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Market America Pyramid Scheme: Insights Into The 2017 Allegations & Lawsuit

Market America, a well-known multi-level marketing (MLM) company, faced serious allegations in 2017, leading to a lawsuit that questioned the legitimacy of its business model. The case was initiated by two former distributors, Chaunjie Yang and Ollie Lan, who alleged that Market America operated more like a pyramid scheme than a legitimate business. This lawsuit has had a significant impact on the MLM industry, highlighting the risks involved in such business structures and raising awareness about the potential for exploitation. In this article, we’ll explore Market America’s operations, the allegations it faced, and the implications of the 2017 lawsuit.

Market America: Know The Company

Market America was founded in 1992 by James Howard Ridinger and his wife, Loren Ridinger, and is headquartered in Greensboro, North Carolina. Originally started as a small family business, Market America has grown to become an international MLM company with operations in several countries, including Australia, Canada, and the United Kingdom. Through its online shopping platform, Shop.com, Market America offers a range of products, including health and wellness supplements, cosmetics, household items, and more.

Business Model

Market America uses an MLM structure that combines product sales with a network marketing approach. As an “UnFranchise Owner,” a distributor is expected to recruit new members to grow the business while also promoting and selling products. The more people an UnFranchise Owner recruits, the more commissions they can potentially earn, creating an incentive to prioritize recruitment over direct sales.

In 2010, Market America acquired Shop.com, an online shopping website, which allowed it to expand its reach and move its business into e-commerce. This acquisition was significant as it reduced reliance on individual distributors to generate all sales, but concerns over a heavy emphasis on recruitment persisted.

Is Market America A Pyramid Scheme?

One of the primary distinctions between legitimate MLMs and pyramid schemes is whether the business model is more focused on product sales or on recruiting new members. Pyramid schemes often promise high returns for recruiting others rather than for selling an actual product. Critics argue that Market America operates similarly, with most income opportunities concentrated at the top tiers of the organization, leaving new recruits with minimal chances to earn.

In the 2017 lawsuit, plaintiffs alleged that Market America made false income claims and failed to disclose the costs of participating in the UnFranchise business. Many distributors reportedly paid substantial amounts to attend training seminars and to maintain their active status, only to find that their earnings didn’t meet the promises made by the company. This structure raised concerns about whether Market America was prioritizing recruitment to sustain profits, mirroring the characteristics of a pyramid scheme.

Market America Lawsuit

The 2017 lawsuit was initiated by former Market America distributors Chaunjie Yang and Ollie Lan, who claimed that the company misled them with exaggerated income projections and pressured them to make large investments without disclosing the full costs involved. They accused Market America of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act, a federal law that targets fraudulent and deceptive business practices.

The plaintiffs argued that Market America was not primarily focused on product sales, but instead on an aggressive recruitment model that promised success primarily to those who could recruit the most new members. They sought financial restitution for their losses and called for measures to prevent Market America from continuing these practices.

Allegations Faced By Market America

Several significant allegations were raised against Market America, including:

  • False Income Claims: Market America was accused of inflating income expectations to attract new recruits, presenting testimonials from top earners to create an impression of easy success.
  • High Costs for Distributors: The company allegedly required distributors to cover high fees for maintaining an active status, participating in seminars, and purchasing products.
  • Targeting Immigrant Communities: Market America was accused of targeting Chinese-American communities and encouraging them to recruit family members, leveraging cultural ties to strengthen the recruitment network.

Case Progress & Judgement Of The Court

The lawsuit was initially filed in California but later transferred to North Carolina, where Market America’s headquarters are located. The court required that the parties engage in arbitration, a process to resolve disputes outside the courtroom, which allowed Market America to defend its business practices away from public scrutiny. Some critics argue that this move limited the plaintiffs’ ability to pursue justice fully, while others believe arbitration offered a faster resolution.

Impact Of The Case

The lawsuit against Market America had notable repercussions. Not only did it cast doubt on Market America’s business model, but it also affected the broader MLM industry. The lawsuit emphasized the need for more transparency and accountability in MLM structures, especially regarding income claims and hidden costs. The case also highlighted that regulatory bodies, like the Federal Trade Commission (FTC), should enforce stricter oversight of MLM companies to prevent unethical practices.

Wrapping Up

The 2017 lawsuit against Market America has highlighted the potential pitfalls of MLM business structures, especially when recruitment is prioritized over genuine product sales. As MLMs continue to attract participants with promises of high earnings, it’s essential to scrutinize the business model and assess whether the focus truly lies on product sales or recruitment. For those considering MLM opportunities, understanding these distinctions can be crucial in making an informed choice.

FAQs

What is Market America’s business model?

Market America is a multi-level marketing company that combines product sales with network marketing, where distributors earn commissions based on sales and recruitment.

What was the 2017 lawsuit about?

The lawsuit alleged that Market America operated a pyramid scheme by prioritizing recruitment over product sales and making exaggerated income claims.

Did Market America resolve the lawsuit?

The lawsuit led to arbitration, but exact settlement details have not been publicly disclosed.

How did the lawsuit impact Market America’s reputation?

The case damaged Market America’s reputation, leading to investigations and the removal of misleading income claims from its platforms.

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