What Is MLM Fraud?: Discovering The Truth Behind MLM

Part 1: Perception And Bias

Who’s Reading This?

There are many kinds of people interested in MLM fraud. The first thing people generally look for is the examples, they want to know if X company is a scam. Unfortunately these people usually do not know how to define a scam, They also do not know who to listen to. They tend to operate on assumption, here say, and third party “credibility”. Although a portion of the time this may cause someone to avoid being scammed strictly by chance, they are also passing up a lot of potential income. A smaller amount of people will go into the common qualities that all companies accused of MLM fraud have in common. This way they will have a better idea of what to look for so that they can identify a guilty party. While this is a step in the right direction this group of people may not always know how to determine whether they should listen to the information they are taking in. A still smaller group of people will look at the situation from many perspectives and evaluate how valuable certain information is.

Regardless of where you are I hope to educate you to move you closer to the final group, not so that you may believe what I believe, but rather so you are capable of making your own decisions. As the saying goes “give a man fish and he’ll eat for a day, teach a man to fish and you feed him for a lifetime.”. There are many valuable aspects to each stage and I will be reflecting on them later in this series of articles but for now I will be building from the ground up starting with the most essential stage. While this series is focused on multi level marketing, the principles can be applied to any subject.

A Vital Question: How Valuable Is This Information?

Have you heard claims about multi level marketing before? Whether good or bad, you need to know how to interpret that information. The internet is like any other medium, it is completely neutral. The content of an internet page is no different than me saying something out loud. I can say anything I want, whether that is true or false.

How do you assess whether the information your hearing is valid and valuable? Something being valid refers to facts, “Are the facts I am hearing true?, Can that be Proven?”. Something being valuable refers to an opinion. “Why should I take this into consideration?, What makes this persons view of value to me?”. Unfortunately people can easily confuse facts with opinions and often find it difficult when deciding who has information of value to them. If you are looking for the truth on MLM the first point is you must learn how to evaluate information and determine if it is of value to you.

An Example

How often do you consider whether what you are reading is fact or opinion? In this article I would like to examine a few statements I snatched from an article that was the first result on the first page of a Google search. Often people may assume that a first result on Google can mean something in terms of validity, credibility, or objectivity. Hopefully I can dispel that today. Using the methods I talk about here today you will find it easier to decipher the underlying spin in the writing.

So I went to Google and typed in “MLM fraud”. I’m going to pull some quotes from the first result. Let me insert a small note about why I’ve removed the name of this website. I’m not here to discredit authors or to pick out negative articles about MLM and pick out all the gaps. Not only would that be a full time job but that’s not my intention. Remember my goal here in this article is to educate you on how to recognize when information is and isn‘t valuable. Obviously typing in this phrase “MLM fraud” I was well aware I would get some results like this. I’m more here to point out the bias/spin rather than the relevance. When visiting the site these is the very first things that I read;

“The Skeptical Guide to Multilevel Marketing”

“Accurate information about multilevel marketing is not easy to get. Few publishers, editors, and broadcasters are willing to examine this topic in depth. Most reports reaching the public express what the companies and individual distributors would like people to believe. Nearly all MLM companies selling health-related products exaggerate their value, and the vast majority of people who become distributors do not make significant income.”

Lets Define skepticism

Notice the way people use the word skeptical when in most cases they should use cynical. I don’t think there is anything wrong with skepticism, it can be a very healthy characteristic. However, healthy skepticism is followed by proper examination of BOTH sides of an issue. Healthy skepticism takes into account the source of the information, and the quality of that source. Cynicism, on the hand operates more on assumption without any in depth study to both sides of an issue. A past experience or intake of knowledge skews their perspective and colors any experience they have from then on. In my mind the defining characteristic is that skeptics are looking for information with which to assess their current position objectively and cynics are looking for confirmation or information with which to squeeze into their pre determined stance. When I see things like I saw in this article I think of a young child pushing play-doh through a cut out of a shape. They take what they have and they always get what they were looking for. The Second point to discovering the truth on MLM is you have to remember to look for information, facts, and check your expectations at the door.

Deception: Lying without Lying

I have always told people that there is a subtle factor you have to watch out for that is changing the way you take in information. The example I use is the news. The news reports facts, right? Well what most people do not take into is that by excluding certain information you can paint an entirely different story. Are the stories reported still true? Absolutely. But this is what I like to call the phenomenon of “lying without lying” which is basically telling the truth in a deceptive manner. Here’s a good example an underage kid drinks a soda with his lunch-fact 1. The kid later goes out drinking and gets pulled over by a cop - fact 2. The cop asks “have you been drinking tonight?” The kid in reply states “innocently” “ umm… I had a soda earlier” In reality the kid is telling the truth, and he isn’t. This kind of deception is subtle and isn’t always a conscious effort. For example lets have a run down the categories on this website offers -Warnings About Pyramid Schemes, Chain Letters, and Other Questionable Plans, Government Enforcement Actions, Legal Issues, Victim Reports, Investigative Reports, Dishonest Promotion, and Sites operated by MLM critics. Oh yeah, sounds like fair and balanced to me…

