fall somewhere in the middle of their company’s hierarchy? Throughout
virtually all of FitzPatrick's work it's as if this substantially larger demographic didn't even
exist.
It’s interesting to note that only a page later in his book, FitzPatrick states "... no one
makes a substantial income in the MLM system." So now, not only do all those like me not
exist, but neither do those elite few at the top. I’m really not trying to exploit poor
semantics here. "No one" means NO one, doesn’t it? So which is it?
FitzPatrick, an obviously scholarly and intelligent man, demonstrates his ignorance of
MLM with statements such as; There are 5-10 million distributors in the U.S. selling $10-$20
billion in goods, "mostly to each other." It seems odd that such an "expert" could not
narrow down such basic data to within at least a 25% margin of error. In a later section of
his book FitzPatrick does acknowledge that his numbers work out to an average $2,000 per
year in sales per distributor, but then notes that this would leave a "profit" of only about
$50 per month, then curiously drops the point as if to imply that would be the total income.
However, FitzPatrick completely fails to consider that most compensation plans pay about
8% of downline volume to each distributor in commission. How does one write a book about
multilevel marketing and when challenging its income potential ignore multilevel overrides?
And are we selling all this product "to each other?" No, we sure aren’t. Virtually all
contemporary MLM companies today have no requirement or system in place where higher
ranking reps supply those below them with product. That’s how many old-school MLM
companies used to do it before affordable and practical computers. No MLM company still
does that. Not one. Even in 1997 when FitzPatrick wrote his book, his comment would
have been obsolete by a couple of decades. Curiously, FitzPatrick makes several references
to distributors warehousing and passing on products to other distributors, yet later
acknowledges that "most MLM companies distribute via computer thus freeing distributors
from having to personally stock and deliver inventory." In seems as if FitzPatrick
occasionally forgets his own earlier arguments only to contradict them later.
In the same paragraph he goes on to say "The larger of these operations have already
reached their saturation points in the United States... who has not been solicited? Who has
not tried it?" Earlier, FitzPatrick asserts that his analysis of MLM will be based on, among
other things, "logic." Let’s do the same. If everyone has been solicited, or even tried MLM
already, then how did so many companies that have launched in the last few years, such as
Freelife, Usana, New Vision, Tahitian Noni, Xango, Isagenix and so many others, acquire tens
of thousands of new reps? Is FitzPatrick suggesting these are all ex-distributors from other
companies?
FitzPatrick goes on to say that MLM "catapulted into economic expansion in the late
1980’s" due to the New Age movement. In fact, MLM exploded in the very early 80’s
primarily due to a very favorable court ruling in the FTC vs. Amway case in 1979 (which
essentially validated the legality of MLM) and economic conditions very favorable to MLM –
such as the highest unemployment rate since the Great Depression.
His lack of knowledge of the subject matter is never more evident than when he
states "One of America’s fastest growing MLMs, Nutrition For Life, which was founded by
marketer Kevin Trudeau sells the inspirational cassette tapes of the largest publisher of New
Age catechism materials, Nightingale-Conant, as one of its core products." First, NFLI was
not founded by Trudeau (NFLI launched under the name Consumer Express in 1984 and
Trudeau was hired as a marketing director in 1987). Second, the majority of the
Nightingale-Conant catalog could hardly be considered "New Age catechism material," and
thirdly, the Nightingale-Conant material was only a fringe part of the more than 300
consumable products offered by NFLI and for only about two of their 19 years of business.
What’s more, this "fastest growing MLM" filed bankruptcy and went out of business six
years after False Profits was first published.
Or, how about this statement: "...what ever the (MLM) product happens to be, it is
presented as largely incidental." I wonder how distributors for such companies as 4Life,
Matol, Cell Tech, Tahitian Noni, Legacy, or Xango would feel about that assertion considering
their entire companies are based on one primary product. There are numerous MLM
companies today whose distributors are fanatical about their products (in many cases to a
fault) and who recognize that income is based on a percentage of sales volume. It’s
common knowledge today (not to mention common sense) that massive product sales
volume is the key factor in generating significant income.
Exaggeration, hyperbole and semantic manipulation are all signs of a weak argument,
and FitzPatrick resorts to such tactics on a number of occasions. For example, he sites that
there are "countless" examples of MLM creeping into "the most sacred of places" - religion.
Then he accounts for only three. One was a blatant pyramid scheme (not an MLM
operation) back in 1988 called Corporate Ladder, and another was Pat Robertson’s short
lived KaloVita company and his "prosperity theology." FitzPatrick is so desperate to come
up with a third example that he throws in Robert Schuller only because his Positive Thinking
tape set was once sold as part of an MLM company’s product line.
Another example can be found in his discussion of Richard Poe’s book Wave 3 where
Poe offers many examples of MLMers making one-half million dollar per year incomes. First
he notes that Poe does concede that "only the rarest few in the industry achieve this level
of success," then refers to this as an "admission of often paltry financial returns from MLM."
How does acknowledging that very few make half-a-million per year get twisted into "often
paltry returns?" What about all those incomes (and thousands who earn them) that fall
between half-a-million and paltry? Oh, I keep forgetting. We don't exist.
In his effort to portray pyramid schemes and MLM as "Kissing Cousins," FitzPatrick
comments: "Periodically, appearing under new names then running their brief and inevitable
course, these schemes now emerge bearing the more respectable, legal veneer of multilevel
marketing while leading ever increasing numbers of people down the same dead end." But
there are dozens of MLM companies over ten years old. Herbalife is 23 years old. Mary Kay
Cosmetics is 41. Amway is 46. Shaklee will celebrate its fiftieth anniversary in 2006. Brief
and inevitable dead end? Really?
In total, only eight MLM companies are even mentioned by name in False Profits and
only four are discussed in any detail. Even then we only hear anecdotal evidence based on
the experiences of a handful of failed distributors (once again, there are currently over
2,000 MLM companies in operation in the U.S., and over 10 million distributorships).
FitzPatrick acknowledges that the Airplane Game is the "center piece" of his book and
devotes a substantial portion of it to a detailed personal journal of his experience with it. Of
those MLM companies mentioned, the vast majority of his attention is on Amway. He is
highly critical, and relates numerous examples, of tactics that were virtually exclusive to
Amway (aka Quixtar, aka Alticor), then couches his comments in language that suggests
such tactics are universally practiced throughout the entire MLM industry. What attention is
devoted to other MLMs is mostly made up of a rehashing of Nu Skin’s troubles back in 1991
and ‘92 with little mention of the extensive and model reforms they have made since then.
But then, this is a common foible in every Anti-MLM Zealot's argument. That being,
the actions of a few high profile regulatory or media targets is indicative of how the other
99% of MLM companies operate.
It's not.
Robert FitzPatrick's writings provide so much fodder for this series that I can't cover
it all in one issue. His essay titled "The 10 Big Lies of Multi-Level Marketing" and newest
booklet "Pyramid Nation" reveals far more and better examples of Dr. FitzPatrick's utter lack
of understanding as to the true nature of network marketing today.
And if you're wondering about such issues as "inevitable saturation" or "99% of all
MLM participants fail" or any of the other tired, almost cliché' Anti-MLM Zealot mantras – oh,
we're getting to them.
The renovations begin later. This is just house cleaning.
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Anti-MLM Zea lots

Part III
If you are one of the many thousands of honest, rationally thinking folks who
supplement their income, or make their living, from a good network marketing opportunity,
you should get the back issues containing parts one and two of this series. If network
marketing matters to you, you are not going to want to miss a single word. There are four
individuals out there who are doing more than just trying to dissuade your prospects from
considering your MLM opportunity, they are trying to get your state and federal government
to take away your choice to pursue an MLM career. If you are making an honest living at
MLM, as I am, they want to take that away as well. Fortunately, they're attempts have so far
been utterly ignored by regulators. However, your prospects are listening.
I’ll be telling you why they're wrong here in the MLM Insider over the next several
issues. The subject of Part One was Dean Van Druff, the author of the well traveled article
"What's Wrong With Multilevel Marketing" (get Part 1 to find out "What's Wrong with Van
Druff's article!"). Last issue I started in on Dr. Robert FitzPatrick, author of the book "False
Profits." Dr. FitzPatrick has got it wrong on so many levels (pun intended) that it'll take
three segments to cover even the highlights.
Pyramid Nation – Dr. Robert FitzPatrick
Dr. FitzPatrick's newest work (2002) is a 62 page booklet titled "Pyramid Nation: The
Growth, Acceptance and Legalization of Pyramid Schemes in America." Oddly, the cover art
depicts Pieter Brueghel's (1525-69) rendering of the Tower of Babel, which bares only a
vague resemblance to a pyramid.
Let's begin by dissecting the title itself.
"Pyramid Nation." The title and cover art is misleading, at least geometrically. MLM
downlines are, in fact, diamond shaped. Ironically, network marketing is the only form of
business that does not form a pyramidal company hierarchy.
"Growth." Really? Is FitzPatrick admitting that after 68 years of existence, this
supposedly saturated industry is, indeed, still growing? This, of course, totally contradicts
the very backbone of practically every Anti-MLM Zealot's primary argument. It is also quite
true!
"Acceptance." Yes, MLM is gaining more and more acceptance over time. FitzPatrick
is right again. In so many words, he then tries to explain this away by suggesting we're just
all getting better at brainwashing people, we're getting lazier in our investigation of the
opportunities we pursue, more ignorant of what defines illegal schemes, and more lax and
less attentive in our regulatory duties. The whole time ignoring the easiest and most
obvious reason. MLM is acceptable.
"Legalization." The word implies MLM is in the process of being legalized. Yet, MLM
has been formally recognized as a legal form of business and compensation model in all 50
states for over 25 years. MLM simply can't get any more legal!
Dr. FitzPatrick first takes on the FTC for it's "failure to oversee multilevel marketing
companies." But only a single page flip away he states that "between 1996 and 2000, the
Federal Trade Commission has prosecuted more pyramid schemes than in the previous
seventeen years." Keep in mind that to Dr. FitzPatrick "multilevel marketing companies"
and "pyramid schemes" are synonymous. He backs up his point by dropping names such as
Equinox, Jewelway and Five Star Auto Club, among others. He suggests that the only
reason the FTC hasn't prosecuted the other 2,100 MLM companies is not because the
others have done nothing wrong (the most logical and obvious reason), but because the FTC
has become complacent and inattentive and simply hasn't got around to them yet.
FitzPatrick later states that our "return on investment" (he means the income from
our business) comes directly from purchases and "fees" paid by new sales reps, but not
from product sales to "end-users." First, to pay bonuses from distributors "fees" is illegal,
and has been the catalyst to many state and federal prosecutions. That's why virtually all
MLM companies don't do that (although pyramid schemes disguised as MLM companies do,
but FitzPatrick chooses to ignore any such dichotomy). He also fails to accept the
reasonable – and legal – position that distributors can be "end-users." Indeed, several states
have statutes that specifically recognize personal consumption by distributors as legally
commissionable, and the FTC has clearly stated that they hold the same position (more on
this in the next installment). It is, and with rare exception has always been, the position of
regulators that who is buying the products is not as important as why they are buying them.
If an MLM company is selling most of their products to distributors who actually want them,
and would have purchased them anyway (even without an income opportunity attached), no
problem. If they are buying the product as a token purchase just to meet a quota in the
compensation plan, and that's the only reason they're buying the products, big problem.
That's exactly what got Equinox and Jewelway shut down.
Most of FitzPatrick's case is at least based on something. He's a smart and articulate
guy who has a masterful way of making a puff of smoke into a mushroom cloud. But
occasionally he comes out of left field with astonishingly ignorant comments such as "MLM...
attracts millions of people to this high risk and unprotected status of... independent
distributor." Wow. How could he not be aware that MLM ventures involve a fraction of the
start up costs of conventional businesses? Perhaps four or five digits less! Or that an MLM
distributorship is the only type of business where a failed businessperson can return their
inventory and sales material for a 90% refund (try getting your franchise fee back from
McDonalds, or returning all the appliances and fixtures from your failed restaurant). Or that
MLM companies provide many services to distributors that conventional business owners
would pay thousands of dollars a month for, such as collecting and paying sales taxes,
product R&D, warehousing, customer administration, and much more – for around $25 per
year. MLM is one of the lowest risk business ventures a person could possibly pursue!
Next FitzPatrick describes the daunting qualifications employed by most MLM
programs to reach the highest paying rank in the compensation plan. "Only a small number
can ever achieve the volume or required positions in their downline, and hence only they will
ever qualify for the high commissions on each level." Here's a great example of FitzPatrick's
subtle wordsmithing. Notice he says "high," not "highest." The difference is, one's wrong,
one's right. By anyone's definition, "high" payouts can be achieved well before the very top
rank is achieved. He's talking about how challenging the qualifications are to reach the
highest pay stage, yet implies such quotas must be met to achieve "high" commissions.
Furthermore, achieving the toughest to meet quotas to achieve the most rewarding stage in
the commission structure is standard and acceptable procedure in every type of sales
profession. Those that achieve the greatest success should be the most greatly rewarded.
What rational person could challenge that? Yet, FitzPatrick oddly presents this as an
inherent evil of MLM.
To be fair, he made the above point within the context of how, contrary to
conventional sales programs, many MLM plans reward those furthest away from the actual
sale than those in the levels directly above the sale. Many (not most) plans do this. He's
right. He then goes on to say this "defines the company as a pyramid recruiting scheme,
not a sales company." He's wrong. This definition is entirely the invention of FitzPatrick's
cohort Jon Taylor (we'll get to him later). No local, state of federal regulatory agency has
ever even attempted to apply this aspect of a compensation plan to their anti-MLM
prosecutions.
As I've mentioned in previous installments, how an Anti-MLM Zealot defines basic MLM
facts and figures tells us a lot about their actual knowledge of the subject. According to Dr.
FitzPatrick, "Avon... does not use the MLM business model." Yes, they sure do. He also
believes "The MLM business model was developed by the Amway Corporation in the late
1960's." Not even close. Wachters was employing a multilevel compensation system as
early as 1936, and was popularized by Nutrilite in 1945. Even Shaklee and Neolife launched
before Amway did - which was in 1958! Also, as any MLMer with even a moderate
understanding of the field would know, downlines are, once again, not pyramid shaped. Yet
FitzPatrick states that the "deepest level (will) always consist of 50% of the entire
organization" (emphasis mine). This is never even remotely true in actual practice since the
organization is more diamond shaped, and due to the limited number of first level positions
under most people it tends to form a tall, skinny diamond. Therefore even the widest lever
(usually somewhere in the middle levels of your downline) often times doesn't hold 50% of
your downline. What's more, FitzPatrick's statement assumes a perfect geometric
progression (2 by 2 in this case) which is an absurd assumption. Ironically, our use of such
geometric progressions are the target of most Anti-MLM Zealots who also claim it is absurd
and will never actually happen. So if this wholly theoretical event will never even come
remotely close to occurring in the real world, why offer it as evidence?
Once gain, as in his previous book, FitzPatrick spends much time making his case for
the "ultimate collapse" of every MLM organization, and "guaranteed" losses to every
distributor. But a network marketing company's sales organization is nothing more than a
large downline, yes? There are dozens of MLM companies over ten years old. Herbalife is
23 years old. Mary Kay Cosmetics is 41. Amway is 46. Shaklee will celebrate its fiftieth
anniversary in 2006. When is this "ultimate collapse" going to occur, I wonder? Indeed,
FitzPatrick later states that "companies using the MLM system... can endure for decades."
He actually states that this collapse occurs annually! Which begs the question, if the
company's downline continues to endure, why couldn't this same enduring scenario be
applied to your downline? And if this perpetual cycling of drop outs and replacements should
be considered "cumulatively" as he suggests, then why, after over half-a-century, have we
not in fact saturated the entire U.S. market? (not a rhetorical question, and one I'll
specifically address in a later installment). And if my losses were "guaranteed" I now feel
prouder than ever that I overcame those kinds of odds. I bet a lot of you feel pretty good
about defying those "guaranteed" losses.
Anti-MLM Zealots love to focus on a few of the baddest bad-boys throughout MLM
history in an effort to create the illusion the other 2,100 companies operate the same way
(with only their "pyramid" shaped brush to connect them). So naturally, Dr. FitzPatrick
spends a lot of time on Equinox. Here are two of his more astonishing statements:
"The (Equinox) settlement resulted in shutting down the company, the payment in
restitution of about $40 million to victims, and the banning of the company founder from
the MLM business forever."
"(this case) confirms that pyramid sales schemes are so firmly entrenched that it is
now largely beyond the power of the government regulators to control them."
There is only one sentence separating these two diametrically opposing statements.
His depiction of the Equinox settlement is accurate. And remember, the FTC is
"failing" to oversee the MLM industry, and us distributors are "unprotected." Then the very
next page he claims the "key factor" that lead to the decision to settle rather than getting a
court ruling was "the prohibitively high cost of prosecution." Hmm. I wonder if the fact the
founder agreed to a lifetime ban from MLM, to shut down the company, and to pay $40
million in restitution to his "unprotected" distributors, as opposed to tying it up in court for
years and eventually paying most of it to lawyers, might have been the "key factor." He
then goes on to claim Equinox was "manipulating the media" then provides only one
example, the #1 position on Inc. Magazine's 1996 list of fastest growing privately held
companies (an audited, financial fact), which was immediately proceeded by a paragraph
about how Equinox was "raked over the coals" by ABC's 20/20.
Sometimes it almost seems as if several people ghost wrote FitzPatrick's book and
never compared notes.
FitzPatrick states that "the vast majority of (Equinox) sales reps" suffered "enormous
losses." Yet, in the same sentence sites their $195 million is sales in 1995. Equinox's pay
plan averaged about a 35% pay out. That would mean Equinox paid out over $68 million to
their sales reps in 1995! He later sites the recent sales of Amway, Nu Skin and Herbalife
which total almost $6 billion worldwide. Meaning they paid out well over two billion dollars
to their distributors – a part of the equation FitzPatrick always seems to forget to calculate.
Since the FTC settled with Equinox and never received a "definitive court ruling,"
FitzPatrick claims the "Equinox model remains shielded." He then informs us that, indeed, its
top distributors have already cloned a new company under a new name. He's right. And
that company was also shut down by the FTC last year.
Anti-MLM Zealots routinely site how we torture our positive industry data, but have no
qualms about making love to their own negative statistics. FitzPatrick is no exception. He
states that the U.S. MLM industry moves between $5-10 billion in wholesale product
annually, and that less than "one-half of one percent" (.005) ever earns a net profit. Upon
reading this I was struck by how he was only able to quantify our annual sales to within $5
billion dollars but somehow managed to calculate our industry's success rate to three
decimal places. And since the average compensation plan pays out about 45% of wholesale
that would then mean, based in FitzPatrick's figures, this industry also paid back $2.25
billion to $4.5 billion annually in commissions! Furthermore, on the very same page
FitzPatrick states that "The MLM business model is not taught or researched at any major
business school in the country" and that "No empirical data on its operations are compiled
by the government..." then goes on to say "The industry is freely allowed to make
outrageously misleading claims" to enroll new distributors. So, if we don't have any actual
research to back up our claims, where does FitzPatrick get his, I wonder? And if we are
"freely allowed" to make misleading claims, then why was Equinox (and others) cited for
"deceptive trade practices"? Such "outrageously misleading claims" have been the crux of
many regulatory actions. What's more - we do have the research to back up much of our
industry data! There's extensive research done by the DSA, DMA, and MLMIA, as well as this
publication. My own company MarketWave has been tracking industry data for 14 years.
We're only half way through Dr. FitzPatrick's "Pyramid Nation" and there's still his
essay "The 10 Big Lies of Multi-Level Marketing" to cover. I'll wrap up my rebuttal to his
works, at least until he cranks out another book, in the next segment. Wait until you hear
his depiction of what the FTC thinks about our earning income from our downline's
personally consumed product – and what the FTC actually said! I'll be putting this oft-
debated issue to bed once and for all. Then the real fun begins as we take on Ruth Carter
and her cohorts over at MLMSurvivor.com. I planned on this being a one segment piece, but
they've provided me with so much great material we may not be finished with them until
2006!
And there'll be so much more after that. Stay tuned!
------------------------
Anti-MLM Zea lots

