Multi-Level Lies

Abstract

If you’ve spent time on social media, you’ve probably encountered claims about multi-level marketing products or opportunities—your friends may be posting about serums and supplements they promise will double the length of your lashes, cure your headaches, or enable you to quit your day job. MLMs enlist an army of sellers who work for free around the clock to spread the gospel of their goods. Meanwhile, over 99% of sellers never turn a profit despite the time, money, and labor they invest. And in their desperation to sell and recruit, some turn to tactics that violate advertising laws, ignoring facts and data to prey on people’s insecurities and persuade prospects to buy products they don’t need and can’t afford.

This Article catalogs deceptive practices by MLM sellers, argues that MLM companies are liable for claims their sellers make on their behalf, and proposes a number of ways to hold them responsible. It relies on original research, including a survey of over 200 MLM sellers and empirical analysis of contracts between sellers and 167 different MLMs. After reviewing the various laws and rules that apply to deceptive marketing claims—including the FTC, FDA, and Lanham Acts; state consumer protection laws; platform terms of service; and contractual provisions—and how they apply to MLM sellers’ claims, it argues that the burden should fall to MLM companies to train sellers and monitor their claims rather than enlisting them to disseminate noncompliant advertisements and letting them bear the consequences of any missteps.

Keywords: advertising; ftc; regulatory; direct sales; multi-level marketing; consumer protection; unfair competition; social media; platforms; Lanham Act