:quality(75))
:quality(75))
What research on Multilevel Marketing reveals about the hidden costs of dependent entrepreneurship.
In today’s economy, characterized by platforms and unicorn start-ups, forms of work have become increasingly diverse and opaque. New forms include gig work, multilevel marketing (MLM), funded trading programs, or other purported income opportunities. While promising participants an easy and flexible route to income, they rarely deliver – and can often leave workers financially worse off, emotionally drained, and socially affected.
In the edited volume ‘Critical Perspectives on Multilevel Marketing', published by Edward Elgar, Deanna Grant-Smith and TIAS Associate Professor Claudia Groß explore the dark side of dependent entrepreneurship: a model in which companies recruit participants with income promises as purported ‘independent entrepreneurs,’ while keeping them financially and operationally dependent. Despite over 104,3 million participants worldwide (WFDSA, 2025), the system is designed so that the vast majority – tens of millions – lose money.
By bringing together scholars and consumer protection experts from Australia, Europe, and the U.S., the edited volume investigates the power relations and structural inequalities produced by dependent entrepreneurship. It highlights how innovative forms of entrepreneurship are structurally exploitative and discusses what is needed to ensure transparency and fairness. The contributors explore why and how these models go wrong, from deceptive recruitment practices to the creation and exploitation of regulatory loopholes, and the consequences for participants, their friends and family, and society.
The book offers three lessons about and beyond MLM:
1. Business innovation is often associated with progress, productivity, and new opportunities. But innovation can produce both positive and negative outcomes.
MLMs are a prime example of the latter. As the Nobel Prize-winning economists Shiller and Akerlof (2015) highlight, in today’s market society, small to large companies can easily fool and exploit consumers, creating value for themselves while harming consumers and society. As they conclude (Akerlof & Shiller, 2015, p. 167/online edition): “But just as every coin has two sides, so do free markets. … Free markets produce good-for-me/good-for-you’s; but they also produce good-for-me/bad for-you’s. They do both, so long as a profit can be made.”
MLM companies like Herbalife, for example, generate billions in revenue for their executives and top recruiters, while most participants who join to earn money, actually lose money (FTC, 2017). Similarily, gig platforms like Uber, DoorDahs, and Fiverr profit from flexible labour by shifting risks, such as assets needed, insurance, and income instability, onto workers. This dual face of innovation, potential for productivity and exploitation, raises the critical question: How can markets and organizations be designed to facilitate the former while minimizing the latter?
2. Businesses need regulations.
As innovation and entrepreneurial spirit are a double-edged sword, self-regulation – coined by Adam Smith’s famous ‘Invisible Hand’ – fails in practice. Market exchanges flourish under basic rules, such as those that mitigate information asymmetry between economic actors, including companies offering purported income opportunities to individuals. For example, those who take on a gig or MLM opportunity should be able to assess basic information on costs and risks.
For MLMs, this is rarely the case. MLMs’ primary lobbying organizations, the Direct Selling Association (DSA), has repeatedly blocked regulatory efforts to mandate earnings disclosures. As a consequence, companies continue misleading recruits about their income potential and risks involved (see Chapter 2 and 3). Without strong(er) regulations and effective institutions, such as labor agencies and consumer protection bodies, companies and markets can easily shift towards exploitation rather than fairness.
3. Business and society are intrinsically interlinked
Business and society are intrinsically interlinked, as embodied by TIAS’ focus on creating value for both. Businesses do not operate separately from society. They depend on stable societies in order to flourish, but they also actively shape those societies through the choices they make.
MLM provides a clear example. By creating economic value for a relatively small group of business owners and successful recruiters, the model can generate financial and social costs for many others. Ethical businesses, by contrast, seek to align economic and broader societal value creation.
For business leaders, policymakers, and academics, the question is no longer whether business and society are interdependent, but how to design systems that ensure mutual benefit.
What leaders can learn from this
The lessons from MLM extend beyond this particular business model. For leaders, the key is to look critically at how value, risk, and responsibility are distributed, and to consider the wider consequences of strategic choices for stakeholders and society.
This perspective closely aligns with TIAS School for Business and Society, where business challenges are approached from both an economic and societal perspective.