Multilevel Marketing, an Unwinnable Lottery: How MLMs Illegally Target Women and Minorities Using Deceptive and Predatory Recruitment Practices and the Need for Specific and Expanded Legal Protections
This Note details the rise of the modern multilevel marketing companies’ (MLMs) business model and explores how MLMs have become synonymous with deceptive recruiting practices that target and exploit women and minorities. To understand the rise of the “modern MLM”—defined by this Note as direct selling companies incorporated after 1979—this Note begins with a discussion of the seminal 1979 Amway decision and goes on to examine the current legal theories behind most states’ criminalization of pyramid schemes as unwinnable lotteries. Further, it analyzes the notable exclusion of MLMs from current criminal statutory schemes. Based on that foundation, this Note posits modern MLMs that engage in deceptive and predatory recruiting practices: (1) disproportionately target women and minorities, resulting in the majority of recruits experiencing negative social, mental, and financial ramifcations; and (2) create an illegal, unwinnable lottery system by failing to adequately disclose to recruits material information about average income at the onset of employment. The MLMs: Mary Kay, LuLaRoe, and Herbalife National are used as illustrative case studies of the tactics MLMs use to illegally target women and minorities. This Note then offers a proposed amendment to state statutes like California’s that do not criminalize MLMs by expanding the statutory language to explicitly address the predatory and deceptive nature of MLM recruiting, which creates an illegal, unwinnable lottery. Finally, this Note explores the danger posed to women and minorities by the Direct Selling Association’s policy priorities and asserts its policies only exacerbate and strengthen the disproportionately negative impact felt by women and minorities nationally.