Part IV
If you’ve ever read the works of some of the most prolific Anti-MLM Zealots, such as
Dean Van Druff (What’s Wrong With Multilevel Marketing), Ruth Carter (Behind the Smoke &
Mirrors), Jon Taylor (Product Based Pyramid Schemes) and Robert Fitzpatrick (False Profits),
you are surely and profoundly insulted. After all, if you’re failing to reach your income goal,
you are a gullible victim of a scam. If you’re succeeding, you are the greedy, heartless
perpetrator of a scam. And your success was not due to hard work and perseverance, you
were just lucky. And if you succeeded without frontloading anyone, without obnoxiously
pestering your friends and family, without making ridiculous income or product claims, and
without depleting your bank account on superfluous tools and meetings, some will flat out
deny you even exist! And if you succeeded in spite of starting at the bottom of an already
mature MLM opportunity? Forget it. You’re just a bold faced liar.
I do exist. And I’m profoundly insulted.
That’s why I’ve decided to fight back. And thanks to publications like the Network
Marketing Business Journal and the MLM Insider I have a forum much larger than theirs to
make my case – our case – that they are flat out wrong.
I’ll continue to tell you why they're wrong here in the MLM Insider over the next
several issues. The subject of Part 1 was Dean Van Druff, the author of the well traveled
article "What's Wrong With Multilevel Marketing.” In Part 2 I started in on Dr. Robert
FitzPatrick, author of the book "False Profits." Dr. FitzPatrick has got it wrong on multiple
levels (pun intended) so it'll take three segments to cover even the highlights. The second
segment was last issue.
Picking up where we left off, about half way through FitzPatrick’s latest work “Pyramid
Nation,” he makes the outlandish claim that the “pyramid scheme industry,” (that’s us) led
by the Direct Selling Association, has “turned it’s attention to ridding the country of
effective state statutes against pyramid schemes.” Obviously, the DSA is not trying to get
the Airplane Game legalized. What he is referring to is the lobbying effort to get states, and
the FTC, to formally recognize personally consumed products by distributors as legally
commissionable. The Anti-MLM Zealot’s best friend, the 9th Circuit Court of Appeals,
declared that only retailed products to non-participants was legally commissionable in the
1994 Webster vs. Omnitrition case, and this is the backbone of Fitzpatrick’s case as well.
Forget the fact that this was only dicta (an unsolicited opinion) offered by the most
overturned appeals court in the country, that it created no law, that the case only involved
dismissing a summary judgment by a lower court (in favor of Omnitrition), or that
Omnitrition’s practices were never officially ruled illegal by a jury. Nonetheless, this concept
of paying commissions on internal consumption is the basis for FitzPatrick’s claim that
virtually all MLM companies are operating illegally in many states. Of course, he looks to
other cases and statutes besides Omnitrition to make his case. For example, he also
provides Wisconsin’s statute which “prohibits schemes, in which a person, upon a condition
that he or she makes an investment, is granted a license to recruit, for profit, additional
investors…”. But, this is why all MLMs are legal in Wisconsin! No MLM company offers the
right to enroll others on the “condition” of an investment. Not one. Sure, some require an
at-cost distributor kit for around 20 bucks. But a product purchase in never required as a
condition to recruit others (to be a distributor). It’s never even a requirement to qualify for
commission (personal sales volume is required, but there is never a requirement that you
must purchase the required volume yourself). This is a subtle but critical distinction that
apparently even a court certified “pyramid scheme expert” can miss.
Keeping with the same theme, he next describes how the DSA is lobbying for a federal
statute (HR 1220 – “Act to Prohibit Pyramid Schemes”) that would formally declare
products purchased by distributors as legally commissionable. Therefore, he declares, this
bill as pro-pyramid scheme. In fact, this bill “wipes out a defining characteristic used by
prosecutors to identify product-based pyramid schemes.” He even goes so far as to state
that this bill would have allowed Equinox and other such schemes to remain in business
instead of being shut down. Here’s what he somehow missed (or has chosen to ignore):
According to the DSA (see Press release 4/14/03 at www.dsa.org) this bill “would provide
an additional federal right of action and would not preempt any state anti-pyramid laws.”
Furthermore, the bill itself contains language that clearly defines illegal pyramids as those
“that finance returns to participants through sums taken from newly attracted participants”
(Sec. 2.1.a); and one “in which a participant gives consideration for the right to receive
compensation that is derived primarily from the recruitment of other persons as participants
in the plan or operation, rather than from the sales of goods, services, or intangible property
to participants or by participants to others” (Sec. 3.11). It further defines the illegal act of
“Inventory Loading” as encouraging “independent salespersons to purchase inventory in an
amount that unreasonably exceeds that which the salesperson can expect to resell for
ultimate consumption, or to use or consume, in a reasonable time period” (Sec. 3.7). Even
with the provision to include sales to “participants,” this bill obviously would not have
protected Equinox, or any successfully prosecuted pyramid. The front loading section alone
would have nailed them. Plus, the Illegal Pyramid definition section still addresses what has
actually been the “defining characteristic” of an illegal pyramid, which is the motive for
distributor purchases, not the existence or amount of distributor purchases. If a significant
amount of product is purchased only by new distributors as a token act to qualify in the pay
plan (as opposed to their genuine desire for the product) Section 2.1.a above would
absolutely still apply.
The entire statute is only two pages long. FitzPatrick’s attack on it is longer than the
bill itself – yet he seems to have somehow completely missed, or misinterpreted, all three of
these pertinent sections. This bill is clearly not designed to protect illegal pyramids. It’s
designed to protect MLM companies who have a lot of distributors who genuinely love their
products and would be purchasing them regardless of the pay plan (thus have a lot of
distributors purchasing the products for their own use), or those companies who have little
or no barrier to entry (i.e. free enrollment) where retail customers freely enroll as reps
simply to get the products cheaper.
Several states have already adopted statutes based on this model, including Idaho,
Texas, Louisiana, Kentucky, South Dakota and Oklahoma. The bill has already passed by a
vote of 64-3 in the House and 34-0 in the Senate.
FitzPatrick is further emboldened by language within the FTC’s suits against such
companies as Equinox and Five Star Auto Club. In these, and other cases, the FTC does
clearly state that commissions may only be paid on sales of products to those who are not
“participants or recruits in the multilevel marketing program.” In other words, these
federally prosecuted companies were, in fact, held to the standard of only paying
commissions on sales made to retail customers. If the FTC were to hold every MLM company
to the same standard, we’d be in trouble. The only chink in FitzPatrick’s seemingly iron-glad
case is – the FTC doesn’t.
In an effort to get a definitive and final answer to this murky and ominous question,
the DSA did something rather ingenious – they asked the FTC. The FTC responded in a letter
signed by the Acting Director of Marketing Practices
(www.marketwaveinc.com/FTC_Letter.pdf) as follows:
"The Federal Trade Commission often enters into consent orders with individuals and
companies that the Commission has determined have violated the FTC Act. To protect
the public from those who have demonstrated an unwillingness to follow the law,
these orders often contain provisions that place EXTRA constraints upon wrongdoers
that DO NOT APPLY TO THE GENERAL PUBLIC. These "fencing in" provisions only apply
to the defendant signing the order and anyone with whom the defendant is acting in
concert. THEY DO NOT REPRESENT THE GENERAL STATE OF THE LAW… For example,
when the Commission brings a pyramid scheme action, the case often concludes with
a consent order. The scope and severity of the order will depend upon the facts of
the case; however, most such orders contain definitions that exclude any sale to a
participant in the business from the calculation of the venture's legitimacy. These
definitions draw very clear lines for those who have demonstrated a willingness to
violate the law, BUT ARE NOT INTENDED TO REPRESENT THE STATE OF THE LAW FOR
THE GENERAL PUBLIC." (Emphasis is mine).
In their response letter, they also go on to explain that, indeed, they pay more
attention to the motive for distributors buying the product, not the number or percentage
of distributors buying the product. Case closed.
Other benighted comments by FitzPatrick in his book include “The FTC has been
shown to have inadequate resources to prosecute the MLM pyramid cases. It is financially
forced to settle out of court.” The federal government can’t afford to prosecute MLM
companies? The same federal government that spends $500 for hammers and $300,000 to
study the mating habits of Amazonian tree frogs? Now I’m even more insulted that he thinks
we’re all that ignorant.
One of my favorite FitzPatrick leaps-of-logic is his statement “NuSkin only counted the
‘active’ group when reporting average incomes… leaving out the larger group who never
earns anything.” Perhaps they never earned anything because they were… inactive? It
follows the same illogic as “The vast majority of the losers in MLM drop out within a year.”
But then, this is very likely the reason they lost money – they quit within a year. In fact,
most voluntarily quit within weeks. That’s a problem with the commitment level of most
distributors, not the MLM model.
He also states that “In 1998 NuSkin paid out 2/3rds of its entire commission to just
200 upliners out of more than 63,000 currently active distributors. The money that this
.3% received came directly from the unprofitable investments of the 99.7% of the others.”
Nu Skin paid out over $330 million in commissions in 1998. This produced at least 200
millionaires, according to Fitzpatrick (that’s a bad thing?). And the remaining $110 million
went to the other 62,800 reps, who would have then averaged over $1,750 in earnings that
year. Yet, he matter-of-factly claims every one of these 62,800 were “unprofitable.”
FitzPatrick has written another popular internet hit piece titled "The 10 Big Lies of
Multi-Level Marketing." He kicks this diatribe off by calling MLM a "free market hoax...
analogous to calling the purchase of a lottery ticket a ‘business venture.’" Of all the specific
accusations made by anti-MLM zealots none offends or insults me more than this one. I’ve
put in years of hard work, at great expense and sacrifice, to get to the level of success that
I’ve reached in MLM. Now I’m being told by Dr. Robert FitzPatrick that I was just lucky.
FitzPatrick again reveals his lack of understanding of even the most basic MLM
concepts with observations like, "If a 1,000-person downline is needed to earn a substantial
income... those 1,000 will need one million more to duplicate the success." True, if you
assume all 1,000 of those under you are on your first level - a wholly absurd assumption.
However, if you had 1,000 people under you, wouldn’t the nine people directly upline from
you also have at least 1,000 under them? So, right there we have ten people with 1,000
people under them and it only required 10% of the people FitzPatrick is claiming it would.
To be fair, I understand and appreciate the point he’s trying to make - yes, the progression
obviously can’t go on forever - but let’s not mislead the reader with garbage math. His
statement is simply, logically, mathematically untrue.
I won’t attempt to defend against each and every one of FitzPatrick’s alleged "big
lies" since they all fall into one of three categories. Either they are simply not a lie, such as
#7, "You can do MLM in your spare time." In fact, most successful MLMers worked part time
in the beginning. Your time investment does take on a bell shaped curve, requiring more
than spare time effort eventually, but only as your downline, and income, grows accordingly.
Or, the "lie" is overstated, such as #6, "Success in MLM is easy." Sure, many over-zealous,
naive or dishonest MLM participants make such claims. But most don’t. The majority
understand the obvious folly in using such an approach - if you deceive your prospect into
joining this way, they are quickly and inevitably going to discover the truth on their own and
quit, making the whole process pointless. Or, the "lie" is entirely fictitious, such as #3,
"Eventually ALL products will be sold by MLM" (emphasis mine). Even the mythical "50-
60% of all goods will be moved by MLM... according to the Wall Street Journal" claim is
accepted as ridiculous today by most MLMers with even a modicum of experience. I have
heard some of the most outrageously over hyped MLM presentations of all time, and never,
not one single time, have I heard anyone even insinuate that, someday, "all" products will be
sold via MLM.
So, to wrap up, Robert FitzPatrick acknowledges in his works that MLM is “backed by
an ex-president” and “defended by top law firms.” He claims MLM even has its own caucus in
Congress. Inc. Magazine, Forbes, Entrepreneur, and Success Magazine have all published
positive articles about this industry. MLM is recognized as a legal business model by all fifty
state’s Attorneys General, the FTC, the vast majority of the House and Senate, and many
state and federal courts, and has been for decades – not to mention the SEC and the several
hundred thousand investors in MLM company stock. Yet, FitzPatrick believes he’s right, and
all of them are wrong. He also claims the "great majority" of the three largest U.S. based
MLM company’s sales are outside the U.S. - so we're fooling the citizens, courts, and
regulators in over 60 other country too!
Or, maybe the ex-president, top law firms, business media, our state and federal
government – and the several million of you who participate in this industry – are the one’s
who get it, and Robert FitzPatrick is wrong.
Next issue we begin a series on Ruth Carter, author of “Behind The Smoke & Mirrors”
and co-founder of MLMSurvivors.com.
------------------------
Anti-MLM Zea lots

