I’ve always thought MLMs and Pyramid Schemes were the same thing. But it seems Amway is the former but not the latter. Would be interested to understand the differences
MLMs are often accused of being pyramid schemes, but they usually defend themselves by pointing to the fact that they sell real products. This argument traces back to a 1979 FTC case against Amway which I mention. The FTC ruled that Amway was not a pyramid scheme because it had actual consumer products, and because distributors were required to make retail sales, not just recruit others. That ruling created what’s now called the "product-based exception".
Under this exception, an MLM is considered legal (i.e. not a pyramid scheme) if compensation comes mainly from retail sales to people outside the recruitment chain, not from signing up new members or selling products just to other recruits. On paper, this draws a clear line. In practice, it’s barely enforced.
The truth is that most MLMs still rely heavily on internal consumption and constant recruitment. The products often serve more as a cover than a real business. As long as there’s something physical being sold, even if it mostly moves within the distributor network, companies are rarely challenged. The product-based exception has become more of a loophole (or legal fiction) than a meaningful check on pyramid-style operations.
From my point of view, it's not about the products - and that includes virtual or digital products like cryptocurrency.
It's all about the style and methods of social control (especially how shame is marshalled) and whether the members are incentivised to sell the 'business opportunity' (i.e. recruiting a down line) more than selling the 'crypto' products (i.e. sales).
Often alongside the MLM corporate operation, there is a parallel 'tools' scam selling sales courses and such conferences run by higher ups and that seems to be what IM Mastery Academy (also operating under names like IM Academy, iMarketsLive, and now IYOVIA) are.
This looks a lot like a 2010-2020's clone of Amway. The DNA is the same.
I’ve always thought MLMs and Pyramid Schemes were the same thing. But it seems Amway is the former but not the latter. Would be interested to understand the differences
Thanks so much for your thorough reply Paul! That makes good sense, but as you say not a clear distinction in practice.
MLMs are often accused of being pyramid schemes, but they usually defend themselves by pointing to the fact that they sell real products. This argument traces back to a 1979 FTC case against Amway which I mention. The FTC ruled that Amway was not a pyramid scheme because it had actual consumer products, and because distributors were required to make retail sales, not just recruit others. That ruling created what’s now called the "product-based exception".
Under this exception, an MLM is considered legal (i.e. not a pyramid scheme) if compensation comes mainly from retail sales to people outside the recruitment chain, not from signing up new members or selling products just to other recruits. On paper, this draws a clear line. In practice, it’s barely enforced.
The truth is that most MLMs still rely heavily on internal consumption and constant recruitment. The products often serve more as a cover than a real business. As long as there’s something physical being sold, even if it mostly moves within the distributor network, companies are rarely challenged. The product-based exception has become more of a loophole (or legal fiction) than a meaningful check on pyramid-style operations.
Thanks for your explanation. Whatabout #CryptoSects ?
Example IM mastery.
IM Mastery does use the MLM form and has drawn the attention of the FTC as a scam and potential pyramid scheme.
https://www.ftc.gov/legal-library/browse/cases-proceedings/im-mastery
https://www.businessinsider.com/iyovia-ftc-mlm-scam
From my point of view, it's not about the products - and that includes virtual or digital products like cryptocurrency.
It's all about the style and methods of social control (especially how shame is marshalled) and whether the members are incentivised to sell the 'business opportunity' (i.e. recruiting a down line) more than selling the 'crypto' products (i.e. sales).
Often alongside the MLM corporate operation, there is a parallel 'tools' scam selling sales courses and such conferences run by higher ups and that seems to be what IM Mastery Academy (also operating under names like IM Academy, iMarketsLive, and now IYOVIA) are.
This looks a lot like a 2010-2020's clone of Amway. The DNA is the same.