Buy! Buy! Buy!—How Multilevel Marketing Companies Pressure Their Participants to Buy Their Products
- For policymakers
- Summary created: 2025
Investigates how multilevel marketing (MLM) companies create pressure on distributors to purchase internal products, leading to financial losses and ethical concerns.
This summary, including its recommendations and ideas, was created by Claudia Groß and is based on original research. The original research itself was conducted in collaboration with the following researcher.
In 2023, MLM companies like Amway, Neora, Herbalife, and LuLaRoe engaged over 102.9 million distributors globally, generating $167.7 billion in revenue. These companies attract distributors with promises of income through product sales and recruitment, yet many distributors spend more on products and business expenses than they earn. A study in the United States found only 25% of MLM participants made a profit, while 47% reported financial losses. The pressure to buy internal products, often driven by deceptive income claims and incentives to advance in ranks, is a significant source of financial loss. This practice is linked to pyramid schemes, where recruitment is prioritized over product sales, leading to financial losses for most participants. The MLM industry operates in a complex regulatory environment, with no federal statute explicitly prohibiting pyramid schemes, making it challenging to distinguish between legal MLMs and illegal pyramid schemes.
Key findings
MLM companies exert pressure on distributors to buy internal products, contributing to financial losses.
Evidence
A representative study in the United States revealed that only 25% of MLM participants made a profit, while 47% reported financial losses. Distributors are often pressured to buy products to advance in ranks, regardless of genuine consumption needs or retail demand.
What it means
The pressure to buy internal products in MLMs is a significant source of financial loss for distributors, highlighting the need for effective regulatory measures to protect participants.
MLM distributors often become both victims and offenders within the MLM system.
Evidence
Distributors are pressured to buy products to maintain ranks and earn commissions, leading them to pressure others to join or buy products. This creates a cycle where distributors perpetuate the pressure they experience.
What it means
The dual role of distributors as victims and offenders complicates efforts to regulate MLMs and protect participants from financial harm.
Existing safeguard policies are insufficient to address the pressure to buy in MLMs.
Evidence
Policies like the 70% rule and inventory buyback options fail to address the root causes of pressure to buy. Distributors often resort to faking sales or pressuring others to meet purchase requirements.
What it means
Current safeguard policies do not effectively mitigate the pressure to buy in MLMs, necessitating more comprehensive regulatory approaches.
MLMs create a unique organizational context that intensifies the pressure to buy.
Evidence
MLMs combine financial incentives, social pressures, and emotional appeals to create a strong organizational community. This context restricts distributors' autonomy and leads to an escalation of commitment to a failing course of action.
What it means
The interplay of financial and social dynamics in MLMs creates a manipulative environment that pressures distributors to buy products, highlighting the need for regulatory intervention.
Proposed action
Effective safeguard policies aimed at preventing ratherthan mitigating harm should be created. These need to address the complex root cause of the pressure to buy and include MLMs’ unique feedbackloop, i.e. participants being first victims before turning into offenders.A fully effective policy would be a shift from multilevel to single-level marketing. A less far-reaching change would involve prohibiting allconnections between group (including personal) purchases and rank qualifications.
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