Part V
If you haven’t been following this series you should really get the back issues and
study up on your opponent. Not your opponent who’s trying to enroll your prospect into
their opportunity, but your opponent who’s trying hard to make sure no one ever enrolls
anyone into their opportunity!
For what ever reason, there are a number of folks out there who are anti-MLM. In my
experience, I’ve found most have a negative opinion of this business because they’ve been
told to. Someone else they know, usually someone who has failed at it, formed this negative
opinion and they’ve chosen to adopt it as their own. And when they gain the strength of
mind to form their own opinion, based on their own investigation, the negativity usually
evaporates.
Then there are those more passionate Anti-MLM Zealots, like Robert FitzPatrick
(author of the books “False Profits” and “Pyramid Nation”) who at least try to go beyond
just anecdotal evidence in making their case against network marketing. I explained why he
was wrong in the last three issues. And then there’s guys like Dean Van Druff (author of the
article “What’s Wrong With Multilevel Marketing”) who openly admit they’ve performed
virtually no investigation into the subject matter at all. His was a “theoretical” analyses. In
other words, he guessed at it. I explained why he guessed wrong in the first segment of this
series. In a future segment I’ll deconstruct the prolific anti-MLM efforts of Dr. Jon Taylor.
Dr. Jon’s case is an odd one. He actually claims he was “successful” in MLM, yet still claims
none of you will be.
Behind The Sm oke & Mirrors – Ruth Carter
So now we come to Ms. Ruth Carter. Ruth is a rare breed of Anti-MLM Zealot in that
she not only, God forbid, actually participated in MLM, she was genuinely burned by it. As
her story goes, which she’s chronicled in her book “Behind the Smoke & Mirrors,” she joined
Amway back in 1982 after being invited to a few meetings. She recounts her feelings of
curious apprehension, and how she had wondered why the speaker at one meeting was
driving such a beat up old car when he was supposed to be so successful? Why was he
serving store bought cookies and drinks in Styrofoam cups? Why was his wife, who was
obviously home, never present? Why was there such “ludicrous” passion and excitement
over a company that just sold some “basic household and personal care items, and supplied
name brand product through a catalog”? However, it was not until about seven years later
(of her 13 “core” years in the business) that she finally “neglected to leave my brain at the
door” and started to look critically at her experience.
This followed years of doing everything by the book: attending all the meetings (at
first a 600 mile round trip), spending thousands of dollars on all the tapes and books she
was told to purchase, attending all the major functions, showing the plan, recruiting people,
and selling some products. Yet, she also describes her arduous financial struggles,
debilitating bouts of depression, and poor social life (one date was “thoroughly appalled”
after attending one meeting with her, and another claimed he had just lost his marriage over
his wife’s Amway involvement – Ruth doesn’t elaborate, but I suspect that date didn’t go
well). Six years into the business, with two children from a previous marriage, her savings
depleted, no regular job, and a new husband who had tried in vain to get behind her Amway
business, but who was now “questioning everything” about it causing constant arguments,
she decided to have another child. Her husband wanted children, and she announced that
she wouldn’t even consider having another child unless they were building the business so
she could be a stay-at-home mom. He agreed to “do whatever it takes.” She then became
pregnant – and their business “ground to a halt.”
Several months later, Ruth’s loyalty and efforts finally attracted the attention of an
upline Diamond who wanted her to come to work in his office. Understand, in the Amway
world, such an offer is analogous to a real estate agent being asked to intern for Donald
Trump, or a Catholic priest being asked to work directly with the Pope. Amway Diamonds
are more than just edified by their downlines, they’re practically deified. However, this is
when, as the story goes, Ruth was exposed to the inner workings of an AMO, or “Amway
Motivational Organization” (better known as the “tapes & tools” business). She alleges a
lucid moment occurred when she discovered that only 5% of the Diamond’s income came
from his downline overrides. The rest came from tools and functions. She said she felt sick
that she had “helped him steal from his distributors.” Actually, steeling would be offering
them motivational tools, taking their money, then not sending motivational tools. Offering
them, taking their money, then sending them exactly what they willingly ordered would be
the opposite of stealing. But this is Ruth’s story.
So, after seeing this “evidence” that was “right in front of (her) nose” for so long, and
after visiting several anti-Amway web sites, she decided to turn hostile witness – and
launched her own web site. It’s called MLMSurvivor.com.
This is probably a good time to address a common question I receive regarding this
series: Why do I mention the Anti-MLM Zealot’s material by name? Doesn’t that increase the
exposure to their work? Fair question. The answer is simple. I have no fear of you being
exposed to their side of the story. I firmly believe this industry can stand up to any scrutiny.
Only the side with the weakest argument doesn’t want you to compare both sides. Only the
side that bases their case on anecdotal, theoretical, sometimes even completely fabricated
arguments doesn’t want you to be exposed to all the facts. Like Ruth and her cohorts at
MLMSurvivor.com, for example. We’ll get to her web site later.
But first, what about this book? It does seem to paint a pretty compelling, dissuasive
story against, well, at last Amway (now operating under the name of Quixtar and their
parent company Alticor – however, her book was written in 1999 and she refers to them as
Amway throughout, therefore I will as well). Indeed, the subtitle of her book is “Amway
Motivational Organizations.” At least 90% of the material and discussions on her web site
directly or indirectly pertain to Amway. Robert FitzPatrick, who’s testimonial consumes the
entire back cover of her book, congratulates her for her “courage” to put the truth in print
regarding the Amway business (an ironic accolade considering “Ruth Carter” hides behind a
pseudonym – that’s not her real name).
For the record, I also dislike the manner in which some AMOs operate. I am within the
much larger MLM camp that believes you don’t have to spend thousands of dollars on books,
tapes, videos and numerous meetings and functions. What is offered to distributors should
be sold at, or even below cost. This would allow more distributors access to the material so
the producer of the material makes their money by the resulting increased sales activity.
That way the seller doesn’t make money by simply selling the tools, they only make money if
the tools actually help the buyer make money.
Having said that, let’s be clear about a few things. First, these tools Ruth is referring
to are not offered by Amway, but by Diamond distributors (which she does acknowledge),
and are not sold on a multilevel basis (in fact, Amway has terminated Diamonds who tried to
do this). Amway corporate makes very clear these tools are totally optional and have no
barring on any qualification in the compensation plan. Thousands of Amway reps are not
involved in an AMO. Also, the Diamond distributor she uses as a case study in her book did,
in fact, have gross income from Amway bonuses less than 5% of his total gross income, but
this Diamond also incurred $2.6 million in expenses while operating his extensive tools and
training business. His Amway income was actually 30% of his total net income. While I agree
it should certainly be more, citing the 5% figure seems disingenuous. Also, Ruth provides a
breakdown of the suggested training event costs for a year and it totals $1,040 – for forty-
two events! That’s about the same cost as two Tony Robbins seminars. At an average of
$24 per event, it’s actually not a bad deal – as long as you don’t go to all of them!
Carter states that the training tapes are repetitive. “After you’ve heard a dozen or so
teaching tapes, you’ve pretty much heard all the information they offer. So why subscribe to
a Standing Order Tape (SOT) and buy a tape per week?” Good question – so why did she?
She tries to make a case that the AMOs are cult-like in their use of brainwashing tactics. She
devotes 36 of her 157 pages to a discussion of cults and “mind control”. This explains her
devotion for so many years to both a financially and emotionally draining experience. This
also explains why, when told to spend thousands on motivational books, tapes, videos, and
meetings, she couldn’t simply say, No thanks (a perfectly valid option). This rationalizes her
commitment to a program that allegedly encourages the shunning of friends and family who
are unsupportive, and so severely damages such relationships. Yet, she paradoxically claims
there are “millions of distributors who have walked away” from their Amway business.
Millions. By Ruth’s own accounting (based on published data), 59% of all current Amway
reps are inactive (that is, somehow found the will power to stop). She refers to “Prisoners of
MLM” who have been psychologically manipulated into continuing, in spite of the notoriously
high attrition rate throughout the MLM industry. Such statements seem to border on the
absurd considering the extreme level of ease so many others seem to have in leaving their
MLM program. In fact, it’s often too easy! She describes the many people whom she
introduced the business to in much the same way it was introduced to her who immediately
rejected it (or even, as described earlier, were “appalled” by their first introduction). What
did they see that she failed to see? She does candidly questions her own “stupidity” in the
beginning.
While it may seem easy to just dismiss her “I did it because they told me to”
explanation with the common Mom line “If they told you to jump off a bridge, would you do
it?” (my Mom used “bridge,” yours probably used the more common “cliff”). However, there
are a very disproportionate number of folks who get involved in these Amway Motivational
Organizations, lose a lot of money and friends, and just can’t seem to stop. I think the
alleged use of mind control techniques by these groups deserves consideration and should
not be summarily dismissed. Some people are more susceptible to these tactics than others
(a sign of emotional weakness and lack of common sense perhaps, but certainly not
intelligence), and in my opinion it does appear most AMO leaders are playing to that
demographic. But let’s be clear: we are talking about a faction within Amway’s distributor
ranks, not all distributor groups within Amway. And we are not talking about Amway
corporate, who seem to be going out of their way to inform new reps of the true average
income potential of the opportunity, and that the tools and training are completely optional,
totally voluntary purchases. In fact, about two years before Ruth wrote her book Amway
began requiring renewing reps to sign an agreement stating “I understand that the purchase
of Business Support Materials is always optional.” If they choose to purchase such collateral
material, they must sign an arbitration agreement. In their policies (which all reps must agree
to) they clearly state:
“If you sponsor others, you have an obligation to train and motivate them whether or
not they choose to buy Business Support Material. All distributors are free to change
their volume of purchase of such items, to cancel standing orders, or to cease such
purchases at any time without threats, pressure, or retaliation.”
Ruth completely acknowledges all this, and the provision that anyone who sells such
tools must agree to buy them back within 180 days, yet it appears to have made no
impression on her at all. She claims this provision is “completely ignored by distributors in
the field.” Her evidence? Two e-mails she received from “disillusioned” ex-distributors.
Ms. Carter also gratuitously, and clumsily, attempts to make a case that Amway is
now operating as a pyramid scheme. Like Robert FitzPatrick, she believes a high percentage
of personal consumption among distributors is somehow indicative of an illegal pyramid
(according to the FTC, it’s not, which was proven in the last installment). But it’s not so
much what she’s claiming as how. Here’s her statement, verbatim: “Virtually no product is
sold at retail today in North America – actual retail sales comprise only about 18% of all
Amway sales.” According to Ruth, 18% = 0%.
She makes the sensationalistic claim later in her book that “As financial and mental-
health professionals become more familiar with the devastation that follows in the wake of
many MLM opportunities, they are becoming better resources for helping people recover
from AMO involvement.” Here in lies the crux of Carter’s ignorant, illogical, campaign
against the entire MLM industry – she thinks the experiences of a subset of AMO members,
themselves a subset of the entire Amway organization, which is a subset of the entire MLM
industry, is indicative of how all MLM programs operate. All this in spite of the easily
verifiable fact that such tools & training systems are virtually exclusive to Amway. No other
MLM company employs such Motivational Organizations. Not a single one. And the
“devastation” she refers to that requires the care of a mental-health professional is overly
melodramatic and hyperbole even within Amway (certainly some folks have been
devastated, but they are a small, vocal minority who file law suits and build web sites). I’ve
known literally thousands of networkers over the last 14 years and can’t think of a single
Oxyfresh, New Vision, Freelife or Cell Tech distributors who ever needed psychological
counseling due to their experience. Every failed distributor I’ve ever known just quit, moved
on, and got over it.
Ruth Carter’s book is not what classifies her as an “Anti-MLM Zealot.” Obviously, she
was genuinely traumatized by her experience. If writing a book and starting an on-line
“survivor’s” support group for others with similar experiences is cathartic for her and others,
more power to her. I sincerely mean that. But her agenda is not so benign. She has, once
again it appears, been brainwashed into believing all MLM opportunities are evil, vile, scum.
Her experience in this one organization within this one company was horrible, so they all
must be as horrible. She is now so blinded by her loathing for all things MLM that she didn’t
create AmwaySurvivor.com, she launched MLMSurvivor.com. This web site is where the real
fun begins. Don’t miss the next issue!
------------------------
Anti-MLM Zea lots

