Insidious temptations to join. Frenzied crowds with religious fervor. Prophetic speakers, shunning any member who dares to leave.

The scene looks and sounds familiar, except it’s not a cult, but an MLM.

Multi-level marketing companies, or MLMs, are defined as companies that “not only markets goods and services through direct sales, but also incentivizes its consultants to recruit other potential consultants.” They are often compared to pyramid schemes, as their hierarchical structure results in a handful of winners at the top followed by an exponential expansion to the bottom layers filled with new recruits.

Many view MLMs as a legal workaround to the illegal pyramid scheme. If you asked the MLM companies themselves, they would staunchly reject the idea that they are pyramid schemes, claiming that they simply employ direct distributors as part of their business model.

Direct selling is not necessarily indicative of an unethical MLM. The issue manifests when sellers’ primary source of income is not actually selling the product but rather recruiting others to become new sellers as well. Recruiters who onboard other sales representatives in turn become part of that person’s “upline” and receive a royalty percentage of that rep’s sales. 

This structure cements disaster for sales reps the further down the food chain we go. In reality, the only potential customers whom distributors are able to pitch to are their friends, family, and social circle. Eventually, when an area becomes too saturated, it becomes impossible for sellers to find new recruits.

The Consumer Awareness Institute found in a 2017 report that 99% of MLM sellers have a negative net gain by the end of their stints. Another study found that most make under 70 cents an hour.

With the advent of Covid-19 and the ensuing job insecurity, MLMs have been gradually preying on people’s increased inclination to work from home and their financial fears in order to recruit more members. Some have even gone as far as suggesting that their products can help protect consumers from Covid-19.

“For the MLM industry, a silver lining of the decimation of the economy is the notion that they can recruit more really susceptible consumers,” said Bonnie Patten, executive director of the FTC’s Truth in Advertising division.

For MLMs, economic insecurity is like wartime is to yellow journalists—a prime opportunity to extort a distressing situation for the general population and reap financial gain.

A deeper look into the tactics MLMs employ when recruiting shows the sneaky psychological and cultural cues that their marketing plays on. 

This is most prominent in the fact that the overwhelming majority (74%, according to The Cut) of direct seller participants are women. Specifically, stay-at-home moms seem to be the primary target of MLMs messaging, which often uses mainstream pop feminism (#girlboss, #momtrepreneur) and aesthetic color palettes and fonts.

MLMs capitalize on stay-at-home moms’ desires for financial independence and a flexible working schedule. They market being a distributor as synonymous with an entrepreneur and take care to highlight the handful of wildly successful consultants (the ones at the top of the pyramid) as if they are representative of the overall MLM experience. 

The Amazon Prime documentary Lularich explores the sinister underpinnings of the MLM leggings retailer, Lularoe. Featuring interviews from former employees ranging from elite distributors to designers to average sales representatives, the series sheds light on the power structures embedded within the company and the harm inflicted on people on all ends of the corporate spectrum.

Being in an MLM is akin to being subject to brainwashing, and leaving is like being awakened from the enchantment’s grip. One former consultant in the documentary reflected on their moment of insight: “Oh my god, I’m in a cult.”

And when examining the psychological abuse, there are indeed more than a few similarities to how actual cults run.

One may wonder — amid all of the evidence that making an MLM a lucrative endeavor is about as likely as winning the lottery — how do these businesses manage to stop people from leaving when they realize they aren’t making any money? 

MLMs use many practices to keep sales representatives in line, some of them crossing the line well into the territory of psychological abuse.  

An article on Medium identifies several of these shared themes between cults and MLMs.

The first is absolute authoritarianism in the absence of accountability—the issue with MLMs is that once the sellers purchase their initial inventory and stock, the company already made their sale. They have no incentive to care about what happens to sellers after they join. If they happen to actually make sales, great! More royalties for the company. If they, like the vast majority of sellers, don’t, no big deal—the company already made money off of them from their “buying in” to the company.

Furthermore, MLMs use a potpourri of tactics to entrap sellers in the scheme long after it becomes clear that there is little, if any, money to be made. There is no tolerance of critical sentiments or what is perceived as disloyalty in the company. The supposed closely knit community MLMs tout often turns into bullying cliques that manipulate anyone who dares express that they may want to leave. 

MLMs also alienate sellers from the rest of their support system, as friends and family understandably get frustrated and tired of being pitched to all the time and cut ties. This makes sellers further rely on their MLM family and creates a vicious cycle that prevents them from leaving.

Followers who cannot manage to turn a profit are made to feel like they are not good enough. The central message is always centered around a mantra like this: “If you work hard enough, you will get to the place all these executives are at.” The blame falls on consultants for supposedly being bad at their jobs ,when in actuality they are victims of a system designed for them to fail. 

Because of this, followers can invest seemingly everything into these companies: their savings, their relationships, their time. They alienate their friends and family. They take out thousands of dollars in credit card debt. They go to seminars and flashy conferences about how to take their business to the next level, all in pursuit of a dream made of smoke.

Although MLMs remain pervasive, the general population is increasingly aware of their evils. Beyond being an unethical business model, MLMs are demonstrative of deeper-rooted ills that they simply take advantage of: the financial dependence of women who are stay-at-home parents, the use of capitalistic “grindsets” to impose inferiority complexes, and the willingness of companies to do anything to turn a profit, even if it destroys those it relies on to succeed.