Facebook and Twitter courted controversy by flagging and fact-checking voter fraud claims on their platforms, but when it comes to socially responsible moderation, video-sharing app TikTok is leading the pack.
A recent update to TikTok’s terms of service bans promotion of scams and fraud, and it includes multilevel marketing pitches alongside Ponzi and pyramid schemes. Users can no longer post recruitment videos or product testimonials for companies that exploit entrepreneurial impulses to swell their sales force.
MLMs are companies such as Herbalife, Amway, Mary Kay, LuLaRoe and DoTERRA that sell products through independent distributors instead of offering them through brick-and-mortar retailers or online stores. Salespeople aggressively recruit others to join the business in exchange for cash bonuses or a cut of their proteges’ profits.
Slippery sales pitches dupe people into believing they can replace or supplement their income by working part time at their own pace, hawking cosmetics, weight-loss shakes or essential oils to their existing networks of family, friends and acquaintances.
The siren song snares stay-at-home parents, students, retirees and beleaguered workers who dream of being their own boss.
Only 1 percent of all network marketers earn money from the ventures after paying membership fees and buying the merchandise they resell, according to a 2011 Consumer Awareness Institute study conducted for the Federal Trade Commission.
Joining an MLM isn’t equivalent to launching a startup. About four in 10 small businesses become profitable, and restaurant and retail companies that operate on the franchise model require business plans that show sustainability before licensing their nationally known brands.
Distinctions between an illegal pyramid scheme and a legal MLM company can be nebulous, and they’re ultimately unhelpful. Study author Jon M. Taylor says the staggering 99 percent loss rate is “even worse than classic, no-product pyramid schemes … and ‘pay to play’ chain letters.”
“Comparisons of odds of profiting from gambling with participation in MLM have shown conclusively that participants in many games of chance fare far better,” Taylor wrote.
Lest that conclusion is dismissed as hyperbole, Taylor offers a stark contrast: According to his analysis, the odds of winning at a Las Vegas roulette table are 286 times greater than those of making money shilling for Amway.
Predatory MLMs remain legal and escape strict oversight through brazen lobbying efforts that would make Big Tobacco blush. There’s even a 42-member bipartisan Congressional Direct Selling Caucus, whose members have held events touting direct sales as a benefit for women entrepreneurs.
Since lawmakers and regulators won’t lift a finger to rein in multilevel marketing, social media companies can help fill the vacuum.
Facebook in particular is lousy with MLM pages, groups and posts. Stories about long-forgotten high school classmates popping up to tout a “unique business opportunity” are so ubiquitous they’ve been made into memes.
How about a Facebook algorithm that removes posts promoting MLM brands or prevents them from appearing in friends’ newsfeeds? Why not apply an ominous warning label to Twitter testimonials — the words “This claim is disputed” accompanied by a link to the FTC website?
Despite critics’ confusion, there’s no guarantee of free speech or viewpoint neutrality on private social media platforms. Tech companies have a First Amendment right to moderate content as they see fit. They can choose to prioritize consumer protection just as easily as election integrity.
As MLM horror stories spread, the industry’s embracing new tactics to lure unwitting victims. Herbalife allows its distributors to open “nutrition clubs” that masquerade as gyms or health-conscious cafés but function as sales and recruitment centers.
They’re a study in sneakiness; Herbalife bans any use or display of its branding and suggests intentionally vague names like “Angela’s Wellness Center,” “Healthy Lifestyles Club” and “The Feel Good Zone,” according to a 124-page company document.
These quasi-shake shops are harnessing social media to draw in customers, setting up Facebook business pages and sharing snapshots of colorful herbal teas on Instagram. Putting a stop to this free marketing — or even requiring nutrition clubs to prominently disclose their Herbalife affiliation — would go a long way toward short-circuiting this business model.
TikTok is wise to ban multilevel marketing messages from its platform. Facebook, Twitter, Instagram and other social networks should follow in its footsteps.
— Corey Friedman is an opinion journalist who explores solutions to political conflicts from an independent perspective. Follow him on Twitter: @coreywrites. Click here to read previous columns. The opinions expressed are his own.