Part VI
Lots of people are anti-MLM. But few deserve the title of Anti-MLM Zealot. Your
average anti-MLMer usually falls into one of two camps: There are those who failed at the
business and discovered that there’s scapegoats galore which to assuage their ego – my
sponsor didn’t support me, the products were too expensive, the pay plan was too
confusing, Mars was in retrograde (no kidding, actually heard that one once), or whatever.
No one ever seems to fail at MLM because they just weren’t very good at it. Then there are
those who heard that MLM is bad, and instead of forming their own opinion, based on their
own evaluation, they choose to adopt the other person’s negative opinion as their own. And
the other person’s opinion usually came from someone else who never formed their own
opinion – the opinion is rarely passed on unsolicited. So, to answer a common question I’m
getting about this series, that’s the key distinction between your run-of-the-mill MLM basher
and a full blown Anti-MLM Zealot. The Zealot wants to tell you their opinion of MLM whether
you want it or not. They want to warn the world, to save us all from this horrible scam. And
when we won’t listen (all ten million of us), they try to save us from ourselves by getting
our state and federal government to silence the siren song of MLM that is so violently
smashing our dreams into the rocks. When our proverbial ship comes in, the lowly MLM
basher will simply tell you not to board it. The Anti-MLM Zealot will try to sink the ship,
court-martial the Captain, imprison the crew, burn down the shipyard, and level every port-
of-call that allowed it to anchor.
zeal·ot n. 1. A fanatically committed person. 2. A fervent and even militant proponent or

opponent of something.
There are only four bona-fide Anti-MLM Zealots in the U.S. today (for such an allegedly
vile and pervasive business you’d think there would be more). Dean Van Druff is perhaps the
least zealous among them, but his disjointed, unresearched article “What’s Wrong With
Multilevel Marketing” is likely the most read piece of anti-MLM propaganda ever created.
That’s why I rebutted his work in part one of this series. Robert FitzPatrick’s book “False
Profits” seems to be the definitive work within the anti-MLM arena which is why he has been
the subject of the last three segments of this series. Jon Taylor’s anti-MLM efforts are by far
the most prolific, culminating in his 40,000 word manifesto titled "Product Based Pyramid
Schemes." That’s why I’ll be focusing on his work next.
MLM Survivors
But let’s get back to our current subject, alias Ruth Carter and her “MLM Survivors”
web site. Last issue I related her experience as an Amway distributor which she portrays as a
miserable, depressing, and expensive one. A fifteen year relationship culminating in her
turning hostile witness and writing a book called “Amway Motivational Organizations: Behind
the Smoke & Mirrors.” In her book she suggests that “mind control” techniques were used
on her, and that Amway Motivational Organizations (AMOs) were cult-like. When so many
people coming from the same MLM support system claim to have lost so much for so long,
and just couldn’t stop doing it, I do feel there is reason for genuine concern. So when she
started her on line support group in the Fall of 1997 I admit to being a reluctant fan.
Reluctant only because I felt she was unfairly stirring all Amway reps (now called Quixtar)
into the same pot. Many do not support an AMO, and Amway corporate has clearly declared
that their tools and events are not required. And she didn’t call it AmwaySurvivor.com, she
called it MLMSurvivor.com. But her failure to recognize the dichotomy between Amway
AMOs and the rest of the MLM industry didn’t end there.
In spite of the fact that virtually 90% of her site’s content and message board posts
pertain to Amway/Quixtar, she and her co-moderators are quick to attack, viciously, any
mentioned MLM company or pro-MLM participant. “Ruth” offers a pull down menu on her
home page where you can look up “news” (dirt) about specific “multilevel marketing”
programs. Based on a phone verified survey conducted by the Network Marketing Business
Journal, there are 2,100 MLM companies operating in the United States. Carter has 21 on
her little hit list. Two are Amway and Quixtar (the same company, but hey, it makes the list
look longer), another is an expired Amway distributor group made up of terminated Amway
Diamonds (which she ironically seems to support in spite of the fact they were terminated
because they tried to multilevel market the tapes and tools – which would have violated
anti-pyramid law!). Of the remaining 19 one has never operated in the U.S., and ten were
blatant illegal pyramids, not MLM companies, which have all been shut down. Then there’s
Equinox, of course, it’s spin-off Trek Alliance, and The Tax People – which have also all been
shut down. Within the entire content of her MLM survivor web site only six existing, actual
MLM companies are even mentioned besides Amway/Quixtar. And even the negative
information she provides about most of these six appears to have been scraped from the
bottom of the barrel. Herbalife’s listing links to only a press release about founder Mark
Hughes’ death. Melaleuca’s links to a law suit filed by some ex-distributors alleging fraud –
which Melaleuca won! Nu Skin links to nothing more than a petition to the FTC asking them
to examine Nu Skin’s adherence to a 1993 Consent Order – authored by the afore mention
Jon Taylor, which the FTC has so far completely ignored.
Most of the action is on their Yahoo message board, which is dictated over by Ruth
Carter herself, under the name “nomore_scamz”, and Lindy Mack, as “PW.” One of the most
active posters goes by the screen name “freethinker4.” After the Dateline segment on
Quixtar and AMOs which aired last October, PW and freethinker4 revealed themselves as the
husband and wife featured most prominently on the show. Yes, they too are ex-Amway reps
(Ruth was also interviewed by Dateline, but for some reason her segment hit the cutting
room floor – perhaps the lady doth protest too much?). The board lists over 3,200
members, but most of the activity seems to come from the same dozen or so people, and
the number of posts has been dropping steadily over the last 18 months (from over 1,300
to 337 in February).
It’s fairly common for folks who are considering MLM to join the forum to investigate
the opportunity they are considering. Without exception they are told that all MLM
companies are scams and should be unilaterally avoided. If a pro-MLMer dare wander into
their domain they are immediately swarmed upon like killer bees. And the venom can be
disturbingly toxic. And should anyone dare post corrections to the rampant flow of
misleading or outright fraudulent anti-MLM information that’s posted there, they are
tolerated for only as long as Ruth and PW feel they can win the point. Once undeniable proof
is offered, or you simply offer up enough logic to make them look foolish, your post is
deleted and you are permanently banned from the forum. Then they gloat over how pro-
MLMers never seem to be able to post proof of our claims. Trust me, I know.
Ruth and I first got into it last year when she posted material claiming that the DSA’s
anti-Pyramid bill (HR 1220 – “Act to Prohibit Pyramid Schemes”) would actually “legalize
product based pyramid schemes” and would have protected companies like Equinox from
prosecution. Sound familiar? The term “product based pyramid schemes” is an invention all
Jon Taylor’s, and the odd idea that the bill would have protected previously closed down
companies originated with Robert FitzPatrick (and was debunked in Part IV of this series). I
asked Ruth at the time if she had ever developed any of her own opinions about MLM in
general, or was she just parroting FitzPatrick and Taylor? She claimed to have done her own
research, of course, yet when pressed to address any issue outside the scope of Amway she
continues to routinely reference the work of FitzPatrick and Taylor. I provided a respectful
and thorough rebuttal to her erroneous comments as to the DSA bill and to her credit she
allowed the response to post (all posts are screened by her and PW). But then, she still
thought she had a valid comeback, which she eventually posted several days later. Then due
to a death in my immediate family I was taken away from the debate for several days, only
to return and find three posts from Ruth rhetorically wondering where I had gone, and
challenging me to respond. She was definitely confident in her position in spite of the fact
that most of it could be easily, logically, mathematically, and verifiably proven false – and it
was in my response. Her follow up was a short comment about a couple of meaningless
points, followed by a curt “That’s as far as I’m going with this.” I was then notified that my
posting privileges were being revoked. One of her own board members then posted the
comment; “Ruth, I would have thought you would have more to say about his response,
especially since you asked for it three different times. As I read his response, he appeared to
make some valid points.” This poster had obviously not figured out yet that the board
moderators don’t respond to “valid points” that support MLM – they censor them.
Before I was blacklisted I was able to answer some attacks by other board members,
such as freethinker4’s totally baseless, unprovoked accusation that I sell my company’s
products by making wild claims. Now, I’m a pretty calm guy, but I do have my hot buttons.
One is an attack on my ethics. Another is wild product claims. Accuse me of being unethical
by making wild product claims and watch out! I tried to explain to her as calmly as I could my
loathing for such claims, which stemmed from my Dad just dieing from Emphysema, my
Mom’s chronic ulcers, my Grandmother’s Alzheimer’s, and my brother’s Crohne’s disease –
and all the garbage that’s out there claiming they can all be cured (I once watched a friend
die of cancer while chugging every “natural” remedy she could find – for around $40 a
bottle). Or worse, the suggestion that my Dad’s death could have been prevented had he
(or I) been more “open minded” to all these pseudo-science based alternative treatments. I
also directed her to the several articles I’ve written on my web site blasting such practices in
MLM, and to a display ad I had running that said “NO! Our products don’t cure every disease
known to science!” right in the ad. She also suggested that I “make more money selling (my)
success system than selling products.” This is typical “survivor” modus operandi – if
someone did it to them, then we all must do it to everybody. I pointed out that I offered my
system for free and directed her to the online evidence. But rather than apologizing for
misjudging me and showing even a modicum of compassion or empathy for my personal
situation (she’s a registered nurse – you’d think it would come naturally), her response was
disturbingly vitriolic. This wasn’t someone who was just being defensive or too egotistical
to admit she was wrong. This was a person who seemed to be filled with anger and hatred
beyond reason. What’s more, other board members were quick to agree with her
accusations and supported her horrid retort. The point behind describing the condition of my
family’s health was clearly not to gain sympathy, but the fact I received none told me a lot
about the type people I was dealing with.
Ruth was never so hateful, just infuriatingly evasive. She has a keen ability to sense
when an argument is about to turn against her then lead you light-years away from the point
you’re trying to make. For example, I made the claim, imbedded within a much larger more
poignant issue, that a high failure rate among participants does not inherently make a
profession dishonest, and that the majority of people who attempt to be successful doctors,
lawyers, actors, politicians, or baseball players also fail, yet no one claims these occupations
are scams. Rather than address the main issue being debated, she responded with her
favorite comeback: “Unsubstantiated anecdotal claims. Where’s your evidence?” Countless
times Ruth has used this clever “Prove it” response to avoid having to provide a response.
Even in cases like this, when asking someone to show evidence that most who attempt to
become pro baseball players fail at it makes her look astoundingly foolish and desperate. She
later stated that she “might” grant me actors and baseball players, but if I could not support
my claim regarding successful doctors and lawyers then “it rather spoils your argument.”
But, couldn’t I have made the same point just as effectively by leaving out doctors
and lawyers and using the other three professions? And what do you suppose she did after I
went through the tedious, time wasting process of digging up the data to prove my claim
about doctors and lawyers? That’s right – she completely ignored my response and dropped
the point. To appreciate the silliness of Ruth’s penchant for requiring proof, here are some
other statements she demanded “verifiable evidence” of: “You get out of it what you put
into it” (how would one even begin to “verify” this?); “so many people (on the Survivor
message board) complain and moan” (she demanded a total count of people involved, and
the number who were complaining); and “There are goods and bads in any business” (she
actually asked for “facts” to back up that claim!). One pro-MLM poster claimed he made over
$100,000 last year at age 30, and Ruth responded by demanding to see his tax return and a
copy of his birth certificate! According to the forum’s co-dictator “PW,” only
“documentation can serve as evidence.” Yet, when it comes to virtually all of their anti-MLM
data, personal testimony and hear-say are entirely acceptable. But then, he openly admits,
without the slightest reservation; “There is a double standard with regard to pro-MLMers…
argumentation in favor of MLM are not permitted here.”
“Fairness is NOT one of the foundations of the MLM Survivors Club.”

– Lindy “PW” Mack, Message Board Moderator
“There is no requirement of balance in this club, numbskull… Give it up, troll.”

– Vicki “Freethinker4” Mack, Message Board participant
Their club rules also state “Rudeness, abusiveness, name calling and the like will not be
tolerated.” Guess there’s a “double standard” on that one, too.
Ruth also states that making claims “without verifiable proof” is a violation of “club
rules.” But when I ask her to provide evidence of her claims, such as “fewer than 1% of MLM
participants ever make a profit,” you’ll hear only crickets chirping. Unless it involves facts
that FitzPatrick or Taylor have already published, she’s lost. And often times she’ll cite
claims made by these two (such as the 1% claim) which even they don’t have evidence of –
they just pulled it out of thin air. A new board member once asked if anyone had any
“negative information” on Usana. Ruth responded that if she hadn’t found any, “you haven’t
looked very hard.” Yet, in spite of the alleged ease in finding it, Ruth was unable to identify
any of it. The standard of proof she requires of pro-MLMers are so high it borders on the
absurd, but if it supports her anti-MLM position there seems to be virtually no standards at
all. “Unsubstantiated” and “anecdotal” would describe at least 87.364% of the anti-MLM
claims made in her message board. Okay, I didn’t really compute that number out – at least
not to three decimal places – but I’m sure Ruth would ask for it!
If Ruth’s “Prove it” dodge should ever fail, her Plan B is to play dumb. While debating
the requirement that MLM companies sell sales aids “at cost,” which I said was true “based
on legal precedent”, she first asked for the precedent, of course (I supplied it, she ignored
it) then actually said this: “… ‘at cost’ covers a pretty gray area. If I manufacture a bunch of
tapes at a cost of 60 cents apiece, and sell them… for $1.00, what is ‘at cost’?” I
contacted three of the top economist in the country and we researched and debated her
question for several hours. The consensus was that “at cost” in her example would probably
be sixty cents! The “at a cost of 60 cents” part was a big clue.
sar·casm n. 1. A mocking or contemptuously ironic remark.
The folly of the MLM Survivor message board is far too extensive to cover in just one
segment. Next issue I’ll explain how surviving a bad MLM experience is analogous to surviving
The Holocaust, according to one MLM survivor. And I’ll tell you what facts I posted that got
me canned a second time from their board. I saved the best anecdotes for last. We’re going
to have some fun, so stick around!
------------------------
Anti-MLM Zea lots

