Ep. 5 - Legal Schmegal
Know anyone who failed trying to sell MLM products or an MLM "opportunity?" It wasn't their fault. How could something “legal” engage in such deception and cause so much harm?
Listen to full episode :
Lesson Ideas:
Collection of Articles related to this episode:
Robert urges us all to think critically and to be aware. We are sharing these articles, that are related to the episode topic, as a resource for teachers and parents who want to provide more practice with critical thinking and fact checking.
Multi-Level Marketing Businesses and Pyramid Schemes
Hardly Anyone Makes Money Selling Multi-Level Marketing Merchandise. So Why is it Still Legal?
USC says alleged MLM recruiting students in UCC will not return
FTC Warns 16 Multi-Level Marketing Companies About Coronavirus Fraud
10 Horror Stories That Prove MLM Companies Are Complete Trash
Mark Kelly Was Paid Pitchman for Multi-Level Marketing Company
Hall Of Fame MLM Celebrities – How To Handle The Pyramid Myth Objection
MLM, Advocare, Is Focus of ESPN Exposé on Misleading Sports Endorsements and False Income Claims
Drew Brees Has a Dream He'd Like To Sell You
Ideas for using these articles in the classroom:
Sketch notes: This link is from a resource by Betsy Potash. Students could read the articles independently or in small groups and create sketch notes to help them when the whole class discusses the article. They could be used during the jigsaw method shared below.
One Pagers: This link is another resource by Betsy Potash. Teachers can provide a variety of different one pager templates for students to choose from to capture the main idea and important details of an article in preparation for small group or whole class discussion. They could be used during the jigsaw method which is shared below.
Jigsaw Method: This link is a video created by Jennifer Gonzalez that succinctly and thoroughly explains the jigsaw method. You could choose a longer article and cut it up so each group member has one part. Another option is to have one short article per student. It is very important to make sure the students in each expert group support each other and that all students are focused during that crucial small group time so that all students are successful when they go back and teach their jigsaw group.
Socratic Seminar/Socratic Circle - In this case, the text could any of the articles above. Follow the link for more about this structure that is very common in middle school, high school, and college classrooms.
Philosophical Chairs - There are many variations to this discussion structure. Podcaster Jennifer Gonzalez calls the following version of Philosophical Chairs This or That. The teacher can ask the class a question related to an article that can be agreed with or not agreed with and then students move to the part of the room that matches their opinion about that question. There can be a “hot seat” set up in each spot for students one at a time to share their evidence, opinions, etc. You could have an Agree and a Disagree area in the classroom or, as Jennifer Gonzalez shares in her podcast episode, a continuum from Strongly Agree to Strongly Disagree.
Links for Robert and Melissa:
Robert’s book: Ponzinomics
Robert’s Website: Pyramid Scheme Alert
Melissa’s Podcast: The Teacher As...Podcast
Transcript:
Melissa Milner 0:00
Welcome to Ponzinomics 101. I'm Melissa Milner. I'm a 30 year veteran teacher and host of The Teacher As... Podcast.
Robert FitzPatrick 0:22
And I'm Robert Fitzpatrick, author of the book Ponzinomics, the Untold Story of Multi-Level Marketing.
Melissa Milner 0:30
We are cohosting Ponzinomics 101, a monthly educational podcast for anyone who would like to learn more about multi-level marketing, and why it should be avoided.
Robert FitzPatrick 0:40
We hope this podcast will be a resource for teachers and parents and provide valuable information that is not currently being taught in our public schools, colleges and universities.
Melissa Milner 0:55
If you are a teacher who has created lessons about MLMs, and you're willing to share your work with other teachers, please go to our website, ponzinomics101.com to contact us. If we get enough lessons from teachers, we may start a Teacher Resources tab on our site to share the great work we are all doing.
Robert FitzPatrick 1:13
The best defense is awareness. Be informed, think, question everything and keep your mind engaged.
