Tonya Ferguson gave a presentation to the Reno County, Kansas, commissioners on how essential oils—which she just happened to sell—can help fight COVID-19. “I like to use an immune support, which is like putting my body in a bubble. It’s a powerful tool to combat viral and bacterial threats” she says on the video. She claimed to have “protocols” to either protect from or treat people suffering from the virus. One of the commissioners tried to shut her down for advertising her snake oil, yet that’s when the video got interesting.
Newly elected Republican Commissioner Mark Steffen spoke up. “This is not an advertisement! I asked her to come to talk about other options to help people be prepared to take care of themselves, so no, this is not an advertisement!” He really got fired up at the end of the lady’s speech, where he insisted that her voice was needed because “traditional, modern medicine has failed us” and that Democrats were taking away hydroxychloroquine.” Steffen was roundly mocked in the local press, but this being a right-wing state, he was also rewarded by being elected to the Kansas state senate a few weeks afterward.
I shouldn’t need to say this, but there is zero link between essential oils and COVID-19. In fact, the lady was a distributor for a shady multi-level marketing (MLM) company called doTERRA that was formally warned by the FTC last April to stop making ridiculous claims about COVID-19 treatment. Yet this article isn’t about Republican medical quackery, as we’ve seen enough. I was more interested in how these companies are still operating. Sadly, I’ve learned a lot more about MLMs than I care to, and I discovered that far from being curtailed, they have strong Republican allies who are trying to make it easier than ever to exploit people. They also have one strong ally in my least favorite Democratic senator, Kyrsten Sinema.
I’m sure I’m not alone getting pitched for things by a family member, friend, or long-lost acquaintance who has fallen into one of these schemes. Some of the pitches are bonkers. Not long ago I unfriended a right-leaning colleague on social media over this. Besides realizing that I was constantly rebutting ridiculous anti-vaxx nonsense, the final straw was when she started pitching these ultra-expensive ionized water machines for thousands of dollars.
She explained in her posts that the machines use electrodes to give you more alkaline than what's in normal tap water, which, according to her, "hydrates cells." This, by the way, is apparently the perfect defense for COVID-19 and several types of cancer. Also, the liquid's hydrogen atoms are somehow split off and rearranged, and more oxygen is added—or something. (I replied if that was even possible, it wouldn’t be H2O.) As with other “alternate” COVID-19 preventative treatments, this one was discovered yet somehow ignored by all the top scientists in every nation researching the virus at the heart of this deadly pandemic.
Except it wasn’t. Ionized treated water is simply utter nonsense.
My former friend was involved in an MLM, sometimes called pyramid selling, which is a controversial marketing strategy that has the following hallmarks:
There is an upfront charge (This is almost always a red flag. If you are going to make millions, why do they need your $200 bucks?)
The revenue comes from a non-salaried workforce, and profit from a pyramid-shaped commission system
They sell products you can’t get in regular stores, and normally require participants to buy in bulk
They typically require participants to sign up for expensive training and support programs
They always seem to be on the hunt for new members to recruit
The last one is a big one, because money is much easier to get by recruiting members than by selling products. MLMs have a lot of explanations of how they aren’t pyramid schemes, but the biggest difference is this: MLMs are legal, and pyramid schemes aren’t. Unfortunately, during the economic collapse that followed the advent of the pandemic, MLM growth exploded.
The Direct Selling Association (DSA), a trade/lobbying group that pushes MLMs, reported that 51 of their member companies surveyed reported that COVID-19 had a “positive” impact on their revenue.
Previous recessions have always been boons for MLMs. During the last Great Recession of 2008, MLMs added over three million people to their ranks. It makes sense. When there are thousands of people out of work, who wouldn’t be lured with the promise of easy, big money that can be made from the safety of your own home?
In reality, MLM stories are horrifying: stories like Apollo Rodriquez, who was scammed out of tens of thousands by an MLM, in this case one called American Communications Network (ACN), are all too common. (Although he really should have known better based on who this company paid $1.3 million to be their spokesperson.) ACN was sued by multiple MLM sellers who lost thousands.
