Herbalife, Younique, LuLaRoe And Other MLMs Suddenly Under Fire
Big number: The DSA reported six million sellers generated over $34 billion in 2018 retail sales. DSA membership, however, has declined 40% over the last decade, and the number of sellers plummeted 74% in 2016. Mariano acknowledged membership decreased over the past few years and said the DSA changed the way it tracks sellers, causing that number to drop.

Surprising fact: MLMs are often referred to as “pyramid schemes,” but the FTC has no hard definition. In general, the FTC says pyramid schemes “promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure.”

Key background: MLMs typically require participants, referred to as “distributors,” to pay startup fees to join along with incidental costs down the line, such as purchasing products and event tickets, and traveling to large-scale, conference-type events. The term “pyramid scheme” gets thrown around colloquially, but only the FTC can determine whether an MLM company is actually operating as one.

What to watch for: “The more the FTC successfully demonstrates the ability to prosecute a firm for a pyramid scheme in this industry, the higher the probability that the next firm could be prosecuted,” said William Keep, a marketing professor at the College of New Jersey. “Because they all fundamentally use the same model.”