Abstract
Multi-level marketing companies (MLMs) such as Amway, Herbalife, or Tupperware differ from most other companies. They market their products and services by means of self-employed distributors who typically work from home, sell products to end consumers, and recruit, motivate, and educate new distributors to do the same. Although the industry’s growth seems to illustrate the attractiveness of MLMs, the industry has been facing several legal and ethical problems. In this paper, we focus on these problems and argue that an extended MLM model may help us to understand why such problems continue to occur, despite the countermeasures that have been implemented. By explicating how problems relate to a specific but often overlooked characteristic of MLMs, i.e., the so-called distributor network, we provide an extended understanding of (a) MLMs’ mode of operation, (b) the sources of their legal and ethical problems, and (c) the reason that currently implemented and suggested countermeasures may not suffice. Moreover, based on our extended understanding of MLMs and their problems, we propose additional countermeasures.
Highlights
Multi-level marketing companies (MLMs) such as Avon, Amway, Herbalife, Mary Kay Cosmetics, Tupperware, and Vemma represent a growing industry worldwide (WFDSA 2016)
We argue that existing measures may not be able to solve all legal and ethical problems, because they do not, in our view, pay enough attention to one specific and important characteristic of MLMs, which we call the ‘distributor network’ (DN)
With its impressive growth throughout the last decades (WFDSA 2016), the MLM industry has proven an important player in the distribution of goods and services and a popular retail channel
Summary
Multi-level marketing companies (MLMs) such as Avon, Amway, Herbalife, Mary Kay Cosmetics, Tupperware, and Vemma represent a growing industry worldwide (WFDSA 2016). Researchers (Juth-Gavasso 1985; Keep and Vander Nat 2014; Koehn 2001; Vander Nat and Keep 2002; Walsh 1999a) as well as consumer advocates have questioned whether the 1979 FTC decision, the legal standards that have been developed since
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