

One of the common arguments that is used to justify the incredible failure and loss rates for network marketing MLM scams is the argument that a network marketing MLM scam is like a gym membership.

Here is an example of how this argument is presented:

Network marketing companies work similar to a gym membership. Both have an initial enrollment fee, and monthly fee’s to obtain membership. (Only with gym memberships you also have a contract and you can’t quit anytime without penalty). With both you can’t just have the membership with the expectation of achieving results. You have to work for them. In the gym you have to consistently physically work hard to get results over the next few months. Some people pay extra for “more training” and such. With network marketing companies it is the same thing only you are exercising your brain with personal development training that will help you with your business as well as personal life. Network marketing isn’t for everyone (nor is the gym) and that is OK.

In my opinion, the analogy of a network marketing scam and a gym membership is deceptive. Here is why I have that opinion.

Network Marketing Scam

A network marketing scam requires you to recruit other people to reach the results they offered you when you joined.

If every person does the work and recruits two people in a network marketing scam, the world eventually runs out of people to recruit and a huge amount of people are doomed to fail.

A network marketing scam takes your results and gives them to people above you.

Your results are limited by your rank in the compensation plan.

Failure in a network marketing scam is built into the design of the compensation plan.

Gym Membership

A gym does not require you to recruit people to reach the results they offered you when you joined.

If every person in the world joins a gym does the work and works out consistently, the world would become fit.

All results in a gym are yours to keep.

Your results are not limited by your rank in the gym.

Failure in a gym is purely based on your own efforts.

If the owners of a gym were selling memberships with the same deceptive results claims that network marketing scams use, they would be a scam too.

What network marketing is like is a business opportunity. With business opportunities it is required for you to disclose the following information:

Has the company or any of its key personnel been the subject of a civil or criminal action, including any FTC Rule, involving misrepresentation, fraud, securities law violation, or unfair or deceptive practices, including any FTC Rule, within the past 10 years?

Does the company offer a cancellation or refund policy?

Has the company or its salesperson discussed how much money purchasers of this business opportunity can earn or have earned? In other words, have they stated or implied that purchasers can earn a specific level of sales, income, or profit? If the answer is yes, the company must attach an Earnings Claims Statement.

Earnings Claims Statement Contents:

The name of the person making the claim and the date;

The specifics of the claim;

The start and end date those earnings were achieved;

The number and percentage of your buyers who got at least that result;

Any information about the buyers who got those results that might vary from prospective buyers – for example, where they’re located; and

A statement that prospective buyers can get written proof for your earnings claims if they ask for it.

The company must provide you with contact information for at least 10 people who have purchased a business opportunity from them. If fewer than 10 are listed, this is the total list of all purchasers. – Source FTC

The Direct Selling Association and the owners of network marketing companies have successfully fought to have themselves exempted from the FTC’s Business Opportunity Rule. A rule that requires them to disclose key information that anyone would need before they join a business opportunity. This allows network marketing scams that are product-based pyramid schemes to hide important information from people that are looking to join a legitimate business opportunity.