Participation and Losses in Multi-Level Marketing: Evidence from an FTC Settlement
49 Pages Posted: 9 May 2018 Last revised: 22 Feb 2022
Date Written: April 27, 2018
More than 20 million Americans are affiliated with Multi-Level Marketing firms (MLMs), but there is little empirical evidence on who participates in this controversial part of today's labor market. We link data on 350,000 individuals cited in an FTC settlement with one of the largest MLMs to detailed county-level information. We find that the share of refund claimants is greater in areas with higher median income and where women are absent from the labor market, suggesting value in flexible work. However, check amount, a proxy for losses, are correlated with higher inequality and lower social capital, suggesting that the pitfalls accrue to vulnerable groups.
Keywords: Alternative work; Consumer financial protection; Direct selling; Financial planning; Household finance; Multi-level marketing
JEL Classification: J2, J3, J81
Suggested Citation: Suggested Citation