Part VII
If you’re just joining this series – too bad. You’ve missed a lot of information that
could have helped you enroll that prospect who you just knew would have been fantastic at
the business, but was too skeptical of it (we all have them). And you missed out on a lot of
fun as well!
Part one described all the reasons why Dean Van Druff’s utterly unresearched, illogical,
ten year old article “What’s Wrong With Multilevel Marketing?” was wrong. Then we spent
three parts on Robert Fitzpatrick’s two anti-MLM books. Not that it was so hard to refute
them, there was just so much to refute! Part five dealt specifically with Ruth Carter’s anti-
Amway book “Behind The Smoke and Mirrors” and part six introduced a discussion of her
web site MLMSurvivors.com.” That’s where the real fun began.
So let’s continue.
The MLMSurvivors.com message board is allegedly suppose to be a safe haven for
“survivors” of MLM to congregate and commiserate. To support and console each other. In
reality, it’s a forum for ex-Amway reps to get together and mutually legitimize each other’s
excuses for failure – and to carpet bomb the entire MLM landscape. The members, and
especially the forum dictators, “PW” and Ruth herself (they call themselves “moderators”)
blindly assume that since Amway (now called Quixtar) is a multilevel marketing company, all
2,100 other multilevel marketing companies must operate the same way. The obvious fact
that such logic would not even remotely hold true in virtually any other industry seems to
carry no weight with them. Their experience in Amway was bad, therefore all companies
within that industry must be as bad. When someone should wander into their forum to do
what few of these people obviously did – some research and due-diligence into the business
they are considering getting involved with – and ask about various other MLM companies,
the result is always the same. They are told the company they are considering is bad and
should be avoided. But rarely is any actual evidence, even anecdotal, ever provided as to
why the company is bad. They think Amway is bad, Amway is an MLM company, the
company in question is an MLM company as well, so it must be bad too. That’s it. Case
closed.
Should someone who is pro-MLM enter their domain and, God forbid, try to install a
little reason and common sense into the discussion, the flames could melt your firewall (only
us computer geeks will get that pun). Every positive portrayal of MLM is arrogantly assumed
to be a “trolling” attempt to gather prospects, which the members are quick to point out is
utterly ridiculous considering the venue. Indeed it is ridiculous, and rarely is the pro-MLM
participant attempting to reconvert anyone. In most cases they are, as I was, simply trying
to get them to understand that their personal experiences in this one, albeit largest, MLM
company is not indicative of how the other 2,100 MLM companies operate (it’s been
suggested more than once that the board should be renamed AmwaySurvivors.com, but to
no avail). Either that, or the pro-MLMer is trying to correct a “survivor” who has stated
erroneous information pertaining to MLM data, legal precedence, history, or specific
company information. The board is chocked full of such bunk.
One regular poster once claimed that not only is there little actual retailing going on in
MLM, a common discussion on the board, but many MLM companies actually “forbid
retailing.” When I asked him to “name one” he gave me a short list which even included
Herbalife – one of the most retail oriented MLM companies in history! I then asked for
evidence of this (I would love to see the section of their distributor agreement where it says
retailing is forbidden) and questioned him as to why every company on his list had a
“suggested retail price” on their product price list if retailing was forbidden? He responded
that he never said “retailing” was forbidden, he said “retail marketing” was forbidden (how
does one perform “retailing” without “marketing”?). These are the kinds of silly games one
plays when dealing with MLM “survivors.” They never admit they’re wrong, no matter how
obviously they’ve been busted, and their attempts to avoid appearing so often times
becomes ridiculous.
I was kicked out of the MLMSurvivor.com message board last year because I dared to
point out errors, and in some cases flat out lies, that were being posted on the board
regarding various MLM related issues. I was in the process of debating the DSA bill (HR
1220) and Ruth’s ridiculous claim that this bill was the DSA’s attempt to legalize pyramid
schemes, and how it would have protected companies that had previously been shut down
by the FTC. I presented my case, she responded, I left for a few days due to a family
emergency, then she posted three times gloating about how I had not responded and
wondering where I went. I then returned and responded to her response with irrefutable,
verifiable proof to support my case. She responded “That’s as far as I’m going with this” and
terminated my posting privileges.
About a year later a board participant posted the claim that the FTC had declared the
paying of commissions on personally consumed product to be “illegal.” Since this would
essentially make every MLM company an illegal operation, and it was just so easy to prove
wrong, I had to try to get back in and refute this silly, but potentially damaging (if left
unanswered) claim. To Ruth’s credit (or bad memory), my response was allowed to post. But
rather than respond to it herself, she brought in a ringer. The mysterious “kublaikant”
suddenly appeared on the board who claimed to be an attorney with extensive knowledge of
the MLM industry and the laws pertaining to it. He pompously cited the FTC’s cases against
Equinox and Five Star Auto Club, both of which defined legally commissionable sales as being
those to non-distributors. Of course, Ruth had to get her two cents in somewhere, so she
cherry picked what she must have felt was the safest point to counter. That being a
comment I made about the 9th Circuit Court of Appeals – the anti-MLM zealot’s best friend
ever since they declared that commissions should only be paid on sales to non-distributors
(Webster vs. Omnitrition, 1994). I stated that this was just dicta (legalese for “opinion”)
which created no law, only overturned a previous summary judgment (in Omnitrition’s favor)
and sent the case back to the lower court for trial, there were only two members of the
“class action” (not hundreds like many believe), no jury ever found Omnitrition guilty of
being an illegal pyramid, five states have since declared that distributor orders are legally
commissionable (Texas, Kentucky, Oklahoma, Louisiana, and Ohio), the 9th Circuit Court was
also the court that ruled the Pledge of Allegiance was unconstitutional, and was the most
overturned appears court in the land. Ruth’s response to all this? “Percentage-wise, about as
many of its decisions are overturned as any of the other appeals courts.” Ruth’s only other
contribution to kublaikant’s rebuttal was the remark (in response to the DSA bill’s attempt
to formally define personally consumed product by distributors legally commissionable),
“Yes, rendering any product-based pyramid scheme ‘legal’ – Great consumer protection
legislation!” So before trouncing kublaikant’s case, I made the tactical error of once again
proving the forum dictator wrong by citing that from 1992 to 2003 the 9th Circuit Court
was overturned 20% more often than the average of all other appeals courts (cfif.org). I
then reminded her that we had already debated the DSA Bill the year before when she made
the same loony claim, and that after I provided evidence that she was wrong she bowed out
of the debate and stopped allowing my posts. I then responded to kublaikant by quoting
from a letter straight from the FTC where they clearly and specifically state that the
definition of legally commissionable sales in the Equinox and Five Star Auto club cases
involved “extra” constraints that “do not apply to the general public… They do not
represent the general state of the law.” The FTC letter goes on to specifically say that sales
volume produced by distributors is legally commissionable (although the motive for
purchasing the products must still be to resell and/or because the distributor genuinely likes
the products and isn’t purchasing them just to meet a quota in the compensation plan).
Their big shot hired gun, Mr. Kublaikant, was dead wrong. The verifiable proof was right
there, in crystal clear unequivocal English. They were wrong, I was right, and this time there
was no possible way to deny it. So Ruth and PW had absolutely no choice. There was simply
no way they could allow my response to post. And this time I was not only censored, they
terminated my board membership and banned me for life! “PW” got to do the honors. He
sent me a private e-mail implying I was the one who “bowed out” of the debate a year earlier
(he said I was now “changing the truth to suit your argument” by stating that Ruth was the
one who quit) but then attached excerpts from my final posts back then that essentially
proved my claim! He then called my post a “personal attack on the forum owner” in spite of
the fact my two comments to Ruth made up about 5% of my response to kublaikant, and
contained nothing that could have been even remotely construed as a “personal attack”! Of
course, none of this had anything to do with why I was banned, and had everything to do
with the FTC allegedly disallowing commissions on internal consumption being the backbone
of their “product based pyramid scheme” scheme. There primary legal argument against the
industry as a whole was a house of cards built on quicksand, and there was no way they
could allow proof of that to be revealed to their followers.
So Kublaikant’s rebuttal was left unchallenged. “PW” did post to the board members
that I had been banned but I could still read their comments. One of the reasons he gave
was that I had broken the board policy of not providing evidence to support my claims! He
also openly declared that “argumentation in favor of MLM” is a violation of board rules.
Later Ruth posted her own version, saying “All we were doing was asking for verifiable
evidence, but apparently he thought he didn’t need to provide it.” In case you missed it,
Ruth, here it is again: http://www.marketwaveinc.com/FTC_letter.pdf. Fortunately, Rod
Cook (MLMWatchdog.com) reproduced the discussion thread on his board and allowed my
rebuttal to Kubliakant to post there. A survivor board member managed to cut and paste
my response into his post on the survivor board, and asked for a rebuttal. There was none.
Kubliakant never posted in the MLM Survivor message board again.
The anecdotes are endless, and unfortunately I’m not allowed this whole publication to
site them (although – wouldn’t this series make a great book? Hmmm). But here’s one I
can’t leave out. Remember how Ruth rationalized why she spent 15 years in a business that
was so depressing and harmful? Mind control. Brainwashing. We (not just Amway
Motivational Organizations, but all of us) are masters of mental manipulation. We make it so
you just can’t stop, no matter how abused you are. And those who “survive” the experience
can even require counseling, or at the very least, an online support group. Yet, when asked
on her message board why the government doesn’t shut us all down if we’re all so bad and
illegal, and why some of the companies she and her cohorts claimed were among the “most
offending” companies all seem to be in good standing with the Better Business Bureau and
Chamber of Commerce, her response was shocking in it’s illogic and hypocrisy. First, she
described how we teach our distributors that if your business is not successful, you’re not
doing it right, therefore people don’t complain because they are brainwashed into believing
their failure was their own fault. Can you imagine? If people try to perform a task and fail at
it, we actually suggest that they may be performing the task incorrectly. What logical,
rational, common-sense practicing scumbags we are! And, of course, the reality is very few
failed MLMers take personal responsibility for their failure. In my 14 years of experience, I’d
estimate maybe 5% of them felt they just weren’t good at it. The rest always had an excuse
(bad sponsor, bad products, bad weather…). Oh, but there’s more. She went on to explain
that after the “brainwashing” wears off “years” later, “most people simply want to move on
with their lives.” Most people. Then there are those who spend years writing anti-MLM books
and operating anti-MLM web sites. She also explained that the government doesn’t take
action because MLM is a “billion dollar industry” (thank you very much), and won’t pursue a
case against particular companies unless they “have an ironclad case against them.” It was
actually fascinating to watch her try to rationalize how the fact that most MLM companies
have clean BBB and Chamber of Commerce records, we’re a huge billion dollar industry, that
most failed reps don’t need online support groups (they just got over it and moved on), and
the government doesn’t have a very strong case against the industry, are all negative
aspects of MLM.
Most of the anecdotes I collected are silly little examples of “survivor” ignorance of
the MLM subjects they expound upon, and the folly of their efforts to avoid looking that
way. But some are not funny. They are disturbing. For example, during one of my many
attempts to nail Jello to the wall (which is what it’s like when trying to get Ruth to focus on
a point she knows she can’t win), she tried to explain to me why my attempts to defend
MLM were so inappropriate. She actually said the following:
“Would you go into a rape survivors group and start touting the use of the date rape
pill? Would you go into an AA meeting with a bottle of whisky and start offering drinks?
Would you go into a support group for holocaust survivors and try to convince them that
the Nazis really didn’t make war on Jews, and the holocaust is an invention of anti-German
historians? I don’t think so… So why do you come into an MLM Survivor group and start
telling them that MLM is a good thing?”
To stay with Ruth’s absurd and profoundly insensitive analogy for a moment (just a
moment), what I would do is defend against the equally absurd suggestion that all men are
rapists, all drinkers of whisky are alcoholics, and all Germans are Nazis! But let’s not stay
with this analogy. Having a bad MLM business experience hardly falls within the same
universe as being raped, alcoholic, or a holocaust victim. To even make such an analogy is
shameful. What’s more, these are actual victims! No one made voluntarily, conscious
decisions to be raped or be Jewish in Nazi Germany. Ruth, and other "MLM Survivors" (which
now seems ridiculously petty in light of her analogy) made choices that put them in the
positions they were in. No one held a gun to their heads, or drugged them, and forced them
to buy a garage full of unwanted products, spend thousands of dollars on tapes and tools
they didn't need, join the very first company they were pitched or believe their upline's
claims of quick and easy riches. There is not one single thing any of them can point to
regarding their MLM experience that could not have been easily avoided with one simple
word - No!
I once considered myself a "victim" of MLM. Until I realized the truth. I was naive,
gullible, and just didn't do my homework. I made decisions that, looking back, were just
dumb. All because someone told me to. But rather than defend my victimhood, I took
responsibility for my own actions and set out to thoroughly research this industry and find a
company and upline that was operated ethically. I used the power of knowledge against the
scam artists that pervert this industry. I didn't walk away wounded and vindictive towards
anything remotely resembling MLM.
I totally understand their motives for banning me from their message board. What I
present ruins their victimhood. They prefer to believe, and mutually reassure each other,
that their failure was forced upon them, and their poor and costly business decisions were
not made of free will. They don't like people coming in and killing their scapegoat.
Next month: Dr. Jon Taylor and his 40,000 word manifesto titled "Product Based
Pyramid Schemes." He can’t seem to get the FTC to pay any attention to it (sure not for
lack of trying), but your prospects might be. So read on, and be ready!
------------------------
Anti-MLM Zea lots