Unfortunately, MLM participants are far more likely to lose money than make money. In fact, according to research at the Federal Trade Commission, a whopping 99% of recruited sellers wind up losing money in an MLM venture.
If you want a good, funny analysis on how MLMs work, how utterly ridiculous they can be, and how they take your money, John Oliver did a much better job than I ever could:
People like Tonya Ferguson, or my former colleague, are likely making ridiculous claims about how essential oils or alkaline water can fight COVID-19 because they are desperate to move product. My ire, however, is directed at people who have no excuse. There are right-wing politicians who are not only MLM supporters, but directly work for them.
Georgia state Rep. David Clark, who infamously got expelled from a legislative session for refusing to get COVID tested, claims that the health supplement company he’s a distributor for, NeoLife, can “boost your immune system.” Then there is “Trump in Heels,” Amanda Chase. She has the distinction of being the first Virginia state senator censured in 35 years for supporting the Capitol insurrection. She is also a representative for Shakeology. A spokesperson for Chase told a Daily Beast reporter that her MLM-based supplements can prevent contraction of the coronavirus.
As disgusting as these claims are, I’m much more angry with those in office who use legislative power to protect these companies from any scrutiny and help make it easy for them to lie. The MLM’s lobby, the DSA, has been extraordinarily successful in keeping federal regulators away from investigating these companies. It has also been successful in pushing to avoid defining the explicit difference between a legal MLM and an illegal pyramid scheme.
The ad hoc chairman of a watchdog group called International Coalition of Consumer Advocates, Robert Fitzpatrick, has called the purveyors of MLMs the “Pyramid Lobby.” They not only target and almost exclusively donate to Republicans, MLMs are a large part of the conservative infrastructure. In fact, the man who built the powerful MLM company called Amway, Rich DeVos, has been credited with building the modern Republican Party as we know it. Rich DeVos, father of the infamous Betsy DeVos, was one of the biggest financiers of GOP candidates and right-wing causes for decades.
This makes sense. After all, Rich DeVos was the epitome of the wealthy Republican. He had real contempt for social and federal institutions that helped the poor while holding the Ayn Randian view that wealthy people deserve to be selfish. After all, poor people are poor because of their own fate, right? Never mind the fact that he helped bleed desperate people dry.
DeVos pitched snake oil to the sick, such as Magna Bloc Therapeutic Magnets to relieve pain or phony nutrition and weight loss products, and sold get-rich-quick schemes to desperate people. He asked Amway distributors to imagine that they could be worth billions like him, knowing full well that most Amway operators lose money.
In 2015, the DSA organized an entire caucus in Congress with the help of Representatives Marsha Blackburn of Tennessee and Marc Veasey of Texas. The Direct Selling Congressional Caucus (DSCC) was created.
Fitzpatrick wrote to each inaugural member about the legal, securities, and regulatory controversies that MLMs were involved in at the time in order to dissuade the inaugural members from joining. He believed that it was deceptive to use the term “direct selling,” which is different from how an MLM is structured. Regretfully, he failed in his effort. In fact, the caucus was not only formed, but it has grown and is now bipartisan.
Fitzpatrick’s fears were realized. The caucus has continuously pushed bills to make things as easy as possible for MLMs. The MLMs have already proven successful in getting a much looser set of regulations to help people with their own “business opportunities.” For one thing, for most sales businesses in the United States, you are required to disclose whether you have been sued for lying about your business, whether the money you promise your sales people will make are based on accurate statistics, and whether there are penalties for quitting (which shouldn’t ever be a thing). Yet if you are in an MLM, these legal standards don’t apply. Yet that apparently isn’t enough Congressional support for the MLMs.
Members of this caucus have pushed bills to make it even easier for MLMs to exploit people. Republican Rep. Tom Graves of Georgia sponsored a bill to ease restrictions for multi-level marketing companies that have bad histories with exploitation. Rep. John Moolenaar, a Michigan Republican, pushed an amendment to that bill to loosen the definition of the term “pyramid promotion scheme,” as well as limit funding for enforcement actions outside this new definition. It was co-sponsored by several members of the MLM caucus.
