December 1, 2023

Tricia Oak

Business & Finance Excellency

How multilevel marketing (MLM) took advantage of the Covid-19 pandemic

In early August, thousands of people — mostly women — descended on the MGM Grand Casino in Las Vegas in the name of $5 jewelry. They had come from across the country to celebrate the 10th anniversary of Paparazzi Accessories, a multilevel marketing company, for a four-day extravaganza that would be a mix of product showcases, motivational speeches, networking events, and performances from OneRepublic, Pitbull, and Jim Gaffigan. The founders declared the event their “best convention yet.” It was also one that ended in tragedy.

Celebrate Paparazzi 2021 has been described as a superspreader event. Dozens of the company’s consultants and loved ones were sickened by Covid-19 after the event, sources told me, and at least six people died. While it’s impossible to know exactly where attendees contracted the disease, many became ill after attending the large, often-unmasked convention.

In Paparazzi-world, the incident has triggered a blowup. I spoke with more than half a dozen current and former Paparazzi sellers for this story — some firmly in the anti-Paparazzi camp, some its staunch defenders. (Paparazzi did not respond to a request for comment.)

The company’s defenders point out that consultants attended of their own volition; they knew the risks, and they traveled anyway. Maybe, they posit, God decided it was their time. One nurse who spoke out says it shows the importance of vaccinations.

Critics note that when you’re part of MLM culture, attending events doesn’t feel like a choice. It’s not God who’s determining your fate, they say; it’s the elite consultant above you who would very much like you to attend. Experts say companies like Paparazzi know conferences keep sellers on longer and boost spending on products and services — spending not by customers but by consultants who are desperate to be part of the team and succeed.

“It’s bound up in, ‘Do you wish to be successful? Do you want to set a good example for your team?’” said Stacie Bosley, an economist at Hamline University who has studied MLMs extensively. “There’s a lot of emotional power.”

Multilevel marketing, or MLM, is a controversial business model in which salespeople derive profits in two ways: by selling a product or service and, more lucratively, by recruiting other people to sell a product or service. MLMs have been around for decades, and you’ve probably encountered one even if you didn’t realize it — Amway, Mary Kay, Avon, Herbalife, LuLaRoe, Young Living, Rodan + Fields … the list goes on and on. While these companies sell an array of products, from skin care to leggings to essential oils, they are united by their business model and the near-religious devotion of many of their sellers (the products are never simply “great,” they are invariably marketed as essential).

MLMs are both incredibly hierarchical and incredibly diffuse. People are made to believe they’re their own boss, but there’s a huge amount of demand to recruit and to sell coming from other distributors and the corporate entity above. MLMs prefer to be called direct sales companies and firmly reject the idea that they are illegal pyramid schemes where only people at the top of the pyramid make money by constantly recruiting new members. But it’s hard not to notice that many, at the very least, look pyramid-ish.

While it’s a $40 billion industry, the vast majority of people involved in them don’t make money off of MLMs, and many people lose money. They have to shell out money to get in, and they’re often not able to recoup it or make a profit. One 2011 report estimated that 99 percent of participants wind up in the red. The trick is that a handful of people make a lot of money, and MLMs tend to prey on people’s hopes that they’ll make it into that top 1 percent — and blame the individual if they don’t make it.

During the pandemic, MLMs, from individual sellers to corporate offices, have figured out how to make the most of the moment. They’ve used it as an opportunity to recruit more sellers, taking advantage of economic insecurity and people’s desires to work from home. People don’t need to sell “belly to belly” — meaning in person — anymore; they can just do it through hours of talking to faceless acquaintances and strangers on Facebook Live and Instagram. Some MLMs and their sellers have suggested that their products may help protect against Covid-19. Federal regulators have warned several MLMs about their pandemic-related health and earnings claims.

But it’s not just the opportunistic nature of the business model that has proven problematic during the pandemic. The surrounding culture urges those involved to deny the reality in front of them and put their complete faith into what is, for some people, a completely forgettable product and company. The world MLMs are selling is one where financial opportunity is limitless and luxury abounds, where the stacked odds against you are ever in your favor, where you’re your own boss, even though you’re handing your profits up the line. There’s an enormous amount of pressure to succeed, and if sellers fail — and most do — they often believe it is their fault alone.

Michele Lloyd, a former Paparazzi consultant from Pennsylvania, says she “dreamt” of going to the company’s convention, Celebrate Paparazzi, for three years. Even though recently she’d had a hard time getting views of her Facebook Lives and making sales, she would sometimes stay up all night trying to work on her business. “They really pushed us,” she said, referring to the “elites,” the highest-ranking Paparazzi consultants who sit near the top of the hierarchy. Lloyd’s struggles became a point of contention with the person leading her team, she says.