Part VIII
The Anti-MLM Zealot is a rare breed. Oh sure, there are a lot of people who may be
"anti-MLM," likely due to one failed experience, or more likely due to them adopting the
negative opinion of someone else as their own, without doing any of their own actual
investigation. Then there are those who dismiss our industry as somehow shady due to
nothing more than the common geometric misconception that our sales organizations form
a pyramid shape (ironically, MLM downlines are the only form of business structure that does
not form a pyramid). But the Anti-MLM Zealot is someone who is passionate about exposing
their negative beliefs and opinions to others - even to the point of obsession. Someone who
spends hundreds, if not thousands of hours of their lives searching for evidence to support
their cause, creating prolific amounts of anti-MLM material, and contacting media outlets and
state and federal regulators in a vain attempt to get someone to pay attention to them.
Someone like Jon Taylor, PhD.
There are really only four bona fide Anti-MLM Zealots out there trying to wreck our
business, and for many of us, our livelihoods. Arguably the most read is Dean Van Druff. The
most prominent, at least at the moment, is Robert FitzPatrick. The most currently active, at
least at the moment, is Ruth Carter. All have been discussed in previous editions of this
series. But by far the one who has churned out the greatest abundance of anti-MLM material
is Jon Taylor.
Product Based Pyramid Schemes – Dr. Jon Taylor
The most prolific of the anti-MLM group is Jon Taylor, Ph.D., a graduate of Brigham
Young University with an MBA is Applied Psychology, who has over 30 years of sales,
marketing, and entrepreneurial experience.
Dr. Taylor has spent several years cranking out anti-MLM material, including a 40,000
word manifesto titled "Product Based Pyramid Schemes." Its essentially a 5,000 word thesis
with the same points repeated over and over. The basis for Taylor's argument is that he
was, in fact, a "successful" distributor who one day had a lucid moment and decided to turn
hostile witness. He came to believe that no one else after him could become successful
since they were now at the "bottom" of the pyramid
Taylor claims he spent two years researching MLM, first as a distributor determined to
give it "every chance of proving what it claims to be," then as a researcher determined to
find out if everyone had as much trouble as he did making "large amounts of money that
were promised to the diligent." First, I'm not sure if a less-then-two-year participation in
one particular MLM company (out of hundreds) could be classified as "diligent" nor provides
an entire industry "every chance" to prove itself. It seems as if Taylor feels that if it didn't
work for him, in this one company, there must be something wrong with the entire industry.
Secondly, I thought Taylor was a "successful" distributor? Indeed, he claims to have been
among the "top 1% of the distributors." What’s more, the company he was in was Nu Skin.
If he genuinely achieved the success he claims to have achieved, in less than two years, with
one of the industry's most challenging break-away compensation plans, in an already huge
company like Nu Skin, his own experience would seem to completely contradict his own
position. The fact that it was unexpectedly "tough" only goes to discredit the manner in
which he was presented the opportunity, and his own investigative skills. Surely he does not
believe that the way one group of distributors for one company pitched him is indicative of
how all seven million of us operate. Does he?
In detailing his MLM experience he describes how he "jumped in with both feet" and
dropped all of his other business interests. He then later discusses how he "had financially
fallen behind to a significant degree" due mainly to "all the product (he) purchased to
maintain artificial qualifying standards (quotas) for ever higher bonus and commission
levels." Also due to "not having any alternative income during that time." Now he seems to
be contradicting his own rebuttal to those who claim his MLM attacks are due to "sour
grapes." He responds to such claims by claiming he was "not a failure" and "rose to the top
1% of all those who tried this program." Yet, literally on the same page of his report he
claims he "came away empty." The only way to logically reconcile his seemingly
contradictory story is to assume he earned a substantial gross income, but due to his
excessive expenses earned no net income. This begs the question, who held a gun to
Taylor’s head and forced him to quit his other businesses and buy a garage full of products
to artificially meet his quotas? Indeed, these were conscious, voluntary decisions made
entirely by Taylor. Nu Skin’s "group volume" requirements were to be produced by Taylor -
and his group! By buying into the "Executive" position out of his own pocket he allowed
himself to earn higher override percentages on his downline, that’s true. But if his downline
were large enough to warrant such an action then most or all of the group volume quota
would have been met by his group’s volume. Otherwise, his upfront purchases would have
only earned him higher commissions on a downline that didn’t exist yet! How ever you look
at it, these were simply poor business decisions, the responsibility for which were entirely
Taylor’s. What’s more, MLM income is residual and not dependent on those expenses
continuing (other than his personal volume quota which was $100 at the time). Most
successful distributors plow much of their income back into their business the first few
years, then back off and live off their handsome residual overrides. That’s just how MLM
works. For that matter, that’s how business works. The challenge Taylor describes related
to his own MLM experience have nothing whatsoever to do with the MLM model or it’s
legality and everything to do with his own misguided expectations and those individuals who
misguided him. In other words, his problem is really with the packaging, not the content.
Yes, many Nu Skin reps back then (very early 90’s) were pushing front loads and
stockpiling of product, and the income hype was rampant. In fact, that’s the reason I quit
Nu Skin back then! Such actions are indefensible. However, Taylor states that "had a
government investigator... gone undercover as a MLM distributor... he/she would have
probably come up with similar conclusions." But - they did! Nu Skin was hit hard by various
state and federal authorities soon after Taylor and I departed. The catalyst for these
actions were the very things he attacks. This was a very high profile case resulting in a lot
of media play. Did he completely miss it?
For the record, Nu Skin has settled all their legal issues from back then and have since
reformed many of their marketing practices.
In an effort to prove his contention that very few people ever succeeded in MLM,
Taylor sent a survey to 60 prominent MLM companies requesting detailed pay out data
(such as the monthly earnings of the "top 1%" of distributors). Today he presents the fact
that not a single company responded to his survey as supporting evidence of his position,
rather than due to any lack of credibility he had with these companies, or the fact that his
survey was grossly flawed in that it did not take into consideration something as simple as
the size and age of the company.
In Taylor's "Twelve Tests for Evaluating A Network Marketing Opportunity" he
stumbled on the very first sentence where he refers to "Gifting Network" among a list of
network marketing aliases (such as MLM, Consumer Direct Marketing, etc.). I believe this
mistake is due more to his obvious bias towards the negative rather than due to a lack of
research on his part. Even the most cursory investigation would have revealed that gifting
clubs are patently illegal, cash based operations (there are no products involved) far
removed from legal MLM programs, and the terms have never been synonymous within the
industry, or at any regulatory level.
One of his "evaluation test" questions is "are numerous levels of distributors
allowed?" Of course, there are numerous (if we assume that to be more than five) levels in
virtually every MLM company. The idea that more than two or three levels of pay out
constitutes an illegal pyramid is an invention all Taylor's. No legal authority in U.S. history
has ever held the same opinion.
Yet another example of surprisingly shallow thinking on Taylor's part (who is otherwise
clearly a bright guy) is the statement that "in some programs, quitting merely enhances the
income of your upline – because income 'rolls up' to those above you." Okay, let's think
about this. If someone were making any significant amount of income, why would they quit?
If they were making very little income, then very little would roll up. As most experienced
MLMers would attest, "roll up" is a very overrated income generator. The vast majority of
upline reps would benefit more by the commission they earn on their downline’s personal
purchases and sales than they would from roll up of their income if they quit. To suggest
otherwise demonstrates a gross ignorance of basic MLM theory.
In yet another example of loaded questions he advises you to ask (there are many
throughout Taylor's work) he suggests prospects ask distributors who have only been
working the business two or three months if they are turning a "respectable profit," then
goes on to say that if they are not, then they are only "fattening the pockets of their
upline." Taylor has a penchant for "set up" lines like this. Very few reps would be making a
profit of any amount after just two or three months. Indeed, to suggest significant profits
can be earned in that short a time is the very type of hypey, over-stated promise that
Taylor warns against! Furthermore, typical income progressions, based on real-world
analysis of those who've worked a good opportunity long enough to create one, show a very
slow growth pattern in the early stages followed by more rapid growth months later.
Inevitably, the rate of increase will begin to increase, creating a "momentum" phase within
an individuals own organization. A typical income progression chart would not show a 45º
diagonal line, but one that looked more like the path of an airplane taking off from a starting
point at the beginning of the runway. This income acceleration may not occur until the
second, or even third year. The fact that most distributors choose to drop out long before
then is a failure of their own tenacity and ignorance of how incomes truly progress in MLM –
not a failure of the MLM concept. So, even after this magnitude of research performed by
Taylor, are we to believe he still doesn't understand a typical, common MLM income
progression?
Another "set up" question he suggests you ask of your MLM company is for net pay
out data, after subtracting product purchases, for all distributors who ever signed up! Yes,
even those who quit many yeas ago. Is he really so naive to think that such data exists, or
even if it does, that any company would provide it? Of course he isn't. He already knows
they won't, or can't provide it (based on his own attempts). So why would he suggest you
all try to acquire the same information? Besides, can you imagine the accounting nightmare,
not to mention the data storage requirements, for major, decades old companies like
Amway, Mary Kay, Shaklee or Herbalife to be able to accommodate such a request. Of
course they are not going to provide it – and Taylor knew they wouldn't when he wrote his
"Income Disclosure Test." It’s just another set up.
We're set up again by Taylor's suggested "acid test" as to potential profitability of an
MLM distributor. He suggests you ask your sponsor to show you his/her last year's tax
return. Again, this is wrong on multiple levels. First, a tax return is a document designed to
show the least possible amount of income legally allowed, which factors in a wide variety of
common expenses that may still have been incurred but otherwise not be deductible (if they
hadn't been running a legitimate MLM business). Also, how does the success of your
prospective sponsor in any way effect your potential success? So what if that one individual
had a bad year last year? Does that mean you will? Furthermore, asking someone how
much money they make is a rude, very personal question to ask, isn't it? It certainly is in
every other profession (its also hypocritical for Taylor to suggest it considering he refused
to provide me with any evidence of his own alleged "success" in MLM). And finally, to abide
the question can be illegal! Using income claims, especially by showing checks, 1099s, or
1040's, as an inducement to join an MLM program is considered one of the most taboo
practices by the MLM industry at large. There is much legal precedent that Taylor's own
proposed question could be an act of entrapment. In fact, this very issue was a major part
of state and federal actions against Nu Skin back in the early 90’s - the very MLM company
Taylor claims to have once been so closely associated with!
Taylor suggest you get a copy of your sponsor's genealogy, including upline, giving no
regard to the fact that this is tantamount to asking for a company's client list (which, of
course, would be a foolish request), or that genealogies that include uplines (other than the
sponsor) are rare. What's even worse is that he suggests you get this information for the
purpose of polling reps at various levels to see how many of them have achieved "time
freedom" with no regard to the fact that, as I described earlier, one's time investment in
their MLM business typically takes on a bell shaped curve spread over several years. It
would seem obvious that one would be able to quit their job and comfortably live off
"residual income" only after months or years of time consuming work. Once again, either
Taylor is genuinely oblivious to what is common knowledge to any experienced MLMer, or
he's fully aware of this basic, fundamental fact of MLM life and he simply disregards it in a
biased attempt to manufacture a negative argument.
Taylor continues his string of trap questions by proposing that prospects should
check to see if the company offers training, audio and video tapes, and various other sales
aids for free, or are you expected to pay for them as another profit center for the company
and upline? Are we to believe that he never thought of a third possibility – that the tools
are sold at or below cost? Of course, Taylor surely knows that every MLM company charges
something for their training and sales tools, so why suggest you even ask? Furthermore, in
the vast majority of MLM programs operating today, these tools are indeed sold at or very
near cost. To mark up videos and audios significantly would mean the company itself would
be making money by recruiting (since only recruits would buy sales aids), which would be a
huge red flag to regulators. Companies are just as forbidden from making money from
recruitment as distributors are. Also, no legal MLM company pays commissions on training
and sales aids (sure, a few do pay on training, but notice I said "legal" MLM companies,
which are the vast majority, and which do not pay on training). Furthermore, all but a very
few, albeit very large, MLM companies don’t even allow their reps to produce and resell
training and sales tools at cost, let alone at a profit.
I've only just begun to pick apart the illogic and ignorance of Taylor's anti-MLM
material. In coming issues I'll show you his evidence that playing the slots in Vegas provides
a greater financial return than an MLM opportunity. He's even got a graph to prove it! And
wait to you hear his solution to the non-existent "saturation" dilemma. And you'll find no
greater example of "selective memory" than the interview he did of a pro-MLM authority in
his alleged attempt to get "all sides" of the issue before presenting his findings. He
interviewed me. His portrayal (betrayal?) of my information is so self serving and skewed as
to suggest deliberate deception. See ya' next month!
------------------------
Anti-MLM Zea lots

