Leak of Compensation Data for Highest Ranking Distributors at One MLM (Video)
Well, maybe not a leak so much (apparently) this particular multi-level marketing company (Monat, sells shampoo and personal healthcare products) left iself *wide open* on outsiders being able to see/download their data. (I suspect this MLM had this data on AWS and it was just open to the world and being indexed by Google.) Anti-MLM YouTuber Chelsea Suarez somehow got her hands on this data and examined it. What she found is revelatory. Basically the top leaders, the Monat senior executive directors, get a minimum 98% of their compensation from downline commissions, not from their own sales.
Just a little background: Pyramid schemes are illegal, and multi-level marketing companies work hard to keep their outfits on the right side of the VERY HAZY pyramid scheme law. It’s so hazy that people still refer to two rules handed down in the FTC case against Amway in 1979. en.wikipedia.org. The two rules are:
- 70 percent rule: 70 percent of sales have to be made to bonafide customers, and not be an example of “front loading” or accumulation of product.
- 10 customer rule:
in order to obtain the right to earn Performance Bonuses on the volume of products sold by him to his sponsored distributors during a given month, a sponsoring distributor must make not less than one sale at retail to each of ten different customers that month and produce proof of such sales to his sponsor and Direct Distributor.
That said, these rules are not referred to in the FTC’s unofficial business guidance on MLMs ftc.gov, nor in recent major regulatory actions. You can feel free to skip this if you want, but the conclusion I got from reviewing these is that when a MLM involves products, it’s harder to call it a pyramid scheme (and that is deliberate). Here are some examples.
- FTC v. Vemma (2015-company shut down after lawsuit brought in federal court) https://en.wikipedia.org/wiki/Federal_Trade_Commission_v._Vemma_Nutrition_Company
- FTC v. Herbalife (2016-company still in existence, but had to change compensation plan and pay $200 million to distributors) https://en.wikipedia.org/wiki/Herbalife_Nutrition#FTC_investigation
- DoJ and SEC v. Herbalife (2019)-violation of the Foreign Corrupt Practices Act (bribery) and ancillary matters regarding their business in China, $163 million total fines https://en.wikipedia.org/wiki/Herbalife_Nutrition#U.S._Justice_Department_investigation_of_bribery_in_China
- FTC v. Advocare (2019)-Advocare paid a $150 million settlement because it basically lied about its compensation plan AND it had to restructure itself to get rid of the MLM component. https://www.ftc.gov/news-events/news/press-releases/2019/10/multi-level-marketer-advocare-will-pay-150-million-settle-ftc-charges-it-operated-illegal-pyramid
It should be noted that our corrupt as hell Supreme Court said that the FTC could no longer seek monetary relief in federal court any more because Section 13(b) doesn’t allow it. ftc.gov
Getting back to Monat, it’s a typical MLM with a pyramid structure of 11 steps from Market Partner to Senior Executive Director. Here’s Monat’s Income Disclosure for your perusal. (They’re required to put this out every year.) monatglobal.com It shows that 93.36% of active and inactive Monat distributors are in the “Market Partner” (lowest) rank and that the average annual earnings is $144 dollars.The people being talked about in this video are in the top two ranks, Executive Director and Senior Executive Director.
I’m not going to give a rundown of the video, you can watch it. What it shows is how much the top three ranks are pulling in each month, five and six figures. That’s jaw dropping, but what will have your jaw on the floor is the percentage of personal sales for Senior Executive Directors (a little after minute 24, but watch the entire video). Basically, in January 2021, the top SED (Jacquelyn Ortega) pulled down $317,545.00 in commission, but only 0.01% of that came from personal sales. That works out to $31.75 or thereabouts in commission on personal sales. The rest of it came from her downline.. The highest percentage of personal commission was 2.60% on $122,465.00, or $3,184.00. Granted, these numbers don’t include clawbacks (from returned product), as discussed earlier in the video, but still, these people are making well over 95% of their money off the backs of the people lower in their downline.
Anyway, apparently the data has been shipped off to the FTC and the Florida Attorney General. Why the Florida AG? Because Monat had its “Market Partners” basically signing up some customers on an autoship plan without disclosing the details. Monat settled with the Florida AG in 2020 (news release: myfloridalegal.com ) There’s a legal agreement, but it’s a PDF so I am not putting the link in here. It’s easily found on Google.
Maybe, just maybe, we can finally get a ruling that it’s a pyramid scheme if a very, very few at the top are making money off commissions from downline purchases. Maybe. Something to keep our eyes on.