Over the summer, out of fear of Covid-19, Lloyd, 62, decided it was best for her and her husband not to attend the convention. She subsequently had a falling-out with her sponsor, who told her she was “making her entire team worried” by publicly expressing her fears. Eventually, she quit. “I’m so disappointed,” Lloyd said. “I loved Paparazzi.”

She still has more than 2,000 pieces of jewelry she’s trying to get rid of, cutting her losses and attempting to offer a discount. She’ll almost definitely end up losing money, but she says she’s thankful every day she stayed home from Las Vegas. Paparazzi was her third MLM, but she’s not looking to do a fourth — she’s never really made money on any of them. “I just don’t want to have that pressure,” she said.

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“Girl, have I got a business opportunity for you”

MLMs have historically been very good at seizing on specific moments and trends to recruit sellers and expand their ranks. During the 1960s, Amway made bomb shelters; in the Great Recession, Donald Trump made millions off a multilevel marketing company called ACN, which markets internet, gas, phone, and electricity products. These companies appeal to people looking for gig work and stay-at-home moms looking to make an extra buck. And when Covid-19 hit the US in the spring of 2020, sending the economy into a tailspin, MLMs took the opportunity to market themselves to people who had lost jobs, were looking for extra income, or were uncertain about the future.

“For the MLM industry, a silver lining of the decimation of the economy is the notion that they can recruit more really susceptible consumers,” said Bonnie Patten, executive director of Truth in Advertising.

Many MLM sellers rely on Facebook and Instagram to try to sell and recruit anyway, so the industry was at the ready for a stay-at-home world. Companies and consultants were also aware that many people had gotten stimulus checks and were looking for something to do with the extra cash.

Many people I spoke to have gotten a message from a friend or relative or acquaintance over the past several months presenting an MLM, something along the lines of, “Girl, have I got a business opportunity for you.” The trend certainly bears out in the data.

The Direct Selling Association (DSA), a trade group that represents MLMs, runs a monthly survey of its members on the impact of Covid-19 on business. A majority of respondents have consistently reported that the virus has had a positive impact on both US and global revenue, with 60 percent saying so as of late July. The DSA estimates that the industry grew by 13.4 percent in 2020 to $40.1 billion in retail sales. It also says that it grew to 7.7 million direct sellers, though Bosley notes it’s hard to know if that figure is accurate — elsewhere, DSA says that 16.7 million people are involved in the industry. (It lops off 9 million people it categorizes as “discount buyers.”)

Lloyd said that higher-ups at Paparazzi were constantly encouraging consultants to go live and build up their inventories. “We were — I don’t want to say encouraged to take advantage of [the pandemic], but in hindsight, that’s what they were telling us to do,” she said.

In 2020, the FTC sent out warning letters telling some MLMs and their sellers (though not Paparazzi) to cool it on using the pandemic to recruit new sellers, often with inflated earnings promises. It flagged one post from a seller for Rodan + Fields, a skin care company, which bragged: “RODAN and FIELDS is always open for business even during quarantine! I’ve been working from home for over 3 years now and still making money when other people aren’t ! Isn’t it about time you found out what it is I do and how this company really works ? … #workfromhome #financialfreedom.”

The FTC warned It Works Marketing, which sells beauty and nutrition products, against false earnings claims made by the company’s sellers as well as by the company itself. On its social media, It Works corporate told people they could “start working from home and earning $500 a month” and encouraged people to use their stimulus checks to join, telling them there is “no better investment you can do.” According to the It Works income disclosure statement from 2019, over 80 percent of its distributors make an average of $48 a month.

MLM income disclosures are often confusing and, at times, misleading. Even the DSA’s self-regulatory council has tried to keep members in line with earnings claims. Again, most MLM sellers do not make money. “The vast majority of distributors in an MLM will make little to no money, and a healthy proportion will lose money,” Patten said.

Paparazzi consultants make about $2.25 per piece sold before sales tax and costs. They also make money from commissions and bonuses, though for more than two-thirds of sellers, the average monthly bonus is less than $25. To make $1 million, consultants would need to sell hundreds of thousands of pieces of jewelry. The company’s income disclosure is difficult to decipher and reflects only monthly bonuses, which for the vast majority of consultants are very low.

There’s limited knowledge of what is going on with MLMs overall — most are privately held, so they don’t release a ton of data, and they often don’t keep track of what happens with their products once they get to distributors. “The industry is very opaque,” said Douglas Brooks, an attorney who specializes in MLMs. “For many years, the industry has taken the ostrich approach — we really don’t want to know what our distributors are doing because we’re afraid of what we’re going to find out.”

