The Federal Trade Commission recently issued warnings to multi-level marketing companies about the dangers of COVID-19 scams. There is a big problem in the MLM industry with people using pandemic fears and confusion to sell their products.
This article will explore why these warnings were sent, how COVID-19 has been used as an opportunity for many multi-level marketing companies, what are some examples of coronavirus fraud that have been found by the FTC, and how direct sellers can weather this storm.
Why did the FTC send coronavirus warnings to MLM companies?
The FTC is concerned that these MLMs are using the virus as an opportunity for scamming people out of money and promoting ineffective products.
They also fear that some companies may be acting irresponsibly by pushing supplements that may not help the body in any way.
The FTC warned MLMs to stop making unsubstantiated claims about their products and practices or they will face legal consequences, which include fines up to $40,000 per violation. They also warn people who have been contacted by companies promoting COVID-19 scamming schemes to report the fraud.
What is multi-level marketing?
Multi-level marketing is a form of direct selling in which the sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit.
Multi-level marketing has been flourishing during pandemic as people look for ways to make money from home.
Some people may feel pressured into signing up with MLM companies because of how much the company is willing to pay them for time spent recruiting new members.
MLM companies are also taking advantage of the virus by telling stories of medical professionals who use their products with success rates as high as 90% for those infected. However, there is no evidence proving this statistic is accurate.
MLMs have been around for nearly a century. One of the earliest documented cases is from 1937 with a company called Amway. However, it wasn’t until recently that MLM companies began to explode because they are capitalizing on the fear and confusion surrounding pandemic.
How do MLM distributors use coronavirus to grow their business?
MLM distributors use the pandemic to convince people of their products. They offer a way out for those who are anxious about contracting COVID-19 and they have been using fear tactics through social media, marketing, advertising, in person outreach blitzes and by word of mouth to recruit new members.
What are some examples of COVID-19 fraud?
Many MLM companies claim their products can help prevent, treat and even cure COVID-19. One example is a company called GanoLife which claims its product will “cure” the pandemic by boosting immune system response to infection with COVID-19. The FTC sent out warnings about this type of fraud because they have no scientific evidence to back up their claims and there is a significant risk of COVID-19 infection associated with the product.
Another example of coronavirus fraud is an MLM company called Ambit Energy, which claims to “stop the spread” of COVID-19 and protect its members with a product that purports to be 99% effective in preventing infection. This is another example where there is no scientific evidence to back up their claims.
MLM companies are flourishing during the pandemic because they offer hope for those who fear contracting COVID-19, especially among those unable or unwilling to get vaccinated against it. MLMs also use slogans like “You can’t stop COVID-19”, to create a sense of urgency for their product.
Some people believe that multi-level marketing companies encourage pandemic fraud by encouraging the sale of unproven and sometimes dangerous products.
MLM can be a great way to earn money, but direct sellers need to research companies before joining. Explore company websites for their credentials, success rates among members, how long they’ve been in business, what kind of training is provided on how to succeed at MLM marketing–all things that will help you make a decision on whether to join or not.
The FTC is also encouraging consumers and direct sellers alike, to use their best judgment when considering MLM opportunities during the COVID-19 pandemic.
If you’re considering joining an MLM company, make sure it’s legitimate and will deliver on its promises to provide financial freedom for your future. There are many fraudulent companies claiming they can treat or prevent COVID-19 when in fact the only thing being delivered is a scam with hefty membership dues that never pay off.
How did social media platforms give MLM a coronavirus surge?
As the prevalence of COVID-19 increased, so did social media platforms. This is because MLM companies use social media to recruit new members and promote their products on free ad sites like Facebook–which has been an important avenue for them since they don’t have a reliable way of reaching people in person due to how viral the virus can spread.
And with the social media recruitment, many new people have been exposed to MLM and their “get rich quick” schemes. The FTC is warning these companies about using COVID-19 as a marketing gimmick that exploits vulnerable populations in order to build its business–which has become easier than ever thanks to Facebook’s algorithm change last year.
The FTC’s warning and Facebook’s change have both contributed to the flourishing of MLM during COVID-19–and that trend is likely to continue. The reason? With more people becoming increasingly desperate for ways to make money, they’re also turning towards companies like these in order to earn an income. But those struggling with homelessness or unemployment can’t afford to put in the time or effort needed for a proper job search; MLM offers that opportunity.
But these types of companies are known for employing “quick” money schemes and misleading consumers with information about their products–which is why COVID-19 has become yet another way to make business more successful.
The number of employment scams has increased with COVID-19
It is difficult to estimate the number of MLM reps, but it is clear that the number of employment scams has increased with COVID-19.
Now that COVID-19 has become a pandemic, MLM companies are using it to their advantage. It seems like each day there is another article or story about the virus on social media and in online publications. In this way, they can promote their product as a means of prevention or treatment–or both!
MLMs flourish during pandemic
MLMs are flourishing during the pandemic for many reasons.
First of all, members are encouraged to purchase more products than usual because they are needed for self-protection from infection with COVID-19.
Secondly, MLMs have been able to take advantage of people’s fears about a virus that is highly fatal yet has no known cure or vaccine.
Thirdly, COVID-19 has been a perfect opportunity for multi-level marketing companies to recruit new members and increase sales because the virus is pushing more people to work for MLM companies.
And finally, with large numbers of people dying from COVID-19, MLMs have been able to increase sales by offering discounts on products that serve protect and treat.
How direct sellers can protect themselves from COVID-19 scams
It is difficult for direct sellers to avoid COVID-19 scams when the virus has been so devastating and widespread. However, there are some steps you should take to make sure your information is safe and secure.
- The first step would be to check the legitimacy of any company that contacts you about COVID-19 products or services by calling a number listed on their site or using an online search engine service like Google.
- If they cannot provide a website address, do not provide your information.
- If they are a reputable company, ask for their mailing address and phone number so that you may contact them later if their offer seems suspicious or too good to be true.
- Avoid giving out any personal data until you know the legitimacy of the organization contacting you about COVID-19.
- If you are unsure about any offers of COVID-19 products, services or treatments that come your way—do not take the risk.
How can MLM companies weather the COVID-19 storm?
Multi-level marketing companies can survive the coronavirus storm by ensuring that they are only selling products people truly want and need, rather than the other way around.
Surging MLM industry
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