Why any competition that allows MLMs is basically fixed

Business

Find out why any voting competition that allows MLMs, like this week’s Pure Beauty Awards, is in effect fixed. And why we believe MLMs should be banned. 

So the Pure Beauty Awards have just held their annual awards ceremony in London. And it’s no surprise to see a rash of MLM (networking marketing) companies among the winners, including:

  • Nuskin
  • Avon
  • Forever Living
  • Mary Kay
  • Arbonne
  • Tropic Skincare

Why is it no surprise to us that MLMs would win this beauty competition?

It’s not because their products are worthy of the win. Nor is it because we’re psychic. It’s because any competition that has a public voting element and includes MLMs is basically fixed.

Here’s why.

Read the 10 ugly truths MLMs don’t want you to know

MLMs have one BIG advantage over other businesses

In a competition like the Pure Beauty Awards, MLMs have a huge advantage over ‘legitimate’ business models (you can read here why we don’t agree with the structure of MLMs). And that advantage is their reps.

In a competition like the Pure Beauty Awards, a non-MLM business relies on encouraging happy customers to vote for them in order to win. Customers who will gain nothing from the effort, bar acting on their genuine love for the product.

However, MLMs can call on an army of reps – people who stand to gain financially if the products they sell are endorsed by a competition win – to vote for them. AND encourage them to motivate their customers to vote.

So, in a competition like the Pure Beauty Awards, it’s very easy to predict that MLMs will win. And not because they have the best products. Not because they have the most (genuine) fans. But because they have reps.

Which means that any competition that is set up like the Pure Beauty Awards is, in effect, fixed, and the MLM wins are meaningless.

Why MLMs ALWAYS win

Of course, it’s not just in competitions like the Pure Beauty Awards that MLMs win. They’re also the financial winners in business – unlike their poor reps.

That’s because, when you look at ANY income disclosure statement from an MLM, their earnings are always pyramid-shaped. And the only people who make any money from MLMs are those at the very top of the pyramid.

As MLMs themselves admit in their own small print, the average rep makes little money, or frequently loses money:

Why we no longer investigate MLM earnings

And it’s not just the three companies we investigated above who use reps in this way. We gave up investigating network marketing companies’ income disclosure statements because it became too boring. Every single company we looked at had the same structure and the same results:

The vast majority of MLM reps will earn extremely little, and often don’t even cover their expenses.

Why MLMs love competitions like the Pure Beauty Awards

As we’ve established, winning competitions like the Pure Beauty Awards is easy for MLMs. They just activate their army of reps and sweep the awards.

And there’s a good reason why they do this: winning awards gives MLM companies an illusion of respectability. And it makes it even easier for them (and their current reps) to recruit more people into their business model.

More people who will, in all likelihood, lose money (and friendships) by signing up as a rep.

What’s it REALLY like being recruited as a rep to Pure Beauty Awards winner Forever Living? Read one university graduate’s experience here

It’s not just beauty awards – Which? also recommend Utility Warehouse

It’s not just in beauty awards and competitions that MLMs have an unfair advantage. You can read here how Utility Warehouse are able to reach the top few ranks consumer champions Which?’s annual survey of energy companies.

Even Which? themselves admitted that, “it’s quite hard to determine if there are Partners that are filling this information in” and that it “isn’t fair” to include a solitary MLM in a survey with non-MLM companies.

What do we want to happen?

In the short term, we believe that competitions like the Pure Beauty Awards should not include MLM products in them. Because doing so makes a mockery of their awards – companies aren’t winning because they have the best products, they’re winning because they have an army of reps who are financially motivated to vote for them.

We have been in email contact with Pure Beauty regarding this, and it will be interesting to see what they do next year. They are aware of how including MLMs, in effect, means their competition is fixed.

In the longer term, we’d like to see more action taken against MLMs to protect vulnerable people from being recruited as reps. Action like the USA Federal Trade Commission forcing Herbalife to pay $200 million to compensate people who were “deceived… into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.”

There will always be unscrupulous people looking for easy opportunities to make money from others. And network marketing businesses have found a model that works for them.

So we don’t just want to see MLMs banned from competitions. We’d like to see the whole business model banned for good. 

Photo by Rodolfo Sanches Carvalho