The Dark Side of Network Marketing

Accountability and ethics in Multi-Level Marketing

When I was briefly between roles in 2017 and chose to become self-employed, I found myself missing the sense of community and camaraderie that typically comes with being a part of an organisation. At this time, I was definitely vulnerable but not entirely easy prey, either. I became interested in people who had added me on Facebook and appeared to be promoting an influencer-esque lifestyle. Their profiles were heavily curated to promote how successful they were. I got involved for around 3–6 months and while I made some sales, I made no profit, partly due to my discomfort at selling to friends and family. I still have a lot of people on my friend list from this time, who are involved in selling products on social media. This practice is known as Multi-Level Marketing (MLM), or Network Marketing.

This week, I noticed an increase in marketers repeatedly posting their products to my timeline on Facebook without my consent. This tested my tolerance because these products were non-vegetarian and I have been vegetarian for almost 32 years. Although all posts to my timeline have to be manually approved by me, it is still inconvenient, offensive and, I believe it to be unethical. Obviously, common sense would dictate that if they were in my network, they would understand that I would not wish to use or purchase animal products. I retaliated with a status update stating my views that resulted in my so-called “friends” coming at me with metaphorical pitchforks. I considered this intrusion to be intimidation and bullying, but what disturbed me more was that most people believed I was wrong, and that the behaviour of the Multi-Level Marketers was acceptable.

When did I lose the right to curate what products and posts appear on my own personal Facebook feed? Am I wrong to want to only include products and posts that are in line with my own personal ethical and philosophical beliefs? When did it become acceptable to manufacture a disingenuous relationship to promote products, and is it exploitative?

Multi-Level Marketing (MLM), also known as Network Marketing, refers to the practice of distributing, selling, or supplying products or services through various levels of independent agents (contractors, distributors, etc.). These agents are paid commissions, bonuses, discounts, dividends, or other forms of consideration in return for selling products or services and/or recruiting other agents. The party that recruits another participant is the “upline” of the recruit. The recruited party is the “downline” of the recruiter. In MLMs, uplines are paid bonuses or commissions on the sales made by their direct downlines and by those who are downline of these direct downlines. MLMs only become illegal or unethical if they operate as “pyramid” or “endless-chain” schemes (Reese, 1996). Pyramid or endless-chain schemes ask people to make an investment and, in return, grant them a license to recruit others who, in turn, recruit others to the scheme. The opportunity to recruit is the product, making the scheme fraudulent. [1]

The MLM groups I was a member of used to repeat the mantra that “you are the product” to their agents. It is certainly an old marketing adage that people buy from people, across any sector. This was the argument for creating a tailored Facebook, Instagram, and Twitter feed in order to sell the dream to your friends, family, and acquaintances. The reality? Agents’ identities are reconstructed to the advantage of the organisation they have aligned themselves with. My posts were monitored, and I was criticised if they did not fit with their idea of what the brand message should be. It was at that time, I got out of MLM altogether. My own cost-benefit analysis rendered the business model a failure, predominantly because I felt that there was a personal cost to selling my soul, too.

Since 2017, I have been staring at barely literate Facebook posts being continually copied and pasted by my “friends”, emotionally blackmailing people to buy their products. They often cite that you should support the businesses of your “friends” and that they are working hard to support their family. Throughout, I have tried to access empathy, with varying levels of success, while not accessing my wallet. There is a larger ethical question, however, when socially vulnerable and income-deprived people are recruited to sell these products, often to socially vulnerable and income-deprived people within their friendship networks. I have come to believe that the MLM organisation has a duty of care to both the agent, who may have been recruited via exploitative and problematic methods, and to the public, who are being exposed to the influence of potentially illegal activities due to the penetration of their social network/community, and by virtue of this, their personal lives. In unguarded moments on social media, people can often be at their most vulnerable.

Drew and Heritage (1992) noted that institutionality is not defined by setting, but by the relevance to the work activities in which the participants are engaged. [2] This, to me, draws in the principles of organisational behaviour and creates a psychological contract that implies a series of mutual expectations and satisfaction of needs arising from the people-organisation relationship.[3] By virtue of this, MLM organisations or entities should be accepting responsibility and being held accountable for, the actions of their agents/distributors/contractors.

Distributors, or agents, join an MLM organisation to earn money, but in many of these schemes, they are enticed to buy products to reach a certain or higher status level e.g., commission. This can lead to agents overspending by buying products they neither need nor are able to sell. An MLM organisation can operate legally while the information on the extent of the business opportunity is not truthfully represented. Motivational materials, including seminars or webinars, are frequently deployed to cite “success” stories despite the evidence suggesting there is a low likelihood of success, low average income, and inequality in the distribution of income. This is ethically problematic as it is a form of deception (Hyman, 1990, 2009), particularly when targeting socially and economically vulnerable groups.[4]

This is a complex area, especially when you factor in the questionable advice and/or illegal claims that are frequently made by agents on social media, particularly when it comes to the supplement and beauty markets. It is problematic when already vulnerable people, are potentially being preyed upon and advised to buy a product to treat a health condition. A way to build trust in Multi-Level Marketing and offer agents credibility while protecting consumers would be to hold MLM organisations accountable. An MLM organisation should be held responsible for the actions of their agents/distributors/contractors and the claims made about their products, but the default position is to avoid, ignore, or disclaim. While this is the case, people will continue to be exploited and intimidated, with this issue seemingly escalating because of the pandemic.

[1] KOEHN, D., 2001. Ethical issues connected with multi-level marketing schemes: JBE. Journal of Business Ethics, 29(1), pp. 153–160.

[2] KONG KCC. Marketing of Belief: Intertextual Construction of Network Marketers’ identities. Discourse & Society. 2001;12(4):473–503. doi:10.1177/0957926501012004004

[3] Mullins, LJ., 2007. Management and Organisational Behaviour, pp. 13.

[4] GROß, C. and VRIENS, D., 2019. The Role of the Distributor Network in the Persistence of Legal and Ethical Problems of Multi-level Marketing Companies: JBE. Journal of Business Ethics, 156(2), pp. 333–355.

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