What experts say MLMS are likely afraid of: a proliferation of distributors who are hoarding products in their basements and garages. They joined the MLM and have to buy a certain amount of items to stay active in the organization and make bonuses, but they are unable to sell them, so they just keep buying and letting products pile up.

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Have a Covid-related ailment? MLMs want you to think they have a cure for that.

MLMs haven’t just used the pandemic to recruit new members; they’ve also tried to leverage the moment to market. Many popular companies sell beauty and health products and were happy to try to pivot their marketing tactics to meet the moment.

“What do you know? MLM has all these alternative health products and supplements that will boost your immunity and protect you from getting Covid,” said Robert FitzPatrick, the author of Ponzinomics, a book about MLMs, and the president of “This is literally nothing new. MLMs have been selling supplements, vitamins, crap like that by people who have zero medical training and knowledge as cures, treatments, and preventatives for years.”

The FTC fired off letters last year telling MLMs to knock it off. It dinged Youngevity International, Vivri USA, doTerra, Tranont, and Arbonne, among others, on both health and earnings claims. The FTC found that some representatives of doTerra, which sells essential oils, had implied that its products helped with Covid-19 prevention and had recommended the products for essential workers. It also flagged that a seller for Arbonne, which sells beauty and health products, had advertised an upcoming Instagram live segment with an immunity support product hashtagged #CoronaVirus. At the time, doTerra responded to the FTC explaining how it had addressed the agency’s concerns and outlining its compliance efforts, according to CNBC, and Arbonne said that it would de-register the consultants who made the posts the FTC had flagged.

When the FTC issued rounds of letters targeted at MLMs in April and June 2020, the DSA responded both times and encouraged its members to act ethically. In March 2020, it had also asked members to ensure accurate product claims.

But where there is a will, there is a way, and MLMs and sellers haven’t stopped trying to leverage the pandemic to boost sales. Patten said sellers have pivoted away from directly citing Covid-19 but are still using coded language, such as “immunity-boosting” and “virus-killing,” to get the point across.

On the Instagram account for Black Oxygen Organics, a supplement company, there’s a video posted in July 2021 of a man who claims that the product, which he heard about from his wife and her friend, alleviated his lingering Covid-19 side effects in a day. In a separate video, his wife talks about how the product, which she heard about from her husband, boosted her energy. On her Facebook page, she has shared a Covid-19 conspiracy theory video called “Plandemic.”

Sellers of Young Living essential oils have begun to market them as in-mask sprays. In one Facebook group for Covid-19 survivors, called Survivor Corp, people discuss hair loss and Monat, which has hair care products, as a potential solution. The company has faced claims in the past that its products cause hair loss. In 2020, Monat reached an agreement with Florida’s attorney general after a two-year investigation into its products and practices in which the company agreed to refund consumers who had purchased certain products and said it would stop making false or misleading claims to customers about its health benefits, safety, efficacy, or performance without reliable scientific evidence.

The MLM community is so broad and diverse that it’s difficult to make sweeping statements about all of it. However, there does seem to be some overlap with potential anti-vaccine and Covid-skeptic sentiment. As Kaitlyn Tiffany recently wrote for the Atlantic, there’s some MLM-QAnon crossover, and some of that does spread into feelings about the pandemic. Cecilia Toll, who ranks high at Arbonne and who, as Tiffany chronicles, has spread QAnon concepts and language, posts problematic messages about Covid-19 on her Instagram as well, including Instagram Stories against masks and one post saying to find the “culprit” people should “follow the money.” (It is not made clear what the “culprit” has done.)

Bosley, the Hamlin professor, said there is some overlap between MLM culture and Covid skepticism with regard to information processing and sources. People generally get recruited to join MLMs by people they know and trust, and they’re interacting on the internet and social media, where information moves fast. It’s a similar situation with how Covid-19 misinformation can spread — on the walls of some Paparazzi sellers, you can see mistrustful posts about the Covid-19 vaccine.

“One of the things that I think is fascinating when people consider joining an MLM or when they’re staying in it is where are those sources of information? Are they seeking external information from what we might consider to be objective, credible sources, or are they seeking that information from local peer-to-peer networks?” Bosley said. “Some of the same pitfalls that we all might experience in decision-making and judgment definitely seem to have a parallel here. A lot of this is what are the chances that certain things could happen to me and my family.”

With MLMs, as with Covid skepticism, outside criticism can also cause people to just dig in their heels. “One of the things that is universally taught within the MLM community is that if people are criticizing your decision or your commitment or your dedication to the MLM company, then you need to divorce yourself from them,” Patten said.

As distributors become more isolated, the only messages they’re getting are from the MLM — that they just need to believe to succeed and work harder, and if they’re failing, it’s entirely on them. “It’s a vicious cycle,” Patten said. “They continue, they get into deeper debt, it’s a sunk cost, and they feel like they can’t quit.”

