Like many Americans, I’m deeply alarmed by the escalating attacks on consumer protection in Washington – especially the efforts to gut the Consumer Financial Protection Bureau. Weakening this vital agency will lead to more fraud, more predatory lending, and greater risk of another economic crisis.
I’m also deeply troubled by recent developments at the Federal Trade Commission, especially the unlawful removal of Commissioners Slaughter and Bedoya – two of the most dedicated public servants I’ve worked with. Their absence diminishes the agency, and they should be reinstated without delay.
But I have not lost hope that over the coming years, the FTC can take meaningful steps to make markets more fair. On May 1, the agency brought an important suit against IM Mastery Academy – an MLM accused of making outrageous income claims to potential recruits. Today I want to urge the FTC to build on this momentum and take additional steps to protect multi-level marketing (MLM) workers.
I use the term “workers” deliberately. People in MLMs wear many hats – consumers, workers, entrepreneurs, competitors – but at bottom, most are trying to earn extra income. More than 14 million Americans are believed to participate in MLMs – more than all Uber and Lyft drivers combined – yet most make little to no money, or even lose money. The FTC’s Chair, Andrew Ferguson, has indicated that protecting workers will be among the agency’s biggest priorities. I would submit that a pro-worker agenda cannot overlook millions of struggling MLM workers.
Today, I’ll outline four proposals – each well within the FTC’s authority – to better protect MLM workers. Notably, while today I’m focusing on the FTC, states have similar tools to promote fairness and police wrongdoing in this market.
I’ll then turn to how lessons from MLM regulation might guide us in safeguarding workers in other precarious sectors, especially gig work.
Let’s dive in.
I. Ban Deceptive Earnings Claims and Increase Penalties for Violations
My first proposal has already been proposed: The FTC should move forward with the earnings rulemaking the agency advanced in January. For some years now – starting in a 2021 article I wrote with Rohit Chopra – I have argued that focusing on earnings claims can be the most efficient and effective path for enforcers to protect MLM workers. There are three reasons I believe this focus is appropriate – call them the 3 Rs. Deceptive claims are relevant to consumers, they offer a clear record for enforcers, and they open the door to remedies that can deter misconduct and make victims whole.
Let’s start with relevance. People looking to earn money want to know how much they can expect to earn. Unscrupulous MLMs understand this, and it’s why these claims continue to abound in spite of years of warnings, enforcement, and self-regulatory efforts. Reducing the prevalence of deceptive claims can therefore make a huge difference in people’s lives, helping them avoid dead-end jobs and spot opportunities that can actually support their families.
Focusing on earnings claims also gives enforcers a clear record to work with. Proving that a company is a pyramid scheme is often complex, resource-intensive, and slow, allowing harm to mount while enforcers build their case. But false earnings claims are a different story. They’re often public – found in Instagram reels, YouTube videos, and TikToks promising “financial freedom.” Deceptive claims are faster to find, easier to prove, and quicker to stop. Especially with the help of dedicated watchdogs like TINA, enforcers at all levels are well equipped to police and prosecute these baseless earnings claims. And strong relief in these cases sends a message not only to violators but to the whole market.
That brings me to the final advantage of focusing on earnings – remedies. One of my focuses at the FTC was sending a clear message across sectors that breaking the law would be costlier than following it. That’s why we served Notices of Penalty Offense on hundreds of firms, and brought a sustained series of cases enforcing these notices against violators.
Based on evidence I’ve seen and conversations I’ve had, I know that these notices made a real difference in deterring deceptive claims. But importantly, the Penalty Offense Authority does not allow the FTC to seek redress for victims – a key gap in the post-AMG landscape.
That’s why the FTC’s earnings rulemaking is so important. It would ensure the agency can seek both redress and civil penalties in every case where MLM workers were deceived about how much they would earn. Finalizing the rule would not only reduce the prevalence of deceptive claims but would level the playing field for businesses that compete for talent honestly.
The question now, of course, is whether Chair Ferguson will move forward with the rulemaking. To date, the rule has still not been published in the Federal Register – depriving the public of the opportunity to even comment on its provisions.
That needs to change. I believe strongly that the rule we proposed should be finalized in some form. Chair Ferguson may feel differently – and that’s his right – but at the very least, the public deserves to weigh in.
And I would further urge Chair Ferguson to keep an open mind about the scope of the rule. When the FTC launched its earnings rulemaking in 2022, the agency had brought two cases challenging deceptive earnings claims by gig platforms. Since then, however, the agency has challenged the earnings claims of five of the largest gig platforms in the country – platforms that collectively employ millions of workers. I believe there is now a strong factual and legal record to support a broader rule – one that covers earnings misrepresentations by gig platforms, in addition to MLMs.
But I won’t get ahead of myself. The urgent task today is for Chair Ferguson to publish the Notice of Proposed Rulemaking, so the FTC can hear directly from the businesses and workers who’d be affected by this rule.
That brings me to my next proposal: making sure MLM workers can speak out freely about their experiences.
II. Stop MLMs from Silencing and Deplatforming Workers
Even if enforcers succeed in cutting down on false earnings claims, the reality remains that many workers will still end up disappointed by their experience in an MLM.
Maybe it’s the pay. Maybe it’s the hours. Maybe it’s just the realization that the opportunity didn’t match the pitch.