I’m not just trying to pick apart this authors verbiage or to focus on semantics. People especially authors use words for a reason. Being “skeptical” seems to have an underlying implication that the person is astute or diligent in their study. Authors use specific words because they mean something that will benefit them in getting their message across effectively, not because it’s necessarily true, appropriate, or relevant to the topic you are reading. For example the author doesn’t hesitate to include on the very top of this page that he is a MD, how relevant? An authority on a subject is certainly valuable but the authority must be relevant to the topic and what you are looking to accomplish. Let’s say you want to become a great football player, You don’t ask your grandma for advice, do you? So I’m not here to determine whether these things were intentional or not, the effect on the reader is the same. The third point to discovering the truth on MLM is to watch out for deception. Pay attention to what’s not being presented as well as what is.

A Note About Irrelevant “Evidence”

“Most reports reaching the public express what the companies and individual distributors would like people to believe.”

The reason this is written this way is some would read this and think “oh no, are these companies trying to trick people?” Well looking at this website I thought “ Isn’t that what this website is?” This website or any website is most often built on what the author wants you to think. The author of this particular page wants you to have a negative opinion on multi level marketing, does he not? That’s not a bad thing if the author knows that is the case. But more often they think that they are reporting the “facts” or as the author in this case put it “accurate information” . As you can see often people will tout something as evidence to support their point when it’s really just an irrelevant information that applies to every situation.

“the vast majority of people who become distributors do not make significant income.”

True… Now what’s your point? This again is another sample of irrelevant evidence. This quote is here to lead you to the assumption that there is meaning behind that. The success of anyone in a legitimate MLM company is based on their performance. You do nothing, you get nothing. And to be honest the great majority of those in MLM do not treat it seriously. Will there always be more unsuccessful people than successful in any arena?, only until more people perform to the standards of success in that arena. I could just as easily say “the vast majority of people who play baseball do not end up in the major leagues” Does that mean anything about baseball or about you becoming a successful baseball player? Certainly not. People who have played baseball may have quit or they just may have not performed to a standard. In this case you must perform to a certain standard to be accepted into the major leagues. People who do not are not being scammed, they just didn’t perform to the standard. This stands true in real estate, insurance, and in any industry where the standard of success is based on performance. The forth point to discovering the truth on MLM is to pay close attention to figures that are irrelevant (they apply to all situations) and apples to oranges comparisons.

The Truth Behind The Negativity

Let’s talk a little about the idea of source credibility. What percentage of negative articles on any topic are written by people successful in that avenue? I would venture to say none. Can you imagine tiger woods taking his time writing articles, and creating websites to discredit the golf industry? Doesn’t make a lot of sense, does it? Often these people will write an article or create a website to justify either why they haven’t done that or why they quit. All the negative articles are written by people who have quit or have many reason why they can’t do something. Once they have decided not to succeed the only way they can live with the fact that they have quit or never tried is to play lawyer and start building their case. Have you ever spent money on something you thought would be a great hobby that would entertain you for years but your enthusiasm faded quickly? I know I still have a set of harmonicas sitting in my closet. I know that I just quit playing harmonica, I didn’t think that I “got scammed” or that I was a “victim of harmonica fraud”. When you put it this way the idea sounds pretty silly, doesn’t it? The fifth point in searching for the truth on MLM is to consider the authors success in the topic at hand, and remember there is a difference between knowledge through success and “case building”. Negative attitudes are always accompanied with a reason to be negative.

There are, of course, issues to address with the industry of MLM. There are characteristics of companies in the MLM industry that can be considered fraud. There ARE real cases of MLM fraud and real companies with illegal practices. These are, however, exactly that, illegal, and should be stopped. I will talk about some of these qualities to watch out for in the future along with the fact that multi level marketing is a legal industry and the actions of fraudulent companies can not hold an entire industry accountable.

MLM Fraud Vs. Poor MLM Company

“Nearly all MLM companies selling health-related products exaggerate their value”

Regardless of the accuracy of that statement, if this occurs in any company it is a lack of proper training, and something to watch out for. But that is a reflection of a companies practices, not the characteristic of an industry and shouldn’t be the basis of an assumption that “all MLM companies do that”. The page that this information was taken from was brought up because I typed “MLM fraud” into Google. This is a statement of a poor company, not a fraudulent company, and certainly not of a fraudulent industry.

Hopefully you are starting to get the picture that much of, if not all of what you read is bias. I’m not saying that no one is being scammed by any company out there. I’m not here to get you to like MLM. I’m simply here to educate you on how to evaluate information so that you can make adult decisions rationally. In my next article I will be covering the necessary prerequisite knowledge on the path to discovering the truth on MLM including what MLM even is and why it is used.

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