Yes, Even Your MLM is a Scam
Most people assume I spend my free time obsessing over all things Mormonsim. Long before the infamy of being known as the founder of MormonLeaks, I had (and still have) a huge passion for exposing the scam commonly referred to as Multi Level Marketing (MLM).
Yes, I realize that using the word ‘scam’ is incendiary, it is meant to be. I make no apologies for that or other harsh words I may use when discussing one of the most pernicious plagues to ever grace modern capitalism. MLM companies and their well connected lobbyists have had way too much success in convincing people of the virtues of their ever so humble attempt to make everyone around them rich, often while simultaneously curing those same people of their various ailments.
Recently I posted a link on Facebook to a nice article that exposed some of the unsavory aspects of one such MLM. The post generated a lot of lively discussion, including from people who claim to agree with the sentiment that there exist predatory MLMs, but that the one they are involved in or that they have a personal relationship with the owners of, is magically the one MLM that is a stand up operation. How convenient!
In the thread I invited participants to tell me the name of an MLM that does not fit the standard scam mold. The two main ones that were mentioned were doTerra and Young Living.
I don’t want to really spend time discussing the value of the actual oil. I don’t buy into the medicinal value claimed for any of them and a whole discussion could be had on the dishonesty surrounding the health claims made by these companies. But for the purposes of this discussion, let’s say that we all agree that there is some value in the products…
doTerra and Young Living are as much scams as any other run of the mill MLM out there. One must look no further than the income disclosure statements put out by each company and then compare that to what their independent contractors (IC) claim you can realistically make by joining their ranks.
Let’s look at the doTerra one first.
EDIT: It has been brought to my attention that I may have misinterpreted the first graph which may have thrown off some of my subsequent conclusions. The main source of my interpretation is from the paragraph above the first graph in the 2016 Earnings Disclosure Summary where it states:
‘This chart shows the rank, the average annual earnings of Wellness Advocates paid at that rank during 2016, and the percent of people within these leadership ranks who were paid at that specific rank in the United States.’ (emphasis added)
Even as I type that I am not sure how to properly interpret the graph.
Whatever the proper interpretation is, the difference it makes on the conclusion is negligible. The money is still made by 0.5% of all doTerra members.
I will leave my original write up unedited as a way to show just how confusing these companies can be when trying to explain their compensation statistics.
Their 2016 Earnings Disclosure Summary leaves much to desire in terms of a full picture, but it does provide plenty of information to know that this is not a company you should be working for if you are actually trying to earn money.
On page two we are told that the ‘leadership ranks’ are the levels that produce the highest income. We also lean that all of these ranks combined make up 0.5% of all doTerra ICs. Further down we see what percentage of those people are actually making the posted average earnings. So, as an example, 62% of Silver Leader ICs earns an average of $26,370. Now, one looks at this chart and might have a hard time really quantifying what this means in terms of actual number of people. Luckily, they have offered another chart to help us out.
It is important to note that the numbers in the second chart are how many people at each rank received a paycheck in the previous 12 months. A person is counted at the highest rank they held during the 12 months but that does not mean they earned the average income of that rank. The percentages in the first chart represent what percentages of the numbers in the second chart that made the average income amount. I have created my own chart based on this information showing how many people actually made the average amounts.
Let this chart sink in for a minute. Think about all of the doTerra people that tell you they make hundreds of thousands of dollars a year. Do you actually believe them?
Keep in mind, it is not that they are full on lying. They are just participating in the deceptive marketing.
The compensation plan is built in a way that a person can bounce around from rank to rank depending on the activity rates of their down line. So, if someone says they are a Blue Diamond Leader, they may have been…for a couple of days or weeks. But what are the chances that they were one of 2% of 145 people in the entire company who averaged $453,100. Furthermore, what you will find is that even if someone was able to make one of these averages in a given 12 month period, it is nearly impossible to sustain that income level long term.
Young Living ICs are basically in the same boat as their doTerra counterparts. You can view their 2016 Income Disclosure Statement and see that and extremely few lucky people actually make enough money to actually call it a living.
There is a part of the fine print in the Young Living disclosure that is very telling. It says that ‘the average annual income for all members in this time [referring to the previous 12 months] was $25.
Why does all of this information amount to MLMs like these being a scam? It is because this information is not easily accessible or readily discussed when ICs pitch their absolutely amazing business opportunity.
Have you ever seen an IC say that it is anything other than an amazing opportunity? Can such results be considered amazing? No way. Would you buy a McDonald’s franchise if they told you that the chances of you making a living were less than 3%??? I would hope not.
Let’s stop coddling these companies because we happened to personally know someone involved. These MLMs are scams. They are preying on people who are too trusting of others.
As if this was not enough proof to change your mind, take a look at how outrageously priced their products are. As an example, frankincense oil from Young Living will cost you about $70 for 15 ml when you can get the exact same thing from non MLM companies like Jade Bloom at a rate of $12 for 10ml. They are ripping you off coming and going!
I am really just scratching the surface of all of the problems within the MLM world. I would suggest that everyone take a step back from their involvement in whatever MLM and really ask themselves what good these companies are serving.
Ryan McKnight has a Master’s Degree in Accounting from UNLV. He is a regulatory auditor for the government, an Adjunct Professor at the local Community College and the founder of MormonLeaks.io.