(NEWS CENTER) — You've probably seen the posts in your Facebook feed for companies like It Works, Beach Body, Shakeology, Arbonne and more. Those are multilevel marketing companies and the people who sell the products often promise big returns if you also join their team. Experts say there may be a reason to be cautious before you open your wallet.
Falmouth mom Laura Farraher joined It Works about two years ago. She sells the company's health and wellness products, in addition to recruiting other salespeople. "I never in a million years thought I would be selling anything," she says. The self-described introvert says the internet makes her business possible, adding "our outreach is now the world." Her friend Danielle Roy sells the beauty brand Nerium in order to make ends meet at home. "I raise my kids on a single income and it's allowed me not to miss a step in my financial contribution to my family."
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The women, like others in MLM, earn money for the products they sell and on the products sold by the people they recruit. "University of Southern Maine professor, Dr. Patricia Griffin says MLM can be a money maker, but cautions it's usually best for people trying to make a little extra money, rather than as a primary source of income. "Most of the time it's a few people make a lot of money," she says.
The industry has its skeptics. Dr. Griffin says it's sometimes compared to a pyramid scheme. If a person makes most of their money based on sales to the public, it's usually a legitimate multilevel marketing plan. If money is earned based solely on the number of people recruited, it's usually considered a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.
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Last year, Herbalife got into trouble with the Federal Trade Commission and agreed to pay $200 million to consumers and overhaul their business to avoid being charged with operating a pyramid scheme.
When it comes to MLM, Dr. Griffin says, "Do your homework. It could be a marvelous opportunity but do your homework.