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A pandemic pressure cooker

What happened with the Paparazzi convention wasn’t necessarily the organizers’ fault — plenty of people have traveled, including to large events, during the pandemic. But it’s hard not to wonder whether they could have been more cautious. They didn’t set up a virtual broadcast for people who couldn’t attend, and they offered no refunds for people who had to cancel, even if they had contracted Covid-19. They even stipulated a $50 penalty for some people who redeemed a free ticket (with a product purchase) and were unable to go. Images of the event show that mask requirements were often ignored. The good news is that Paparazzi appears to have canceled an upcoming trip for top sellers due to Covid-19. Unfortunately, for those who got sick after the Las Vegas convention, it’s too late.

In a statement to Vox, MGM Resorts, where the conference was held, said that “nothing is more important than the safety of our guests and employees” and that it has made vaccinating its workforce and community a “top priority” as part of its ongoing efforts to increase vaccinations and “do our part in helping end the pandemic.” MGM noted that it offers groups holding events at its facilities an option to use a health pass with rapid testing and vaccine records as part of its “Convene with Confidence” program. According to MGM, Paparazzi did not take up that offer.

The internal culture of pressure was something Paparazzi, like many MLMs, has built up over time. The company does daily drops of new jewelry that consultants scramble for in the hope of getting the hottest pieces, which are often in short supply — more so during the pandemic, Lloyd said. Some team leaders create “challenges” that encourage their downlines to buy. Consultants are constantly worried about the possibility they’ll be “canceled,” as in kicked out, if they don’t comply with all the rules.

During the pandemic, one of the founders said he would move to Paparazzi’s warehouse to keep operations up and running in the event of an economic activity shutdown, which consultants viewed as a sign of his dedication to the business. “I’m in awe,” one distributor remarked on Facebook. And sellers were made to feel like the convention was absolutely a must — a place to get the most coveted pieces, to hobnob with high-ranking “jetsetters” and “impressionistas,” to learn the keys to success.

“Of course they feel pressured to go,” said Andrew Thompson, a former high-ranking consultant in Paparazzi. “They brainwash you into it. This is a fucking cult.”

A number of sellers for the company have died following the convention. Their Facebook walls often follow a similar pattern: months of Paparazzi videos and callouts, in some cases with tidbits of Covid-19 misinformation and jokes about the vaccine sprinkled in, expressions of excitement about the convention, pictures of the convention, and then mentions that they’re sick. Later, it’s their family members who announce that they died. The obituary for one consultant mentions how “diligently” she worked on her sales and the “life of the party” award she was recently given at the annual Paparazzi gala. Some of their friends and families have set up GoFundMe fundraisers.

In the aftermath, a screenshot has surfaced from one distributor higher up in the Paparazzi apparatus encouraging others to delete posts about the convention and Covid-19. Former sellers say that some images of the event and those who died after having attended disappeared from the internet as well. The Paparazzi pages from some of the late sellers listed on their Facebook pages appear to have been disabled. Paparazzi fans and critics have spent weeks arguing online about what happened — in recent years, there’s been a rise in anti-MLM communities as well, and they’ve also been put on pandemic overdrive. Former “Papa sisters,” as some distributors call themselves, have turned on one another, and it’s gotten ugly.

Paparazzi aside, there’s no doubt that the pandemic has injected even more stress into what is already a high-stress environment for many people in MLMs. Sellers are supposed to believe they can succeed, believe their products will work, and now, believe all of this through a pandemic that has cost more than a half a million lives in the US alone.

“There’s a strong rhetoric of self-determination,” Bosley said. “The language that’s often used is that you’ve been given the vehicle, the vehicle has worked for a lot of other people. We’re telling you how to turn the key — the question is how well do you drive this thing.”

Lloyd certainly felt that from her sponsor. “She constantly would go online and say if you’re not succeeding, you’re not working hard enough,” she said. “It made me so mad.”

The thinking is almost magical as participants come to believe that the MLM has saved them, that their hopes and dreams will come true through their community. “That ecstasy, that delusional euphoria, that utopian view is transferred over to the product,” FitzPatrick said. “You’re talking about a kind of madness that takes over, but it’s very instilled in people.”

With MLMs, the danger is generally financial — that excitement generated might toss people into debt. But in the context of the pandemic, there can be a health risk, too. If you think $5 jewelry is your opportunity of a lifetime, you’re going to seize the opportunity, even if it could mean the end of your life. “If you really thought that this business opportunity was your ticket to freedom of your life and your family’s, you might go,” FitzPatrick said. “Who wouldn’t go?”