ACFE Communications Specialist
Kate Pospisil, CFE
Multi-level marketing (MLM) companies have been around for decades, but they have recently gained popularity in the health and wellness industry. You’ve seen these companies promoting on social media, like the ubiquitous “Hey hun!” in your Facebook Messenger, or perhaps even approaching you in public squares and asking to join their “exclusive” club, buy their product or join their workout group. Keywords and phrases can include: “detox” (you have a liver and kidneys for that), “lose weight fast” (diet, exercise and your doctor are your best bets here), or the worst, “cure your [ailment] with a simple supplement.”
These multi-level marketers promise to help people achieve their health goals while providing a business opportunity to those who join. However, many of these companies have been accused of fraud, making false health claims and preying on vulnerable populations.
Firstly, it’s essential to understand how MLMs work. MLMs are a type of direct selling where independent contractors sell products to customers and recruit others to do the same. The recruiters then earn a percentage of their recruits’ sales. MLMs are legal, but they have been criticized for their business model, which often relies on recruitment rather than selling actual products. This leads to a high turnover rate and a focus on recruiting rather than building a sustainable business. These companies often make false health claims and exploit vulnerable populations, leading to harmful outcomes for both individuals and communities.
In the health and wellness industry, MLMs sell products such as dietary supplements, weight loss shakes and skincare products. These products often come with health claims that are not supported by scientific evidence. For example, some MLMs claim that their products can cure cancer or other serious illnesses, which is not only false but also dangerous.
MLMs also target vulnerable people, such as those with chronic illnesses or disabilities. They promise a cure or way to manage their conditions, but these claims are often untrue. In addition to their negative impact on health, health MLMs can perpetuate systemic inequalities through their business practices. MLMs often target marginalized communities, including people of color and low-income individuals, promising financial success and health improvements. However, these promises are often proven to be false, leaving people in financial and physical distress. MLMs use high-pressure sales tactics and make false promises of financial success, which can lead to people losing the money they initially invested.
Moreover, MLMs perpetuate systemic inequalities through their recruitment practices. These companies often rely on personal networks and social connections, which can exclude people who do not have access to these networks. MLMs also require distributors to purchase large amounts of inventory upfront, which can be a barrier for people who do not have access to the necessary funds. Some companies also require their distributors to pay for training and other expenses, which can add up quickly.
To promote equity in health and wellness, it’s important to prioritize evidence-based health practices and to support businesses that prioritize diversity, equity and inclusion (DEI). This means holding health MLMs accountable for false or exaggerated health claims and their impact on marginalized communities. It also means supporting businesses that prioritize DEI in their recruitment practices and business operations.
To avoid falling victim to fraudulent health MLMs, here are some warning signs to look out for:
A distant associate reaching out to you on social media, especially if it seems like their initial and subsequent contact feels scripted.
Claims that their products can cure serious illnesses or conditions.
High-pressure sales tactics and false promises of financial success.
Requiring distributors to buy large amounts of inventory upfront.
Requiring distributors to pay for training and other expenses.
While MLMs can be a legitimate business opportunity, health MLMs often rely on false health claims and prey on vulnerable people. It’s essential to do your research before joining an MLM and to be aware of the warning signs of fraudulent companies. If something sounds too good to be true, it probably is. Always prioritize your health and financial well-being over the promises of MLMs.
On World Health Day, let’s commit to promoting health equity and supporting businesses that prioritize the well-being of all individuals and communities. By doing so, we can create a healthier and more equitable world for everyone.
SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners