Commentary: Is LuLaRoe eating its own tail?

Recently, multiple news outlets reported several disturbing reports that LuLaRoe is not only rescinding money back policies, but also threatening to sue a blogger critical of its operations to obtain information that it claimed were "proprietary".  This has raised questions about why would a company with claimed 80000 reps would turn on its reps like this.

First, multiple TV stations reported that local reps are worried when LuLaRoe rescinded its no-fee 100% money back and free return shipping policy, which has only been in effect for a month. Instead, reps are to use the regular return channel, which only return 90% of price, but also have to pay shipping.

According to reps, the inventory you get from LuLaRoe is like hitting a lottery, as you cannot specify designs, merely quantity and size. Similar to collectible card games. Certain rare patterns sell quickly at inflated prices on eBay or such, while the rest languish in rep's stock, until the rep either liquidate them on eBay and give up, or try to go through the buyback process. There are rumors that up to 4000 cases of refunds are pending, and people have been waiting for months

And unlike other MLMs, LuLaRoe's startup costs are extremely high, as much as 5500 dollars to start, and if rep can't sell them, often the advice one gets from rep's upline is "order more!"  Some reps claimed you need about 15000 in inventory and markup of over 40% to earn a profit. And if you get a bunch of duds from the factory order (remember, it's random), you will have to arrange a trade with a different rep... if you can find someone who wanted your duds and trade you something they considered duds.

One blog that exposed such practices, and other complaints about LuLaRoe from disgruntled customers and reps was Christina Hinks, better known as MommyGyver online. And after publishing many such complaints, including documents shared online by such, Hinks has been served with a "discovery petition" from LuLaRoe demanding that she...

...disclose the identity and contact information of potential defendants who have damaged LLR and its goodwill by providing Respondent with LLR's confidential and proprietary business information, information about LLR and its merchandise, and false, derogatory information regarding LLR, much of which respondent has posted on her blog, www.mommygyver.com.

The interesting thing is much of the information had already been shared online via various social media platforms.

LuLaRoe so far has yet to comment about this potential SLAPP suit, though they did respond to the change in return policy (which is technically against their own company policy that changes in return policy must be announced for 30 days before it can go into effect). LuLaRoe's statement claimed the policy was always 90% buyback. The "improved" 100% buyback and free shipping was merely a temporary "waiver".

Bad Propaganda: "Alternative Facts" about MLM

Recently the Trump camp used "alternative facts" when attempting to "defend" some numbers that are obviously bogus... with even MORE bogus factoids. It is interesting to note that this has been used by MLM for decades, with little success.

So what are some of the "alternative facts" that had been used by MLM supporters?

• If I can succeed you can too...  just like "any lotto ticket can be the big winner"
  
• Success requires hard work... and a whole lot of luck, and other stuff conveniently not mentioned
  
• Thousands of people around the world found MLM works for them...  out of 100 million, as estimated by DSA
  
• Avon is nothing compared to the bigger network marketing companies...  despite Avon is almost same size as Amway, about 10 billion annual revenue larger than any other MLM company.

Eric Worre is wrong about Dave Ramsey: or, why MLM advocates only knows truthiness, not truth

If you are in the US, you probably heard of Dave Ramsey, who had been giving financial advice for decades as a radio call-in show (i.e. he goes live on air and lets normal people call him and he gives answers immediately) since 1992. He does not fully endorse multilevel marketing, but instead, advocates caution and realistic outlook, something that is inherently anti-faith, but based on evidence and reality. 