On the Senate side, the MLM’s biggest advocate is without question Kyrsten Sinema. This is dangerous, because Sinema has shown over and over again that she can be plied with money to help with her decisions on blocking big Democratic priorities.
Pharmaceutical PACs have funneled more money to her than they did for her entire six-year congressional career to kill drug reform. She has opposed the Build Back Better bill, which would fund expansion of Medicare for vision, dental, and hearing, because she’s been raking in cash from GOP billionaires who don’t want any rollback of their tax breaks.
Yet another big Democratic priority is the labor bill, called the Protecting the Right to Organize (PRO) Act, which passed the House in March. Joe Manchin has already signed off on it. The bill offers protections for workers and gives at least some standards so companies can’t so easily identify everyone as an independent contractor. MLMs want this bill killed and targeted Sinema, who seemed happy to sell out rather cheaply:
The political action committee associated with Alticor, the parent entity of the health, home and beauty company Amway, gave $2,500 to the Arizona Democrat in late June, as did the PAC for Isagenix, an Arizona-based business that sells nutrition, wellness and personal care products.
Nu Skin Enterprises, another personal care and beauty company, gave $2,500 that month, as did USANA Health Sciences, which sells similar products. In April, Richard Raymond Rogers, the executive chair of Mary Kay, a Texas-based cosmetics company, gave $2,500 to Sinema.
Herbalife, which also sells nutritional supplements, gave $2,500 in July. All are affiliated with the Direct Selling Association, a trade group that promotes multilevel marketing.
Sinema is the only senator that Isagenix and Nu Skin have donated to, and the only Democrat that USANA Health Sciences has provided payment for services rendered. Isagenix even hosted Sinema for a virtual town hall. Granted, these are small donations compared to the Pharma PACS, but that’s likely because the bill has so far been successfully stalled. The DSA has met dozens of times with legislators demanding changes to the PRO act. At the very least, they can count on Sinema to demand significant changes protecting them.
MLMs are not going away anytime soon. Norway, which always tops the lists for best economy because of theirpeople-centric policies, simply bans any company where 50% or more of its revenues are derived from recruiting participants into the company. Although that would be ideal for adoption in this country and mostly solve the problem, that would be too easy. The fact is that there is too much money to be made by the wrong kind of people, and they have powerful friends in Congress.
At the very least, legislators might take a cue from the six states that do regulate MLMs and do at least something for those that are getting bled by their MLM employers:
- Require that MLM companies explicitly permit their agents to cancel their agreements and to agree to repurchase inventories at not less than 90% of the original transfer price
- Prohibit inducements under which the agent is told that he or she will earn a specific amount of money
- Prohibit the purchase of a minimum inventory
- Prohibit operations under which agents are only paid for recruiting others
I would add that it makes sense to have real financial penalties for those companies that break these rules. In the meantime, if you see someone falling for one of these scams, there are plenty of resources on the internet about particular companies. For a long time, most people who left MLMs because of failure (which is the reason most people left) didn’t want to talk about it. The mindset that is ingrained in the participants is that it is their fault if they fail, and others were just humiliated because they dragged their friends and family into the MLM.
However, there are now tons of videos online and support groups that people can see before they join. I will admit I can’t stop watching the videos of people who record what goes on in some of these seminars. Many seem more like cults than businesses. Legitimate businesses don’t try to deceive people about their products or potential sales, nor do the legitimate businesses need to use emotional manipulation, guilt, shame, and fear to keep people from leaving despite the fact that they are losing money.
One of the influencers I couldn’t stop watching was a guy who featured victims of Dan Lok, who told stories that were so cultish and off the wall I couldn’t believe them. (First two minutes gives you a good taste.)
Yet it didn’t surprise me at all that Dan Lok was also featured as some sort of guru on Stuart Varney’s show on Fox Business.
At the very least, all of us should try to do what we can to help someone if they are considering joining one of these kinds of businesses. If not for the obvious moral reasons, then do it for our social media feeds. I don’t think I can take another pitch in my DMs.
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