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Note - Pyramid Schemes and the American Dream: The Many Problems with Multi-Level Marketing and Why New Legislation Is Needed to Constrain the Industry


Multi-level marketing (MLM) is a large industry in the United States made up of independent salespeople that sell both products and the opportunity to join the business. The increasingly predatory industry has developed over years of under-regulation. Practices such as inventory loading, recruitment mandates, top-loaded compensation plans, and the tendency to recruit from particularly vulnerable groups are essential to the success of the MLM model. Each MLM is slightly different, but the foundational flaws are the same and consistently lead to the same financial losses for salespeople. To prevent more people from falling victim to these schemes, this Note proposes legislation to prohibit these practices and thus ban MLM companies. The proposed legislation is based on previous legislation from China banning MLM companies and a 2017 anti-pyramid scheme bill and aims to confront the most unethical qualities presented by MLM.