Part IX
I'm sure those of you who have been following this column over the last several
months have a pretty clear picture of what I'm defining as an "Anti-MLM Zealot." For the
benefit of those readers new to this series, allow me to reiterate – an Anti-MLM Zealot isn't
someone who dislikes MLM. Even those who really, really dislike it are not necessarily worthy
of the title. There are a lot of people who are "anti-MLM," likely due to one failed experience,
or more likely due to them borrowing the negative opinion of someone else and making it
their own, without doing any of their own actual research. No, the Anti-MLM Zealot is
someone who is borderline obsessive about exposing their negative opinions to others -
even those who never asked for it. They are someone who spends hundreds, if not
thousands of hours of their lives searching for evidence to rationalize their extremist
viewpoint. Then they compile and present their observations, theories and opinions to
anyone who will pay attention to them in an effort to rid the nation of all things MLM. The
fact that there are thousands of good, honest people supporting their families from their
MLM incomes, who's livelihoods would be ruined if their MLM prohibition agenda were
successful, is rationalized away by simply denying they exist. Or, creating a dichotomy where
all those who do succeed are the "perpetrators." The rest are "victims."
There are really only four bona fide Anti-MLM Zealots out there trying to wreck your
business, and for many of you, your livelihood. Arguably the most read is Dean Van Druff,
the most prominent is Robert FitzPatrick, and the most currently active is Ruth Carter. All
have been discussed in previous editions of this series. But by far the one who has churned
out the greatest abundance of anti-MLM propaganda is Dr. Jon Taylor, co-founder of the
Consumer Awareness Institute, who's work we barely scratched the surface on in last
month's edition. Let's dig deeper.
Tall Taxing Tails
In an effort to bolster his case that very few network marketers make any money,
Taylor relates the testimony of 33 tax preparers and CPAs he interviewed, not one of which
could remember an MLM distributor client who made a "substantial" profit. The only
challenge in rebutting this hogwash is deciding where to begin! Let's start with the fact that
a document in which someone attempts to report the least amount of income legally
possible isn’t exactly the best tool to judge how potentially lucrative a profession may be
(not to mention all those returns these preparers saw where the client was overly aggressive
in reporting business expenses, which I’m sure were more than a few). Putting that obvious
point aside, consider this: According to Taylor, these 33 tax preparers had an aggregate
total of about 14,400 clients in 2002 (the year Taylor did this "study") and had worked on
over 300,000 tax returns in their careers. Yet, amazingly, not only did they remember the
"several hundred" that were MLM distributors, but even recalled the amount of their profits
and losses! One particular preparer from H&R Block claimed to have prepared over 10,000
returns over 32 years, and not only recalled that all of his MLM clients lost money, he could
even cite the average amount they lost! Pretty incredible, isn’t it? And what, exactly, is a
"substantial" profit? And how would they know who was a network marketer? I've filed over
a dozen 1040s since going full time in this business, and don’t recall once being asked to
define my occupation. What’s even more difficult to accept is Taylor’s claim that he then
called other tax preparers, accountants, financial planners, bankers, and insurance
underwriters, (insurance underwriters?) who all allegedly "relayed similar feedback." What
does this mean? Who? Where? When? With such damning evidence you’d think Taylor
would have spent some time on this point, and provided specifics. Yet he simply glosses
over it in all of three sentences. And get this: Taylor decided to call 33 more tax preparers
in Utah county and found that they could recall 38 clients who had made "large profits from
a variety of MLMs" in the last year alone, and about 185 throughout there careers. Some,
Taylor reports, "were reaping checks ranging from tens of thousands of dollars a month to
close to $1 million a month!" How does he explain this? Well, Utah county, you see, has a
high concentration of MLM corporate offices, and those most likely to be at the top of the
pyramid would reside near their company's home office. I'm not kidding. That's his
explanation. Of course, he provides no information as to the level these mega-earners are
on, nor does he really have even the slightest clue. He also does not take into consideration
that those top earners who do live near the home office (of the very few who actually do)
often times moved there after they became successful. The reality is, his first survey was of
tax preparers in what he acknowledges are "sparsely populated" areas of Utah, and the
second survey was in a densely populated area, and common sense would suggest (and my
own MarketWave research has proven) that areas of higher population density are more
conducive to successful network marketing. Within the fine print footnotes Taylor mentions
that he also called 106 tax preparers from other parts of Utah as well as Michigan, Idaho and
California. Curiously, his findings from these surveys are not presented. If it supported his
case, you can bet he would have presented them.
Taylor concludes this section by asking for the reader’s assistance in gathering
"objective" information about MLM, but then declares he is "not interested in anecdotal
material." I see. So, if a tax preparer provides anecdotal material that is negative towards
MLM, based entirely on memory, he’ll accept it. If a practicing network marketer provides
anecdotal material that's positive towards MLM, it’s unacceptable. Yeah, that’s objective.
Odd Odds
In yet another example of Taylor's gross lack of objectivity, he states, "It is interesting
to compare the odds of success of MLM schemes with legalized gambling in Nevada. It
appears that on average one could do better at most any of the gaming tables or slot
machines...". Once again we have an anti-MLM zealot (previously it was Robert FitzPatrick)
suggesting our successes are somehow a game of chance. It’s interesting to note how
one’s "odds" of success in MLM seem to increase the longer they commit to it, the more
they study it, and the harder they work at it. Taylor provides charts, graphs and numerous
footnotes to create the illusion of substance to his findings. But when held up the light it
reveals itself to be nothing more than gussied up garbage math. In one case he provides a
chart showing the odds of turning a profit in a "no product" pyramid scheme, a single bet on
a roulette wheel, and an MLM opportunity. He claims the percent who lose money in a classic
pyramid scheme is 90.4% (9.6% make a profit), but 99.95% lose money in MLM. If we
follow the asterisks to the fine print, we discover that his 9.6% figure came from a news
report of a scheme called "The Original Dinner Party" and Robert FitzPatrick's experience
with the "Airplane Game" over 20 years ago. That's it. Another asterisk leads us to where
Taylor arrived at his so often cited "99.9% fail" figure. He picked six MLM companies (out of
thousands) and analyzed "internal reports" along with SEC and FTC filings, even though only
one is a public company in the United States. He also factored in "reports from ex-
distributors." But apparently his findings were still not to his liking, so he had to "correct"
what he refers to as "deceptive data." First, he didn't care for the way MLM companies only
report the earnings of those who are "active." Adding back in all those who made no money
because they didn't do anything to earn it (signed up, bought a kit, and quit) would certainly
increase his "failure" percentage. Next, he had to factor in each distributor's average annual
expenses. How he arrived at this number is not stated, nor does he even reveal the number
he chose to use – because there's only one way he could have arrived at it. He made it up.
For someone who demands such statistical facts and verification from us, it’s both ironic
and hypocritical of Taylor to pull flimsy, baseless, claims such as this out of thin air. His
"99.9% fail" mantra is based on nothing more than a grossly bias guess.
At one point in his marathon diatribe, he suggests a prospect ask the spouse of his or
her potential sponsor "what problems the family has experienced due to MLM participation?"
Notice, he doesn’t suggest you ask "Have there been any problems?" He’s suggesting you
just assume there have been. And what does your sponsor’s family life have to do with
yours? Taylor doesn’t say.
Taylor’s ignorance as to basic MLM law is most glaring in his definition of the
proverbial "Seventy Percent Rule." This is a rule that was derived from, and clearly defined
by, the FTC vs. Amway decision in 1979. It is, and has always been, a rule that forbids the
purchase of more inventory until at least 70% of all previous goods have been sold or
consumed (designed to prevent front loading and stock piling). According to Taylor, this
rule demands "distributors must derive at least 70% of their income from retail sales to non-
distributors." He’s wrong.
Among myriad other examples of Taylor’s asserted effort to fold, spindle and mutilate
the facts to conform to his argument, he charges that "MLM apologists typically respond
that a pyramid structure is common in all large businesses and their organization." And yes,
we do that. But then he states, "I maintain that many significant features (symptoms)
separate a pyramid scheme syndrome from normal business organizations. To suggest that
‘all organizations are really pyramid schemes’ is naive." Yes, it would be, except that’s not
what we say, and Taylor just confirmed it! The common, if now almost cliche’ assertion we
(us "apologists") make is, as Taylor just described, that the "structure" is shaped like a
pyramid, nothing more. So, how did we go from an innocent discussion of the shape of a
company’s hierarchy chart to us claiming the "symptoms" or "syndrome" of a pyramid
scheme are in common with conventional businesses? The bridge between the two totally
separate concepts is an invention all Taylor’s.
Taylor's illogic and shallow reasoning is never more evident than in his proposed
solution to the challenge of local market saturation. Taylor suggests that by MLM companies
not applying territorial restrictions (i.e. limiting the number of distributors per area), it is
common for local markets to become saturated with reps from the same company, making it
extremely difficult to enroll more sales reps in that area (such local market conditions are
actually extremely rare). His solution? Restrict the number of reps that can enroll per area.
So, his solution for a condition where recruiting more distributors becomes very difficult, is
to make it impossible to recruit more distributors in that area! Can you imagine having a
neighbor down the street who becomes interested in your business, but your company's
policies forbid you from enrolling them? Taylor's proposed cure to this local saturation
challenge would actually make it far worse, and cause it occur earlier!
Selective Memory
In his research, Jon Taylor interviewed me and read my book "Inside Network
Marketing." The only evidence of this anywhere in his material is his recounting of a
question I have on my MLM survey (www.marketwaveinc.com) related to income goals. Yet,
in spite of my crystal clear description of the question itself, and a verbal discussion on the
phone where I reiterated my findings, his portrayal (betrayal) of this survey is so self serving
and skewed as to suggest deliberate deception. My survey question simply asked at what
income level one would consider themselves "successful?" Not their dream goal (of course
we all want to be millionaires), but their "primary" income goal, and anything above that is
icing on the cake. Eighty-six percent said they would consider themselves successful if they
only made enough to quit their job and make a "comfortable living," which they quantified,
on average, as being $5,988 per month. According to Taylor, I asked what their
"expectations of success" were and that 86% said they "expected a full-time income to
result from their (MLM) participation." My survey also found that 6% said they would not
feel "successful" unless they made at least $84,000 per month (one million per year). This
means, as I state in the survey, my book, and in every other situation when I’ve ever recited
these findings, that clearly 6% misunderstood the question on the survey (obviously, they
would likely consider themselves successful if they made only $10,000 per month, or surely
$50,000). But Taylor calls it "remarkable" that 6% expected to make $86,000 per month,
then asks "What do such expectations tell us about the more aggressive MLM promoters?"
A better question is, what does Dr. Taylor’s portrayal of my findings tell us about the more
aggressive MLM demoters?
Taylor claims he also interviewed a producer of "multiple vitamin" products that had
several MLM clients. He alleges the conveniently unnamed producer told him that he sells
the vitamin supplements to these MLM companies at a cost of $3 to $4 a bottle, and each
of the MLMs sell to their reps for a wholesale price of about $50 a bottle. He goes on to
claim that this producer suggested to these MLMs that they could offer a superior product
with higher quality ingredients at a cost of $7 a bottle, and all declined because there was
"not enough margin." First of all, I’ve not only been a full time participant in this business
for over 14 years, I’ve studied it, and it’s companies, extensively that entire time. I’ve never
seen a "multiple vitamin" product wholesale for fifty bucks. Not one, ever. Besides that,
consider the absurdity of an MLM company selling something that cost them $3 for $50 - a
$47 margin, but then deciding they can’t afford a better $7 product because a $43 margin
wouldn’t be enough (that’s still over a seven hundred times mark up). Or that a
manufacturing company would tattle on their clients like this and risk losing literally millions
of dollars in business. Kind of hard to believe, isn’t it? It would be great if we were able to
verify Taylor's sensationalistic anecdotes, but unfortunately he does not place the same
level of substantiation and verification on his own claims as he demands we do on ours.
There are pyramid schemes, and there are legitimate, legal network marketing
businesses. There are numerous laws and countless legal precedence spanning several
decades supporting this delineation. This dichotomy has been defined and refined by
literally hundreds of judges, attorneys, law enforcement personnel, the FTC, Attorney
Generals, district attorneys, and various other local, state and federal regulators, as well as
the Better Business Bureau and Chamber of Commerce. We are now asked to believe that
they are all wrong, and Dr. Jon Taylor is right. At one point in Taylor’s manifesto he
rhetorically states, "While researching this subject, I often asked myself why is MLM so
pyramidal in concept, motivation, and effects, and yet has been so successful in avoiding
the label of ‘pyramid scheme.’" In researching Taylor’s position, I often asked myself why he
so utterly fails to accept, or even acknowledge the simplest, most obvious answer - because
they’re not.
The last two installments of this series will deal with general anti-MLM concepts and
accusations, such as market saturation, exploiting relationships, and high distributor failure
rates, among others. I'm done with rebutting specific anti-MLM zealots – unless there's
another one you think deserves the scrutiny. If so, please let me know.
For the record, all those individuals discussed in this column were invited to provide
supporting data to defend their expertise of this subject. Jon Taylor did provide a short,
general outline of his research, but refused to provide any financial data to support his claim
of past "success" in MLM. Dean Van Druff's response was mostly a rude, childish attack on
my intelligence. Ruth Carter referred only to here personal experience in Amway several
years ago. Robert FitzPatrick never responded at all.
------------------------
Anti-MLM Zea lots

Part X
Anti-MLM Zealots are rare. For an industry that’s been around for over half-a-century,
composed of over 2,000 companies and with well over ten million participants in the United
States alone, you would think there would be more. Especially considering how many
“victims” have been so ruthlessly abused by us, at least according to the Anti-MLM Zealots.
But the fact is, there are really only four. Robert FitzPatrick, Ruth Carter, and Jon Taylor
have all written books on the subject, and I’ve included Dean Van Druff in this list only
because, thanks to the internet, the one little anti-MLM article he wrote fifteen years ago
has probably been read by more people than the other three subjects combined. There
arguments against MLM, although sometimes well dressed, stand up poorly to scrutiny, and
virtually across the board are focused on the same two or three companies (the easiest
targets).
Readers of this column have asked why various other anti-MLM types have not been
mentioned in this series. First, the four I have featured have, to varying degrees, caused
some damage to the standing and credibility of this form of business. The others I’m asked
about have not. They are little known outside of MLM circles – and I’d like to keep it that
way. No sense giving them more attention than they are already not getting. Not that their
case is any stronger. In fact, that’s the better reason why I’ve ignored them – for the most
part they just parrot Fitzpatrick, Carter, Taylor and Van Druff. It’s always the same, tired,
arguments, over and over.
Various Others
There is, however, a fifth relatively vocal MLM nay-sayer who does deserve at least
some attention – Dr. Stephen Barrett, a prominent medical doctor well known for his anti-
quackery campaign. Dr. Barrett's MLM related criticism is the most frustrating to contend
with because it is, for the most part, the most valid. His concerns are well founded and his
targets well chosen. The only criticism I would have of his work is that it creates the illusion,
perhaps unintentionally, that the entire MLM industry is guilty of outlandish, over-the-top
product claims. In fact, you will find a small but vocal minority of MLM participants on Dr.
Barrett's hit list. Nonetheless, the list should certainly be smaller, and this is a challenge
that does need attention. However, being limited by law as to what we can say about the
benefits of our products certainly does not suggest many of those benefits are untrue or
overstated. Certainly some are – many are not.
There have been numerous negative other articles about MLM in various magazines
and newspapers over the years. The vast majority were not written by someone I would
classify as an "Anti-MLM Zealot," they were more like one-hit-wonders. They took one hit,
and I was left wondering how professional journalists could have been so inept at researching
their subject matter. In most cases, it was obvious they just didn’t know what they were
talking about. Again, not to say there are not many aspects of MLM that deserve criticism.
This industry, or more specifically the way some people practice it, is far from perfect. But
the legitimate concerns are rarely the target of the hit.
The epitome of this is an article by Rhonda Abrams, a syndicated small business
columnist. I’m only picking on her because her views are so typical of the MLM-ignorant
journalist. They pretty much all say the same thing.
In her article "Don’t Get Taken By MLM" (Nov. 2002) Ms. Abrams suggests we should
"Never, and I mean never, sign up for a multi-level marketing (MLM) program." Why? Well,
according to Abrams, "All MLM programs share the same fundamental flaws." Which she
lists as follows:
1. Recruiting your competitors: If I'm in sales, the last thing I want is more salespeople
competing with me. But in MLM, your goal is to get lots and lots of competitors.
Why would I want to do that?
About five paragraphs previous to this statement, Ms. Abrams defines MLM as follows:
"In a multi-level situation, I make money off my sales and also the sales of those I bring in to
the organization." So, did she forget what she just wrote? Does she really have that little
understanding of the most basic, fundamental concepts of MLM? Or, is she so desperate for
a negative argument that she has to invent one?
2. You pay to be a customer: Overwhelmingly, buyers of MLM products are MLM

salespeople. A legal counselor to MLM programs advises that a mere 20% of sales
to outside consumers is high enough to avoid legal scrutiny. Can you imagine any
other business where 80% of sales are made to employees?
Abrams apparently doesn’t understand that the majority of MLM programs today have
distributor enrollment fees so low (many are free) that any wise retail customer will sign up
just to save money on their products. If her findings are accurate, that would mean 20% of
all customers are voluntarily choosing to pay full retail when they could simply call an 800-
number or visit a web site, sign up as a rep and get 25-40% off. I’m surprised it’s as high as
20%!
And Abrams comparison to "employees" is grossly flawed. Imagine if Ford allowed
customers to simply fill out an employment application to get a 25% employee discount on
their cars. They never actually had to do anything, just apply. I bet over 80% of Fords
would suddenly get sold to "employees," wouldn’t they?
3. You'll pay far more: Expect to be required -- or pressured -- to buy samples,

