The Truth Behind Network Marketing.

The other day I was visited by an MLM guy. U know of them don’t u? They are the guys who promise u the Financial freedom, the proverbial pot of gold at the end of the rainbow, the best dog food available..etc. This guy was from a firm called RMP Infotec. No, no it’s not a spelling mistake, that’s just the way it’s spelled. Anyway he came armed with a laptop that had a god awful presentation and disapproved of everything under the sun that didn’t come under the technical brilliance of RMP. So he goes on to dazzle me with an amazing presentation that was loud obnoxious and pretentious.

He started by a tall claim that unlike other MLM companies, this company does not make seemingly tall unrealistic promises. To prove his point he promptly ran me through the presentation that had more tall and unrealistic claims that the number of potholes that are present in the Goregaon Malad link way. The presentation was so loud that Rakhi Sawant seemed to be meek and docile in comparison.

Off course I told a polite no thank u and asked him to never bring this topic up again when we next meet. But it astounded me that he had such firm conviction in the company’s products and schemes. And he’s not a sadak chaap either. He’s well educated and an MBA as well. Evidently he might have been born smart but education must have ruined him.

But as an article in CNN-IBN showed, there are scores of people who have been gullible enough to fall in this trap and in the process they ended up squandering their life savings and their losing izzaat in their circle of friends/relatives.

In case u missed out the article u can access it here, here and here. This was an investigative journalism done by them and they talk about MLM or network marketing companies like Amway, Quantum International Pvt Ltd among others.

One of the people they interviewed was a retired couple from AP.

Dr Umamaheshwar Rao, a retired scientist, and his wife were initially supportive of their children’s venture.

The expenditure was guaranteed but not the income. “The net result is a loss. The sales were less and the money spent in the game was more.” The family lost several lakh rupees even as their children drifted away.

“It ruined our inter-personal relationships. People were cult controlled in immeasurable ways,” says Rao, who has filed a public interest litigation (PIL) for action against Amway.

Even villagers who have extremely limited source and income are not spared from the claws of these companies like Pearls Agrotech Corporation.

People from Percherla have been duped into shelling out almost Rs 20 lakh for land that only exists on paper. In Ramadevi’s case after this dud investment, her husband just walked out on her.

Baali, a daily labourer earning Rs 50 a day, mortgaged her house hoping to become a successful Amway Business Owner. “When they met me, they said it’s a great opportunity to earn money. I didn’t have spare money then, so I raised it by mortgaging my house,” says Baali.

“First I paid Rs 5,000, then Rs 2000 and then Rs 2000 again. Like this I paid Rs 50,000 borrowing on interest,” says Baali.

A daily wage labourer !! This is astoundingly ridiculous. Can u believe the strata of society that Amway is targeting.

Most of the time it’s the promise of a Rosy Picture and the lure of money that drives people to invest in such insane schemes. But what they forget is that there are limited people with whom u can network with..and even they will tap the people in ur network only. Sample this..

Shivaiah says, “Aap kahreed lo, bas woh business ho jaata. Aap member bano baad me, aap paanch member ko, dus member ko, waisa mein mahina ka ek enroll kerte hue to, aapka net failta rehta hai, aapka income aate rehta hai, bolke bol diya.” (“Keep buying and keep making business. You become a member and then enroll five to ten more members a month. That way the net keeps spreading and your income keeps coming in. That’s what they told me.”)

Many memberships and seminars later, all Shivaiah managed was to lose Rs 3 lakh. Soon the people he enrolled were competing with him.

He says, “Mera downline poora ismein ghus gaya. Mujhko maloom nahin. Koi khareed rahe hain, koi join, enroll nahin ker rahe hain. Kya bole. Mujhe to baad me mujhko samajh mein aaya.” (“My entire downline jumped into this. I realised this far too late.”)

If you thought the companies may be only guilty of roping in clients with guile but at least their products are good think again. Many Amway distributors recommend a brand of supplements which is supposed to work wonders with energy levels of the body. Here’s something that will open ur eyes.

A lab analysis of some Amway products has thrown up damning results. A report from the Andhra State Food Laboratory shows that these dietary supplements do not contain all that they promise.

Calling them dietary supplements saves the company from tough regulation laws.

“When a product is labeled as a dietary supplement then it neither comes under the category of food nor under the category of drugs and that is how they are evading the regulatory mechanism.”

I can hear some of u saying “well if it’s as bad as u claim it to be how come the companies are still thriving..how come government’s not taken any action against them?” Very valid point. And guess what – the activities that these companies are conducting have been banned in India.

Multi-Level Marketing was banned in 1978. The Prize Chits and Money Circulation Schemes (Banning) Act bans “money circulation schemes” in all forms – Multi Level Marketing, Network Marketing and Direct Marketing

A recent Andhra Pradesh High Court judgment in a case involving Amway has held that its business is illegal, calling it a Prize Chits and Money Circulation Scheme that have been banned since 1978

“Even in Supreme Court, an SLP has been dismissed of Amway company where it was clearly held that Amway is nothing but money circulation scheme, falling into the mischief of this act.”

In 2003 and 2004, the Madras High Court also declared such networking schemes illegal.

About 5 years back even my dad had put about 20k in Amway and never got the funds back. After that all our family members have taken a Bhishma Pratigya of never putting money in any MLM scheme ever in our lives. But every year I get calls from at least 4 of my friends who urge me to listen to a presentation by their “mentors”. And countless invitation to their “Seminars” which will open my eyes to the potential of the getting Financial Freedom (!! Methinks this term is patented by them!). As always I attempt to dissuade them only to be rebuffed at that moment. After sometime they invariably come back to me with their tail between their legs. As the article summarizes wonderfully:

Mathematics and common sense will tell you that losing money in network marketing is not because you failed.

Chain recruitment tends to favor those at the top of the heap. But most – and that could include you – do end up at the bottom.