The Illusive Multi Level Marketing History Explained
Like many other misunderstood concepts, multi level marketing has met resistance in the past due to a general confusion of what it’s all about. The multi level marketing history is pretty straight forward but things got confused in the general public’s mind when illegal pyramid and Ponzi schemes were created around the same time.
In reality, multi level marketing, also known as network marketing or simply MLM, is just another sales model that first emerged in the early 1940’s. A company called California Vitamins realized that all its new sales representatives were friends and family of the existing sales force, the reason being that they wanted the product at wholesale cost. The management also discovered that it was far easier to create a sales force of a lot of people who each sold a small amount of the product than it was to find a few people who could sell a lot of products.
So they responded to what was going on by designing a sales compensation structure that encouraged their sales staff to turn satisfied customers (often family and friends) into sales representatives. The company rewarded them for the sales produced by their entire team of sales representatives. And multi level marketing history was made!
In 1956, Dr. Forrest Shaklee joined in the multi level marketing concept to offer a broader distribution of the food supplements he had developed.
And then in 1959, former NutraLite distributors Rich DeVoss and Jay Van Andel started the Amway company as the American Way of marketing products.
All was fine and good until the concept got into some wrong hands who started to abuse it. Believe it or not, one of the first examples of this came in the form of chain letters. The letters promised great profit if you would send a dime or a dollar to the person at the bottom and many did just that. Although these letters actually started and were thankfully shut down before multi level marketing was born, they later spawned similar schemes which we know as pyramid or Ponzi schemes. These illegal activities involve paying members commissions for recruiting other members. However, no product or services is offered as it is by legal MLMs.
In 1974, Senator Walter Mondale declared pyramid and Ponzi schemes to be the nation’s number one consumer fraud. And that’s when it got rough for multi level marketing. In the mid 1970’s, because they had no real clear understanding of what network marketing was all about, the Federal Trade Commission began to target all network marketing companies. In 1975, the FTC filed suit against Amway, on the grounds that the company was an illegal pyramid and that its refusal to sell its products in retail stores constituted a restraint of trade.
Four years and millions of dollars later, Amway cleared its name. In 1979 the FTC finally ruled that Amway was not a pyramid, that its revenue was generated from the sale of its products, and the FTC acknowledged network marketing as a legal distribution system.
Since then, the multi level marketing history has come to include thousands of successul MLM companies all around the world.
