I was recently looking at a letter that Mary Kay Inc. wrote to the FTC in 2006. The FTC was coming up with a Business Opportunity Rule to protect consumers, and MLMs were scrambling to get themselves an exemption. (MLMs certainly shouldn’t be confused with those scammy “business opportunities!”)
The gist of the rule that was implemented (and its later revisions) was that it:
- Would protect people who were getting involved in “business opportunities” (any sort of work-from home arrangement)
- Would require certain information to be disclosed to those getting involved
- Would require those signing up to have a waiting period (a period of time after being given the disclosures, before they could sign the contract).
You can see the 2011 version of the business opportunity rule (and the disclosure form) here. The FTC explains more about the rule here.
You might notice that MLM companies aren’t specifically discussed anywhere. So while the FTC doesn’t actually say MLMs are exempt from these rules, it’s pretty clear in the rule and the discussion of the rule that they aren’t really a part of this.
Why? Because the MLMs lobbied so hard to be exempt from it, because God forbid they’d have to make certain disclosures about how terrible the “business opportunity” is.
Mary Kay wrote their letter to the FTC as well, and I was amused by this portion of their letter:
Requiring a seven day waiting period will stifle this enthusiasm and lessen the chance of the individual’s participation and/or success. In our opinion the presale disclosure requirement is a significant barrier to entry – and makes the simple decision of becoming an Independent Beauty Consultant unnecessarily burdensome and complicated while delaying the ability to “hit the ground running” after her introductory experience.
Furthermore, we believe the proposed Rule’s disclosure requirements and waiting period needlessly creates an “air of suspicion” in the mind of a prospective Independent Beauty Consultant. A prospective Independent Beauty Consultant trusts the Mary Kay experience shared by her family, her friends, and her coworkers. If, in the future, prospective Independent Beauty Consultants are required to be presented with a pre-sale disclosure document and wait a period of time for review, analysis, and examination, it would be natural for her to think “what is wrong here?” despite her general trust in her family and friends’ experience. Such suspicion would be misled in light of our 43 year history with legitimate and ethical business practices coupled with our built-in consumer safeguards, but nonetheless, these concerns would impact Mary Kay’s ability to continue to tell the Mary Kay story. This disclosure requirement would suggest a level of risk that simply does not exist.
Well look at that. It’s a “simple decision” to start a business and invest hundreds or thousands of dollars. Oh I know… They’ll say it’s only a $100 decision because that’s the cost of the starter kit, and anything after that is a separate decision. (Incidentally, the inventory decision is one that involves a whole lot of arm twisting, guilt, and con games.)
And how dare we stifle some enthusiasm or create an air of suspicion! Mary Kay and others worried that giving people 7 days before they could sign their MLM contracts might make them rethink signing up. No kidding! If people have (true) disclosures about income and they have time to research before they sign up, there are at least some people who will change their minds.
It doesn’t really delay the ability to hit the ground running. If someone wants to sign up for MK, she can go ahead and get the process started, and during her waiting period she could start lining up parties. What a great use of time! It takes some time to set up appointments anyway.
So this air of suspicion… Yes, indeed. There SHOULD be an air of suspicion surrounding MLMs. More than 99% of people lose money in MLM. The fact that Mary Kay Inc. has been skilled at selling their con for decades doesn’t change that fact. It would be natural for her to think what is wrong here??? Yes! Exactly! People should be given time to research this “opportunity.” What is Mary Kay so afraid of? If the company is as wonderful as they say, a week shouldn’t have much impact on recruiting efforts.
Oh, wait. There is a problem with the company and its bogus business opportunity. And the time would give people a chance to research. And they would be more likely to research because they would wonder what might be wrong. And they’d find websites like Pink Truth. And they’d start to see facts about MK that bother them. And they’d see all the tired lines and scripts that were used on them, and realize they’re used on everyone to manipulate them into signing up.
And the concerns of potential recruits “would impact Mary Kay’s ability to continue to tell the Mary Kay story.” Really? You can’t tell your story if people are concerned? No. What you really mean is that it would impact MK’s ability to sell their nonsense to unsuspecting recruits.
The risk that simply does not exist… An outright lie. There is tremendous risk, and women who sign up as Mary Kay consultants are almost assured of not recouping their initial investment. And Mary Kay Inc. knows this.