What’s Wrong With Multilevel Marketing? – Dean Van Druff

       Dean Van Druff, the author of the well traveled, rambling, disjointed essay “What’s Wrong With Multilevel Marketing?”, is perhaps the most prevalent of the four in spite of making the weakest argument. Mr. Van Druff goes so far as to state that “MLM will never work, even in theory” in the face of the blatant fact that MLM is a 64 year old industry with numerous profitable companies and thousands of successful distributors.
       The ignorance of most Anti-MLM Zealots is clearly evident in their reporting of basic MLM related facts and figures, and Van Druff provides a litany of them. I should point out that I am not at all implying he, nor anyone opposed to MLM, is dumb. Ignorant means to ignore readily available information, thus resulting in a lack of knowledge, not intelligence. For example, throughout Van Druff’s 12 page essay he makes several observations about MLM that are simply inaccurate, such as, that we are a 25 year old industry, which would have been off by 30 years even in 1990 when his essay was originally written. This could be explained by Van Druff’s own reluctant but eventual admission that he has had no personal experience with MLM and did little, if any, research into the subject previous to putting his “theoretical analysis” on paper.
       Besides the historical inaccuracies mentioned previously, Van Druff also claims “many high level MLM promoters have been shut down, the ‘executives’ incarcerated.” He later claims that the founder of FundAmerica (which he misspells) was “arrested for having generated some 90% of revenues selling ‘distributorships’ versus product.” Although FundAmerica was declared a pyramid scheme, the founder was actually arrested on fraud charges. In fact, it is extremely rare for anyone promoting even a blatant pyramid scheme to actually serve jail time, and most legal actions against MLM companies are civil, not criminal. The few criminal cases involving incarceration (three that I know of over the last 25 years) did not involve multilevel marketing companies. They were, in fact, blatant pyramid schemes.
       Van Druff again shows his ignorance by asking the question “If (an MLM product) is so great, then why isn’t it being sold through the customary marketing system that has served human society for thousands ofyears?” Yes, he actually said that in his article, and its wrong on multiple levels. First, I can think of only one “marketing system” that has served human society for “thousands of years” – word of mouth. The marketing system used by MLM companies. Let’s forgive his hyperbole and assume he meant store shelves. Has Mr. Van Druff ever researched what is involved with getting a product on a store shelf? Obviously not, for its a daunting, expensive, extremely competitive challenge. It also involves millions of dollars in advertising to get those products off the shelf. Where as word-of-mouth is not only the most powerful form of marketing, it’s the least expensive (that’s a pretty good combination). But then, this is one of the most fundamental, basic, and most touted benefits in regard to marketing a product via MLM. Yet, Van Druff appears oblivious to it. This is the epitome of ignore-ance.
It gets worse.
       Van Druff also claims that some MLM companies attempt to address the saturation issue “by limiting the number of people you can sponsor, say, to four.” Really? Actually, no. No such limitation has ever existed in any of the several hundred MLM programs I’ve reviewed over the last 20 years, nor do I suspect it has ever existed. He’s probably talking about matrix plans where you are limited to the number of people you can place on your first level, but not the total recruited, and he just doesn’t understand what he’s talking about. He also claims MLM distributors “usually sell through prefab parties or home demos.” Of course, anyone with any actual experience in MLM would know that such activity is uncommon today in all but a few old-school MLM programs (although it is making a comeback).
       He goes on to describe a “shadow pyramid” where people are induced into buying “motivational tapes, seminars, and videos”. Of course, we all know he’s talking about only one, albeit very large, MLM company. And even then its upline distributors (not the company) who are making the profit, and on a direct sales basis, not MLM, and such purchases are clearly stated by the company as being totally voluntary.
       He also claims the MLM company itself profits by “conning” recruits with a “distributor fee.” What he is ignorant of is the easily obtainable and verifiable fact that, by law, MLM companies must sell their sales aids, promotional tools, training, and distributor kits/fees at cost! No significant profit can be made from these items, and they can not be commissioned as part of the MLM compensation plan. Sure, some MLM companies push the envelope a little on this, and yes, some push it a lot. But the vast majority do not. Furthermore, that $25-$50 annual distributor fee we all are “conned” out of typically covers such things as maintaining our sales organization, the paying of commissions to our downline sales reps, the paying of sales taxes to all 50 states, data entry services, customer support, warehousing, and various other administrative functions that would likely cost hundreds, if not thousands of dollars per month if we were to hire someone to do them for us.
       Van Druff then takes on “loony product claims.” While I concur with his overall criticism (some are pretty loony), his theory as to how MLMers “effectively skirt the Federal Trade Commission” is by using “word of mouth testimonials, supposed ‘studies’ done by scientists, fabricated endorsements (etc)…”. If Van Druff would have invested even ten minutes of research into this topic, he could have easily discovered that, indeed, the FTC already prohibits curative or treatment claims by all of the means he lists, including personal testimonials. In fact, the FTC has made available (for years) guidelines for product claims in their document “Dietary Supplements: An Advertising Guide for Industry” We are just as forbidden from promoting our products in all the ways Van Druff describes as any other marketer of products.
       Van Druff arrogantly professes that “the law generally condemns MLM” and even goes so far as to claim that all MLMs are illegal! Of course, Mr. Van Druff is utterly and completely wrong. Our state and federal government makes those laws, and our courts decide who breaks them. And, based on decades of legal precedent involving hundreds of cases, our government and our courts have ruled that MLM is legal. Van Druff’s opinion, much to his chagrin I’m sure, doesn’t count. Van Druff then borders on the absurd by implying there is some grand conspiracy by MLM “experts” to “propagandize, lobby and defend” MLM. (Defend ourselves? How dare we?!!!). He theorizes (but states as a matter of fact) that the MLM industry has used “so much money from it’s victims” to hire these nameless lobbyist experts who have managed to pull the wool over the eyes of state and federal regulators. Considering, once again, there are over 1,500 MLM companies in the United States, over 7 million distributors, and MLM has existed for over half-a-century, those must be darn good lobbyists! Of course, the truth is, few MLM companies or distributors are involved in defending the industry on a regulatory level. That job is left to the MLMIA and the Direct Selling Association, which is a national trade organization representing all direct sales companies (MLM or otherwise).
       When I inquired as to whether or not Van Druff has had any experience with MLM, he responded by directing me to a section of his web site (which I had read) where he states his analysis was “theoretical.” He then mockingly attacked my intelligence and investigative skills for not understanding that this meant he had no experience (of course, he could have just said “no”). I guess, in Mr. Van Druff’s world, you can’t have any actual experience with things you theorize about. Van Druff references me in his article as a “lucid reformer within the MLM industry.” Flattery will get him nowhere.
       Near the end of Van Druff’s diatribe, he states “Anyone who has any experience with an MLM has strong feelings, either for or against…” Its even worse when people develop strong feelings about it who have no experience at all.

       Mr. Van Druff was just a warm up. Next issue I’ll be cleaning up the mess made by Dr. Robert FitzPatrick, author of the books “False Profits” and “Pyramid Nation.” He’s also the founder of the “Pyramid Scheme Alert” organization. Naturally, he believes all multilevel marketing companies are illegal pyramids. He’s wrong – on multiple levels. Stay tuned. This is going to be fun!