On August 10th, 2016, at about the 7:48 point, a "Sarah from Cincinnati Ohio" called in and asked about joining "It Works!" MLM.  Ramsey urged caution and be absolutely aware what she wants to do going in. His message was "... You will be in the recruiting business. There is nothing really inherently bad or evil about it, Your real job is training salespeople, in a high turnover environment, because most of them don't make it... I have friends that makes 7 figures in that business... But for every one of those, I know a thousand (chuckles) that didn't last 90 days, with six boxes of makeup in the garage they are still paying off on credit card... Is this really your calling if you had lost everything and starting from scratch? ... You ought to really thinking about what you're getting into. But if you want to give it a run, I will support you on it... " 

The MLM sphere went nuts as they reacted with venom. So-called MLM 'leaders' started posting videos 'Dave Ramsey is Wrong'. Here's a typical reaction from Eric Worre of networkmarketingpro.com:

Dave (Ramsey) went on to pour cold water all over the hopes and dreams of this young woman, and pigeon holed the Network Marketing profession into his very limited understanding of what it is all about.

So what exactly is Eric Worre mad about? He claims that Ramsey made multiple mistakes. 

• Risk is minimal in MLM, w/ the buyback policies in place
• It's not recruiting, it''s expanding your network
• Failure? So what? 90% of traditional businesses fail
• Bothering friends? They''re doing it wrong

Mr. Worre's final message is: basically "why don''t you just be honest and admit you hate network marketing? Innuendo doesn't suit you". 

Go look in a mirror, Mr. Worre. Innuendo does not suit you either. 

Let's examine the factors at play... who''s really wrong or right? But with a skeptical attitude and fact-checking. 

Just how risky is MLM?

Eric Worre claims that Dave Ramsey exaggerated the risk involved in MLM, and most people don''t have "6 boxes of makeup sitting in the garage getting paid off on credit card".  He claims that with the 90% buyback policy in place in most major MLMs (esp. DSA members), financial exposure is minimal.

The problem with Mr. Worre's statement is there are NO stats available from the MLMs that such policies have been utilized. Yes, DSA members do have at least a 90% buyback policy for at least six months, i.e. if you want to return all the stuff you haven''t sold within 6 months, you get 90% back. Some even go as far as a year. However, there are various caveats not discussed. 

Is there any stats available on how often such policies had been invoked? How many hoops do people have to jump through to get such returns processed? 

Nope. Nada. Zero. Zilch. Nothing. 

In fact, it's been documented in Mary Kay that any attempts to quit an return inventory would trigger an "intervention" from your upline and other people in your group (because she would be notified as any returns means her commission from your purchases will be clawed back) who will want to meet with you then shame and guilt you into staying in past the refund deadline, or to delay you in order to ensure you will get as minimal refund as possible. 

Mary Kay sales directors and recruiters are notorious for using misinformation or unethical tactics to stop consultants from returning inventory. This includes lying about the program or otherwise delaying the consultant’s return so that less product can be returned under the “last 12 months” rule. -- PinkTruth.com

It's hard to imagine the same does not happen in other MLMs as well. 

There are other tricks that can be done as well, like refresh products at less than 12 month cycles. That way when you try to return product it had already been phased out and thus cannot be returned. 

Sure there's a policy on the books, but a policy that's never used / enforced is no policy at all. 

Mr. Worre's hypothetical "white elephant" MLM only exists in his imagination. 

OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done

July 2016 has been a busy month.

On July 15, 2016, news was released that Herbalife has reached a settlement with the Federal Trade Commission where HLF agreed to a LONG list of reforms and pay a $200 million fine / reimbursement to the victims.

Then on July 22, 2016 Federal Court in North Carolina passed down the verdict... a Federal jury has convicted Paul Burks of ZeekRewards of all four counts of fraud and conspiracy to commit fraud.

MLMSkeptic has long criticized both schemes, both here on the blog, and on BehindMLM.com.

MLMSkeptic had analyzed the various comments, retorts, criticisms, and cheers of Ackman's epic short of Herbalife at end of 2012 and the subsequent PR war, and pointed out problems with such arguments.  Most of the critics of Ackman then believed that HLF was "too big to fail", or perhaps "not egregious enough to die, maybe fined".

So it is with much amusement and facepalming when "journalists" loudly proclaimed "FTC says Herbalife not a pyramid", when FTC said no such thing.

How did CNNMoney got it so wrong?
FTC never said HLF is not a pyramid scheme... 