Melissa Milner 1:24
To understand the reality of multi-level marketing, we first distinguished real direct selling from MLM and found them completely different. MLM is not direct selling. That's its disguise. Then we looked at the point by point similarities between MLM and pyramid schemes, and based on basic traits, characteristics and consequences concluded that MLM is a pyramid scheme. At each turn, we cut through marketing hype, false impressions, or lack of information to discover how millions of people keep falling into MLM pyramid schemes, even though it is widely known that virtually everyone loses in them. We identified the key factor of disguise, disguises to hide pyramid schemes, and even disguises that prevent knowing what a pyramid scheme is.
Melissa Milner 2:19
We stressed ignoring the outward disguises and hyped up claims and focusing only on basic characteristics. That is, how MLM works, and what happens to those that invest in it. Sorting truth from fiction is what education is about. But it's also about gaining the ability and the habit of looking at everything critically, with an eye to sort reality from fiction. This is a great power that can then be applied to any circumstance. Lesson five, is a perfect opportunity to demonstrate how important and powerful critical thinking can be for students. The truth is not always as clear as revealing the false math of endless chains and pyramid schemes, or recognizing the contradiction of personal direct selling, and constantly recruiting your own competitors and MLMs as we have done in the earlier lessons.
Melissa Milner 3:16
On the episode five page of ponzinomics101.com, we have compiled some article recommendations for students to further practice reading critically, and possibly getting started doing their own fact checking and online research about pyramid schemes and MLM. I was disappointed to find that on the educational news site Newela or NewsE-L-A, there were no articles about MLM companies or pyramid schemes. I even searched certain MLM company names, there was nothing. I will be reaching out to them to ask them to start incorporating these topics into their article choices for older grades. Here's Robert's lesson.
Robert FitzPatrick 4:01
Hello, everybody. A question for this lesson is if MLM is a disguised pyramid scheme, and virtually all new recruits are deceived and lose money. How can MLM be legal? Turning the question around, if MLM is legal, and we do know it mostly operates openly without regulation or prosecution, how could something legal engage in such deception and caused so much harm? Before addressing this, we need to ask with MLMs operating openly in every community, endorsed by famous people, and generally called legitimate by government agencies, why are we having to ask about its legality? If someone invites you to join an MLM by claiming MLM is legal, rather than putting your concerns to rest, this ought to be a red flag. How many other areas of work or any other parts of our lives do we have to ask about legality? What other opportunities do we hear about that are defended as, "But it's legal." Yet everyone who has ever been in an MLM or been recruited to invest, has heard the question, "Is it legal?? Or the argument that MLM is good because it is legal?
Robert FitzPatrick 5:37
The first reason to question MLM legality even when we are told officially that it is legal, comes from the very government agency that regulates MLMs, the US Federal Trade Commission, on its website page entitled, multi-level marketing businesses and pyramid schemes, the FTC tells us quote, "Some MLMs are illegal pyramid schemes." Okay, but which ones? Unfortunately, the FTC does not say which ones. In fact, the FTC prosecutes a few MLMs every year as pyramid schemes. Some of those companies the FTC prosecutes had been operating openly for years and years, and millions of people had been joining those companies believing they were legal. That means, and the FTC says this too, it's up to you to figure it out for yourself when you are recruited. And an article on its official website entitled, "Multi-Level Marketing or Illegal Pyramid Scheme"... This is what the Michigan Attorney General's office tells us. Quote, "It is understandable that consumers often have difficulty telling the difference between an illegal pyramid scheme and a legitimate multi level marketing opportunity. Governmental regulators and the industry continue to debate where the legal lines are drawn."
Robert FitzPatrick 7:24
Then there's Money magazine' warnings, and a 2021 article entitled, "Hardly Anyone Makes Money Selling Multi-Level Marketing Merchandise, So Why is it Still Legal?" The magazine asks, quote, "MLMs have been long accused of operating as thinly veiled pyramid schemes that employ predatory business tactics. So how exactly is this legal?" The magazine then answers its own question, quote, "A combination of murky laws, lack of resources and a whole lot of lobbying power." Okay, to sum it up, the government itself is quote, "Debating the MLM legality question." It tells us plainly that some MLMs are in fact, illegal. And a trusted financial magazine explains that MLM legality is an open question, due to quote, murky laws, and quote, lobbying and, quote, lack of resources. Lack of resources means illegal operations could operate just because the government can't enforce the laws. Murky laws mean the legality question is unclear and in debate as the Michigan AG verify. And lobbying means political and financial forces of MLMs inhibit or prevent laws against MLM, or even enforcement of current law.
