mirindimo
JF-Expert Member
- Nov 2, 2009
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Pyramid schemes might not be quite as old as the pyramids themselves, but they’ve been around for a long time.
Most people know the telltale signs — promises of fast money, pressure to recruit others, and products of dubious value. Yet these scams just won’t go away. The FTC isn’t always successful at identifying and shutting them down, in part because there’s no single federal rule clarifying what makes a pyramid scheme a pyramid scheme, Bloomberg reported.
So what exactly differentiates a pyramid scheme from a legitimate business? According to the FTC, 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.”
5. USANA Health Sciences
- Type: Public
- Founded: 1992
- Products: Nutritional supplements
- Net revenue: $918 million
USANA was also scrutinized by Dr. Murray H. Smith, a New Zealand government statistician for the Commerce Commission. In 2008, he said, “You can make a very strong argument that this could be a pyramid scheme.”
4. Nu Skin Enterprises
- Type: Public
- Founded: 1984
- Products: Supplements and skin care
- Net revenue: $2.25 billion
The Chinese media called Nu Skin a pyramid scheme in 2014, and the company was then investigated by a Chinese government agency. This was not the first time the company faced criticism for its operations in China. Citron Research published a report calling Nu Skin an illegal pyramid scheme in 2012.
3. Mary Kay
- Type: Private
- Founded: 1963
- Products: Cosmetics
- Net revenue: $3.7 billion
Although the FTC says receiving commissions based on actual product sales is legal, Sole-Smith claims in many FTC investigations of multi-level marketing companies, “The majority of sales occurred between company and salespeople.” In these cases, the products can be mere decoys.
2. Herbalife
- Type: Public
- Founded: 1980
- Products: Supplements and skin care
- Net revenue: $4.47 billion
Eventually, the FTC started investigating the company, concluding the majority of the company’s “sales leaders” were earning a paltry $5 per month, while many others lost money. In June 2016, the company settled the case for $200 million, though it didn’t have to shut down entirely. Weirdly, the drawn-out saga doesn’t seem to have hurt Herbalife’s fortunes all that much. Many of the people who received checks from the settlement were happy Herbalife customers, and they quickly turned around and used their windfall to buy more Herbalife products, Fortune reported.
1. Amway
- Type: Private
- Founded: 1959
- Products: Health, beauty, and home
- Net revenue: $9.5 billion
Although the FTC did order Amway to make certain changes, it was largely a victory for Amway and the future of the multi-level marketing industry. Amway has faced legal trouble in numerous countries outside the U.S. over the years, and Robert Todd Carroll, author of The Skeptic’s Dictionary, insisted Amway was a “legal pyramid scheme.”
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