You are welcome to search the actual FTC complaint and stipulation agreed to by HLF. "Pyramid scheme" was nowhere in the documents. Furthermore, when questioned by the press at the news conference, FTC Chairwoman Edith Ramirez was asked at least FOUR SEPARATE TIMES whether HLF is a pyramid scheme, and Ramirez repeatedly dodged the question (probably as a part of the settlement).

Q: I know that you’re not going to put any labels on this, but it seems to me if we look at the BurnLounge case, that while this complaint does not use the words “pyramid scheme”, would you agree that a prima facie case of a pyramid scheme is alleged with the allegations within the complaint?

A:  Again, I will leave it up to you to draw that conclusion. Our focus in this complaint was in addressing the core issues

When asked outright about HLF's own announcement... That FTC have determined HLF to be NOT a pyramid scheme...

Q: Did you review the language in their (Herbalife’s) press-release that sort of affirmatively said that they were not declared to be a pyramid scheme? Because they’re sort of having that as an outright headline.

A: I do not agree with that statement. The word “pyramid” does not appear in our complaint that is true, but um again the core facts that we’ve alleged, that we consider to be problematic with their compensation structure, are set forth in detail in our complaint. And again, I will leave it to readers to draw their own conclusions. But that they were determined to not be a pyramid… that would be inaccurate.

And indeed, checking the HLF website no longer shows any sort of language that claimed "FTC determined HLF not pyramid scheme"...

So you know which way the CNNMoney article was written... They were written from HLF's press release, not the FTC press release. It is... biased.  Shame, CNN. Shame on you for lazy reporting.

I am not listing all the changes that FTC managed to squeeze out of HLF. You can read the documents linked above yourself. It is a LONG list of reforms, and it will likely become a new standard much as Amway's settlement with FTC created the modern MLM back in 1979.  And that pretty much tells you the fact: HLF was a scam that required reforms so it is no longer operating as a scam. Any one who argues otherwise is simply denying reality.

I may do my own analysis later on these changes, but HLF is no longer the same company. They believe they can continue to thrive (or else they would not agreed to these changes), but we shall see.

Then we come to Zeek Rewards, and Paul Burks.

Commentary: How MLM affects the current presidential campaigns

While politics is usually quite far from the world of multi-level marketing, presidential campaign is big enough that anything anybody ever did figures into the equation, and in this case, two of the presidential candidates have direct ties to MLM... Donald Trump, and Ben Carson.

Those of you who had watched "Celebrity Apprentice" should recall that ACN, the MLM telephone company, was featured on the show... twice.  And Donald Trump even had his own MLM, "Trump Network", which nobody hears about any more.

What you may not remember is Ben Carson previously offered testimonial that Mannatech stuff helped him in his battle with prostate cancer... since 2004.

And let's not forget how big some of these MLM businesses are... and they donated HEAVILY to Republican candidates of all levels. It's already documented that co-founder of Amway, Richard DeVos and two family members donated 25K per person to Scott Walker's campaign AND unknown amounts to Jeb Bush's campaign. When Mitt Romney ran he had support of Amway, NuSkin, and Xango, all big name MLMs.

So, what are some facts about ACN and Mannatech, and perhaps, related to Donald Trump and Ben Carson, that you don't know, but should?

Let's start with ACN and Trump

ACN / Trump

Did you know that in 2010, the average ACN Canada participant takes home about $41.00 per month? That's directly off their website:

"The average ACN Canada active IBO in 2010 earned approximately $500." -- ACN Canada website 

As it is 2015, and there is no update, clearly the figure had not risen (and may even have FALLEN!)


Did you know that despite ACN having sponsored Celebrity Apprentice twice, Donald Trump was quoted by Wall Street Journal of saying, "I (Trump) know nothing about the company (ACN) other than the people who run the company, I’m not familiar with what they (ACN) do or how they go about doing it, and I make that clear in my speeches."

This is also interesting considering that Trump allegedly boasted to WSJ that for a speech at an ACN event he got $2.5 million back in 2008, and pocketed another $1.3 million for 3 more recent (and presumably shorter) talks at ACN events.