Robert FitzPatrick 9:06
All of this is to say that the claim MLM is legal, is not a reason to trust or believe that the MLM you are being recruited to join is not a disguised pyramid scheme. There is no legality guarantee, how would you know? Well, by using the tools we have already covered for understanding direct selling and MLM and the basic traits associated with MLM and pyramid schemes, and then making your own judgment. In fact, that is exactly what the US Federal Trade Commission advises, quote, " The information you learn can help you decide whether it's really a deal, a dud, or straight up illegal." Meaning you have to figure it out for yourself. On this MLM question, you don't need a law degree to see that claiming legality or citing a lack of prosecution can be just as misleading and entrapping as saying that an MLM can't be a pyramid scheme because the MLM sells products. All the MLMs that have been prosecuted sold products.
Robert FitzPatrick 10:27
But even if you know that claiming MLM is legal, does not mean anything. And in fact, is a red flag, telling you to look at basic traits for yourself. There is one other aspect that causes many people to not use their critical thinking or their knowledge when recruited. This has to do with how MLMs recruit. Everyone who has ever signed up for an MLM was invited by some other person. Sometimes our close friends, family members and neighbors, or they were influenced by famous people we respect and admire. Many people assume that good people, people they know, trust or even love, don't do illegal things, right? A friend or family member or even a trusted celebrity would not promote something that is, or even might be illegal, a harmful pyramid scheme, would they? When a friend or colleague recruits you to an MLM, and tells you it can't be a pyramid scheme because pyramid schemes are illegal and MLM is legal, you now know that statement does not hold water, it is meaningless. Yet to argue to your friend or colleague that their MLM in fact, could be an illegal pyramid scheme would be almost to accuse them of wrongdoing and illegal action, or deception, or putting you at great risk of loss. This very difficult to do. So many people set aside their critical thinking and allow the relationship to influence them, even against their best judgment.
Robert FitzPatrick 12:25
The claim MLM is legal, becomes a code word just for don't evaluate, trust me. In MLM ,where millions are deceived, and sophisticated methods are used to persuade, and where as Money magazine explains, murky laws, lack of resources, and a whole lot of lobbying power affect law enforcement, it is only reasonable to expect that many well meaning people are misled or misinformed. Some of those people could be your very own friends and family who are recruiting you. They just might not know or are under the influence of these false arguments and claims. So to refute them, you don't need to accuse them. But you also don't have to go along with what they are saying. You can just decline. If they want to know more, you can offer them your insights into the basic traits of MLM and pyramid schemes.
Robert FitzPatrick 13:38
What about those individuals that absolutely do know that MLMs always caused 99% losses, and that gaining money in MLM is always at the expense of all the others? What about the top leaders who know the loss records, who write the deceptive claims, who hide the consequences behind the claim, "MLM is legal," expecting that to cause you to suspend critical thinking. It is very unlikely you will ever meet those at the very top of an MLM. You might see them in a video or on stage in a recruiting rally. But even for them, you can attribute some level of self delusion and misinformation to their false claims. Or you can conclude they just don't care as much about the truth and the harm as they do for the money they gain by making false claims. That's a personal judgment for each of us to make.
Robert FitzPatrick 14:46
What about trusted celebrities or sports stars or politicians or even clergy hyping MLM and also saying MLM is legal?Just remember that endorsements don't require knowledge. Celebrities are paid. They are making commercials,reading a script. Their fame is why they are asked to endorse, not their knowledge. At the rallies, those speakers are also well paid. Some later say they did not even know what MLM was when they made their speeches. They only encourage entrepreneurship, or self employment, or following your dreams. How you view these speakers and endorsers after, you know the realities of MLM and pyramid schemes, is also a personal judgment for each of us to make. MLMs rely on disguise, deception, and blind belief. Critical thinking uses facts, data, records, and questions.Thank you.
Melissa Milner 15:57
Please remember to check us out on Twitter, Facebook and Instagram @ponzinomics101. And check out our website www.ponzinomics101.com We hope you spread the word about this podcast because the best defense is awareness. Thanks for listening.