marketing materials, training courses and tapes, seminars, etc. You're very likely to
spend far more than you'll ever bring in from sales.
She’s just wrong. No MLM company operating in the U.S. today "requires" such
purchases as a prerequisite to becoming a rep. Pressured? Well, I suppose that’s true to
varying degrees. If someone wanted to start a successful MLM business I would strongly
suggest they get marketing materials, product samples, and some training. Is that really
unreasonable? Too much pressure can occur, but once again, that’s a problem with the
individuals you’re working with, not the MLM model.
Note that Abrams doesn’t say that "most" MLM participants spend more than they
bring in, she says you very likely will. How could she possibly know that?
4. Your products are priced too high: No matter how good the quality of your
products, consumers are likely to be able to find better deals elsewhere. Just think
about it – all those middle layers of salespeople and commissions means higher
prices to the consumer.
Yet again, Abrams, like so many of her peers, demonstrates an utter lack of even the
most basic MLM concepts. MLM companies don’t have advertising budgets. Their products
are marketed by word-of-mouth, and the millions they likely would have spent for
advertising and promotion is instead used for commissions to pay those who talk up their
products. Furthermore, MLM companies greatly reduce the number of "middle layers"
between the manufacturer and customer, because the reps are their distribution system.
These facts have been among the most openly and widely promoted benefits to the MLM
distribution model for more than half a century!
Having said that, are some MLMed products priced too high? Are some jacked up just
to support a better paying comp plan? Absolutely. Is that a valid reason to avoid "all"
MLMs. Absolutely not.
5. You turn your friends and family into "prospects:" MLM programs typically suggest
you sell to – and recruit – people you know well. Do you really want to be
constantly beseeching those closest to you?
How did we go from selling to those we know well to "beseeching those closest to
you?" Not only do you not have to even sell to those you know (there are numerous
alternative lead generation systems available to MLMers today), but why not offer your
product or opportunity to those you know, and if they are not interested, don’t beseech
them! In fact, most MLM training today advocates exactly the opposite approach. If
someone says No thanks, you say "Next!"
6. You face group pressure: One of the positive sides of MLM groups is the support
given to those who spend a lot of money or who try hard to succeed. The flip side
is that those who don't spend as much or believe as strongly in the program are
likely to face strong negative judgments from the group.
It amazes me how those who "investigate network marketing" always seem to assume
that the way a minority of those involved with only a few of the largest, oldest MLM
companies is the way we all do it. Personally, I encourage and motivate, but I don’t
"pressure" anyone to do anything - and I’m not alone.
Abrams concludes her article with this: "Personally, I recommend you NEVER sign up
for any MLM program. I believe most of them are unethical, many illegal, and all of them a
waste of money." There are over 2,000 MLM companies operating in the U.S. today (have I
mentioned that?). I admire the years of research she must have put into her article that
allowed her to make a sweeping judgment like that about all of them. And I sure wish I had
taken her advice 15 years ago. She could have saved me from a life of sleeping in ‘till 9:00
am every morning, taking a week off when ever I feel like it, and paying taxes on a six digit
annual income. Jeez, if I had only known they are ALL a waste of money!
The common theme throughout most all anti-MLM propaganda centers on six issues.
One being the product benefit claims made by over-zealous distributors, which, again, is a
valid criticism and deserves no rebuttal. The other five crumble easily under the weight of
historical precedent, practical experience, and common sense. The final installment of this
series will address these issues head on. They include: Market saturation, exploiting
relationships, why “Most distributors fail”, the allegation that success in MLM requires
extraordinary talents and skills, and of course, the “Pyramid” issue.
I’ve saved the best and most definitive response to these issues for last. Don’t miss
part XI!
------------------------
Leonard Clements has concentrated his full-time efforts over the last fourteen years on
researching and analyzing all aspects of Network Marketing. He is a court certified expert in
the field of network marketing. Len is also a professional speaker and trainer, and currently
conducts "Inside Network Marketing" seminars throughout the world. He is the author of the
controversial book "Inside Network Marketing" and the best selling cassette tapes "Case
Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing
Boom."
To receive additional information about MarketWave and its products, please call 1-800-
688-4766, or visit www.MarketWaveInc.com.
Anti-MLM Zea lots
Part XI
This is the final installment of this series. The previous ten parts rebutted the writings
of the four highest profile MLM antagonists: Dean Van Druff, Robert FitzPatrick, Ruth Carter,
and Jon Taylor (get the back issues!). This edition covers the most common, general
criticisms made by virtually all those who are anti-MLM.
Market Saturation
The more naive of the anti-MLM crowd will typically offer a mathematical progression
showing five people who get five, and so on, then gloat over their revelation that by level 14
they would have accounted for the entire population of the Earth (Van Druff uses an even
more ridiculous "ten sponsor ten" scenario). However, when an MLMer uses such a scenario
to demonstrate the income potential of their plan, the anti-MLMer is always quick to jump all
over the absurdity of such a scenario ever playing out. So, why use it then as evidence to
debunk an industry based on it's theoretical occurrence?
In over 68 years we've managed to involve only about 2.5% of the U.S. population.
By the end of this decade over 40 million Americans will turn 18, and another 9 million
adults will immigrate to the US. I think there's still some room to grow.
John Taylor is critical of the lack of disclosure as it relates to local market saturation.
He advocates territorial restrictions, believing that when a certain geographical region has
reached a certain number of distributors for a particular company, no more distributors
should be allowed to participate in that region. The glaringly obvious flaw in this logic is that
by limiting the number who can participate in a given region causes local market saturation!
Can you imagine someone wanting to join your MLM program but you can't enroll them –
unless they move out of the area?
Another common anti-MLM concept suggests that those who get involved too late
miss out. As Taylor exclaims, he was at the top, but those after him would be at the
bottom, thus be too late to achieve any real possibility of success. But... didn't he start at
the bottom? Indeed, has not every single successful MLM distributor in history started at
the bottom? There are numerous examples of folks who joined very mature companies,
started at the bottom of what was an already large existing hierarchy, and managed to
achieve success, like me – and John Taylor! Its happening every day.
Exploiting Relationships
So, you invite your new neighbor over for dinner under the guise of making a new
friend. Once desert is consumed you begin your opportunity spiel. Yes, that's not a cool
way to build your business, and you'll lose more friends than you gain. Fortunately, most
MLM distributors don't practice such tactics. Naturally, those who were victims of
deception or had their friendships exploited like to tell their story to authors of anti-MLM
propaganda. Unfortunately, authors of anti-MLM propaganda never seem to bother to see
how the other 99% of us conduct our business.
Sure I've offered promotional material to friends. Some were thankful and joined.
Most said they were not interested. No problem. I never mentioned it again, and we're all
still friends. Its not who you ask, its how you ask. The bulk of my recruiting efforts over
the years has been conducted the same way most of those I've recruited, and those
throughout the industry, have conducted there's – by seeking out already interested people
via various lead generation devices. Those who were not invited to their 20th class reunion
because they obnoxiously tried to recruit everybody at their 10th are a very noticeable, but
very small minority of MLM distributors. The hundreds of MLM-folk that you've come in
contact with over the years who do not practice overly-aggressive recruiting behavior are
never recognized – because they don't aggressively try to recruit you!
Most Distributors Fail
Yes, they do. In fact, this is perhaps the strongest argument of all against the
imminent saturation theory (although, most anti-MLM zealots make no attempt to reconcile
the two completely contradictory positions).
What most nay-sayers would like us to believe is that this high failure rate in due to
some inherent flaw in the MLM model. Some at least concede the MLM concept is sound,
but the potential for success is grossly overstated. What they fail to appreciate is that
"success" doesn't necessarily mean getting rich. For some strange reason, anti-MLM zealots
see success in MLM as an all or nothing proposition. Either you achieve wealth, or you failed.
I don't agree. Nor, according to a MarketWave survey of over 6,700 distributors and
prospect (I base my conclusions on actual research, not theory) do 86% of you who are
shooting for a comfortable living income. A nifty $6,000 per month without having to set
the alarm in the morning would make most of us quite satisfied. The majority of the rest
would be happy with only an extra $200-$300 per month. But, when that person only earns
$250 per month, the anti-MLM advocate points to them as an example of MLM's unfulfilled
promise. Several years ago a distributor for a large MLM company was profiled as part of a
semi-negative article that appeared, of all places, in Good Housekeeping magazine. The
distributor lamented over his net profit of $16.45 after his year long effort. Of course, had
this been any other form of business, a first year profit of any amount would have been
considered a success story. Only in network marketing is this considered, at least by some,
as an example of failure.
Sure, many of us overplay the income angle, and that's a problem – but not one
exclusive to MLM. Hype exists in all industries. Its a flaw in one's marketing technique, not
the product or opportunity being marketed.
Is it fair to blame the high failure rate on the MLM concept or model? Well, what if ten
people were given free memberships to a gym which even included a personal trainer. Five
went once or twice, saw no immediate results and quit. Two went several times but never
followed the advice of their trainer and used all the equipment wrong, then quit. Two others
never even showed up once. Only one went on a regular basis, followed the prescribed work
out regimen, and after a year gained the body and vitality they desired. Then an anti-gym
zealot comes along and claims that 90% of all those that signed up for the gym membership
and trainer failed to receive any significant benefits. Although technically true, its not the
whole story. Anti-MLM zealots are not telling the whole story. A classic example of this is
the "Payout Distribution Study" attempted by Jon Taylor. When he requested payout data
from 60 MLM companies he required "even those who only bought a starter kit whether or
not they have done anything with it... be included in these statistics, including those who
have not sold anything or quit, even after one day." My point is, why would Taylor want to
include those who didn’t go to the gym in a study about the benefits of going to the gym?
The Anti-MLM Zealot can be just as guilty of manipulating data as they often accuse
us of being. For example, if ten people join ten MLM programs in succession, then all ten
succeed in their tenth company, based on the way Jon Taylor tried to acquired his data, by
looking at what percentage failed in each of these ten companies, he could easily show a
90% failure rate (nine of these companies would show these ten people as failures) even
though 100% of them are now successful!
Certainly some people work their hearts out, do all the right things, and still fail, as is
true with any endeavor in life. However, with rare exception, MLM failure is voluntary. No
one has ever held anyone at gunpoint and demanded that they buy $5,000 worth of water
purifiers or vitamins they didn’t want. That was a choice. No one forces anyone to jump in
and out of ten MLM program in a year. One reader of this column wrote me recently to let
me know that, indeed, MLM didn't work. He should know. He's been in 50-60 companies over
the last nine years. I wrote him back to explain to him the most likely reason for his failure.
He's been in 50-60 companies over the last nine years. No one has to exploit their
friendships, or make ridiculous product claims to succeed. What defines an illegal pyramid
and how to avoid one, and how to sensibly pursue a legal MLM business, is easily accessible
information for those that seek it. Most distributors fail because they make very emotional,
very poor, but totally voluntary business decisions.
One such decision is to quit entirely. Certainly, in some cases, if someone perpetually
fails at something they might want to quit and try something else. But the ease of entry
into MLM also makes for a way too easy exit, and far too often it is premature. I once met a
woman who claimed she was "failing miserably" at her MLM business. After one full year of
effort she was making only $250 per month. I took her actual, and very modest net growth
figures and projected them forward one more year. She would be earning just over $3,000
per month which, she said, would allow her to reach her goal of quitting her job and living off
her MLM income. If she could just "fail miserably" for one more year.
What is perhaps the most ironic and hypocritical thing of all about this "failure rate"
claim is that the Anti-MLM Zealot's very anti-MLM campaign has, to some degree, increased
the failure rate, thus personal and financial harm, of the very people who's relationships and
finances they claim to be trying to protect!
Success in MLM Requires Extraordinary Talents and Skills

Not only is this untrue, it is perhaps the single greatest benefit of the MLM business
model. If you don’t have the time, money or skills to build a large downline sales
organization you can still achieve great success by finding someone who does! If you were
to only get two or three people who are good at MLM to join with you, when they eventually
succeed you succeed. They’re downline is your downline.
I’ve heard many stories - including ones that are actually true! - where 70, 80, or 90%
of one’s downline was build by one talented person. I recall several years ago speaking to
the third highest earning rep in a large MLM company who confessed that he understood
very little about how to build a downline and had only recruited a "handful" of people. One
of them was the number one earning rep. Another popular story, which I have confirmed as
true, tells of an opportunity meeting at a Holiday Inn in Dallas where only one person showed
up - one of the grounds keepers at the hotel. He was a 19 year old Hispanic man who knew
only a few words of English. This man went on to enroll only one person. That one person
was the owner of the Holiday Inn - who went on to become one of the top earners in the
company. So would have been the young Hispanic man - if he hadn’t quit after only a
month.
Is MLM for everyone? Absolutely not. Especially those unemployed folks looking for
immediate income. And yes, some of us fail to reveal that to our neediest prospects, and
that’s a problem. But once again, and for the last time, that’s a challenge with the way
some people practice MLM, not with MLM.
Pyramids in Disguise
Robert FitzPatrick epitomizes this position when he states "MLM is a legal form of
business under certain rigid conditions set forth by the FTC and state Attorneys General,"
but goes on to suggest "Many MLMs are in gross violation of these guidelines and operate
only because they have not been prosecuted." This is a bit like saying "Many honest people
are liars." Either you're a legal MLM company, or you are an illegal pyramid disguised as an
MLM company. And yes, this is unfortunately not uncommon and legitimate MLM companies
certainly do suffer a guilt by association. But let's be clear – illegal pyramids try to look like
MLM companies because they want to appear legal!
Most anti-MLM zealots are surprisingly ignorant as to what legally defines a legitimate
MLM company. FitzPatrick’s definition of the "70% rule" is somewhat different than
Taylor’s, but just as far off base. He claims this rule requires that, "at least 70% of all
goods sold by the MLM company must be purchased by non-distributors." Non-true. The
original rule came from the FTC vs. Amway case in the late 1970s, and clearly prohibits a
distributor from buying more product until at least 70% of all previous orders have been
consumed or sold. It was also simply a suggested guideline, never a law. Yes, subsequent
interpretations by state and federal regulators, and even other MLM companies, have been
all over the map. Anti-MLM Zealots like to cherry pick the one that best serves them, and
ignore the original. FitzPatrick also states that "the very legality of MLM rests tenuously
upon a single 1979 court ruling on one company." For us to believe that FitzPatrick actually
believes this, we must also believe that he has somehow forgotten the literally hundreds of
other state and federal cases since 1979 that have defined and refined the definition of a
legal MLM operation. Or, that the ruling in question involved the aforementioned Federal
Trade Commission vs. Amway case (not exactly a minor-league case). Or that, in the very
words of the federal court "The Amway sales and marketing plan is not a pyramid plan. In
less than 20 years, the respondents have built a substantial and efficient distribution
system. Consumers are benefited by this new source of supply and have responded by
remarkable brand loyalty." The government's position doesn't sound too "tenuous" to me.
Researche r Bias
Researcher Bias is a term used to explain why two opposing groups can study the
exact same information yet come to completely contrary positions. People see what they
want to see. If you have an agenda to debunk the MLM concept the "evidence" is not hard
to find, if that's what you're looking for. Its no curiosity that when each of the four anti-
MLM zealots mentioned above were asked to identify the number of happy, successful
MLMers they surveyed, or to list the pro-MLM books or magazines they read, each refused
to provide an answer (although Taylor claims to have interviewed "hundreds" of MLM
distributors, he also claims the best information source are distributors who have failed).
When Ruth Carter and her MLM Survivor followers are shown evidence of those who honestly
succeeded in MLM they are always labeled "perpetrators." Those who fail are always their
"victims."
Its also no mystery why Carter, Taylor, FitzPatrick and Van Druff describe in their
writings the most notorious examples involving only a handful out of the thousands of MLM
companies that have existed. They'll always focus on the most controversial practices
employed by Amway/Quixtar (or more specifically, employed by some of their deified
Diamond distributors) which tabloid TV shows are quick to back them up on. Then there's
Equinox, of course – the poster Bad Boy of the MLM industry. They'll never let us forget the
trouble Nu Skin was in over a decade ago, or Herbalife two decades ago (long since
resolved). Occasionally they're site Trek Alliance, FundAmerica, SkyBiz, International
Heritage and a couple gold & silver deals from 15 years ago, likely because their ammunition
was handed to them by state and federal regulators. That's about it. That's 95% of all the
companies they're hit by name, which is less than 1% of all MLM companies in existence
today, let alone those that have existed since the 1979 FTC vs. Amway decision. The
dozens of good, clean, mature MLM programs that have never had any legal challenge, or
the thousands of hard working, professional network marketers who practice a conservative,
honest approach to their business are completely ignored, as if to create the illusion they do
not exist.
Some anti-MLM zealots are passionate about their cause, and they've dug themselves
into their position far too deep to ever emerge – the obviousness of their folly be damned.
Ego is a powerful thing. If someone tries hard enough, long enough, to make a case that the
sky is always red by only showing images of desert sunsets, they're stick to their case no
matter how many times you force their heads upward in mid-afternoon.
MLM has never even approached market saturation in over half a century of existence.
Thousands of distributors succeed in reaching their income goals (what ever that may be),
many with mature companies that have been around for decades – and all started at the
bottom. The vast majority didn't exploit friendships, or hype their products. Products
which they genuinely love, some with a passion. Most that failed did so due to poor, but
completely voluntary business decisions. The legality of network marketing is well defined
and based on decades of precedent, the model is sound, and to those seeking a home based
business, the benefits are substantial. Evidence of this is everywhere, and easily obtainable
– assuming you want to find it.
To slightly misquote Shakespeare, Me thinks the Anti-MLM Zealot doth protest too
much.
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Anti-MLM Zealots

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Anti-MLM Zealots

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Anti-MLM Zea lots

Me Thinks Doth Protest Too Much!

By Leonard W. Clements © 2004

What's Wrong With Multilevel Marketing? – Dean Van Druff

Anti-MLM Zea lots

By Leonard W. Clements © 2004

False Profits – Dr. Robert FitzPatri ck

Anti-MLM Zea lots

By Leonard W. Clements © 2004

Pyramid Nation – Dr. Robert FitzPatrick

Anti-MLM Zea lots

By Leonard W. Clements © 2004

Anti-MLM Zea lots

By Leonard W. Clements © 2004

Behind The Sm oke & Mirrors – Ruth Carter

Anti-MLM Zea lots

By Leonard W. Clements © 2004

zeal·ot n. 1. A fanatically committed person. 2. A fervent and even militant proponent or

“Fairness is NOT one of the foundations of the MLM Survivors Club.”

“There is no requirement of balance in this club, numbskull… Give it up, troll.”

sar·casm n. 1. A mocking or contemptuously ironic remark.

Anti-MLM Zea lots

By Leonard W. Clements © 2004

Anti-MLM Zea lots

By Leonard W. Clements © 2004

Anti-MLM Zea lots

By Leonard W. Clements © 2005

Anti-MLM Zea lots

By Leonard W. Clements © 2005

2. You pay to be a customer: Overwhelmingly, buyers of MLM products are MLM

3. You'll pay far more: Expect to be required -- or pressured -- to buy samples,

By Leonard W. Clements © 2005

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