Pink Truth Critics and other pro-MLM zealots often cite the “legality” of MLM in support of their arguments. But it’s legal! If there was anything wrong with it, our government would have shut them down! There is a difference between illegal pyramid schemes and MLM, which is legal!
There is a lot riding on this legality claim. If MLM is legal, then success in Mary Kay is all due to hard work and following the system, just like legal businesses. Failure in MLM is therefore just a normal part of business, where there are market forces at work, or (more likely) the fault of those who lose. (They didn’t work hard enough, didn’t follow the system, quit too soon, etc.)
Governments in the U.S. (federal, state, local) almost completely avoid legal action against MLMs. The FTC’s action against Herbalife was an aberration. And in terms of scale, it’s almost meaningless. The top 100 MLMs by amount of revenue for 2017 adds up to over $82 billion. Herbalife is $4.5 billion of that total, but remember that the $82 billion happens year after year. The FTC did one relatively little action against Herbalife once.
So we could argue about whether or not there are laws that make MLM illegal. Our government simply doesn’t protect consumers against MLM and chooses to not take legal action against these companies. They operate with almost no oversight.
Unfortunately, many consumers believe that inaction by our government means that MLM is fine. But whether or not there are laws that allow MLM to exist, and whether or not the government ever goes after an MLM… that doesn’t change the fact that MLM inflicts financial harm on consumers. Nearly everyone loses money.