Whatever the reason, those workers need to be able to speak up. They should be free to tell their stories – to the public, to the press, and to the government. No one investing their time and money in a business opportunity should be forced to operate in the dark.
But too often, as the FTC has found, MLMs include gag clauses that purport to prevent workers from speaking out about their experience. In fact, the agency heard from MLM workers who commented anonymously because they said they feared retaliation.
These gag clauses cause real harm. They deprive prospective recruits of critical information. They isolate workers who might otherwise be able to connect, share experiences, and recognize systemic problems. And they expose workers to harsh retaliation. The FTC has documented numerous efforts by MLMs to sue or deplatform workers who dare speak out about harms they have suffered.
For these reasons, earlier this year the FTC voted to launch an Advance Notice of Proposed Rulemaking to consider prohibiting MLM gag clauses altogether, among other worthy initiatives. This rulemaking should move forward.
Yet unfortunately – and ironically – Chair Ferguson has so far refused to even open the ANPR for public comment. That means workers don’t just lose their voice in contracts – they’ve lost their voice in the policymaking process itself.
I would again urge Chair Ferguson to reconsider that decision. The Chair has repeatedly expressed concerns around free speech and deplatforming – and those concerns are valid. But that right of expression must extend to MLM workers. If Chair Ferguson truly wants to be a champion for workers, that starts with giving them a voice – both in their jobs and in FTC policymaking.
III. Ensure MLM Workers Can Compete
I want to turn now to another opportunity for Chair Ferguson to advance the well-being of MLM workers – challenging post-employment noncompete clauses.
Last year, the FTC voted to ban these clauses nationwide – a reform that was expected to raise wages for millions of workers over the next decade. Notably, MLM workers weighed in to support the FTC’s rulemaking, even as the Direct Selling Association opposed the initiative.
Regrettably, that rule hasn’t taken effect, and Chair Ferguson voted against it. Yet the Chair has also said he sees challenging non-competes as part of his pro-worker agenda. If that’s true, then MLM workers deserve special attention.
Workers who leave their MLM often do so because they couldn’t earn a living, despite investing significant time and money. It’s far from clear what legitimate purpose is served by barring them from pursuing adjacent work that better rewards their expertise. Unlike high-level executives, MLM participants are typically low-wage, non-salaried, and lack the power to negotiate their contracts. And unlike traditional employers, MLMs rarely subsidize worker training – indeed, they often charge for it.
In short, the usual justifications for noncompete clauses simply don’t hold in the MLM context. Yet the harms to workers looking to improve their lives are manifest. The Commission should examine carefully whether the use of these clauses in MLM contracts is an unfair trade practice or unfair method of competition, and if so, should move swiftly to restore economic liberty for workers through rulemaking or enforcement, as the agency has done in the past.
At a minimum, the FTC should seek to void noncompetes when MLMs have misled workers at the point of recruitment. That was the approach the agency took in its recent case against Qargo, a coffee franchise charged with deceiving entrepreneurs about how much they could earn. There, in addition to banning deceptive claims, the Commission voided noncompetes for affected franchisees. Notably, both Republicans on the Commission supported this relief.
At the end of the day, if MLM workers are finding they cannot support their families, they should be able to seek out other opportunities. Tying their hands through noncompete clauses offers no apparent benefits to consumers and competition – rewarding instead those poorly performing MLMs that cannot retain talent otherwise.
Here again, Chair Ferguson has an opportunity to demonstrate his commitment to providing greater freedom and opportunity to low-wage workers. I hope he takes it.
IV. Challenge Illegal Price Discrimination
Let me turn now to my final proposal. Although stopping deceptive recruitment and freeing workers from gag and noncompete clauses would significantly improve the MLM industry, there may still be operators who are trapping workers in dead-end jobs due to how they structure their compensation. Enforcers have traditionally approached this challenge through the Koscot framework, and last year the staff of the Bureau of Consumer Protection issued a letter clarifying how Koscot should be applied. But today I want to advocate that the FTC use an additional tool to ensure MLM distributors are not being set up to fail – a tool the FTC deployed in the same seminal case, Koscot.
While the Koscot test is well known, another key aspect of the decision seems to have been lost to history. Because in addition to finding that Koscot operated as an illegal pyramid, the FTC found that Koscot discriminated against smaller participants by allowing top distributors to purchase products at a 65% discount, while allowing sub-distributors – those in their downline – to purchase products only at a 55% discount. Since distributors and sub-distributors competed for sales, this placed sub-distributors at a competitive disadvantage – forcing them to realize tighter margins on every sale.
This raises the question how the FTC’s finding figures into the Koscot test. And it does not, at least directly. This finding supported an entirely different claim – that Koscot violated Section 2(a) of the Clayton Act, 15 U.S.C. § 13(a), more commonly known as the Robinson-Patman Act.
RPA was passed in the 1930s to help protect smaller retailers from chain store dominance. The law declares it unlawful for any seller to discriminate in price between buyers of goods of like grade and quality where the effect may be to injure competition. RPA also provides certain defenses – most commonly, if sellers can show that the difference in price resulted from different costs in the “manufacture, sale or delivery” of the product to different buyers.
That the Commission’s RPA claim in Koscot has not gotten more attention should not be surprising. First, it was not particularly unique at the time – the FTC brought a nearly identical claim in Holiday Magic, and prevailed there as well. But the real reason RPA has likely been forgotten is that shortly after these cases were filed, the FTC and DOJ largely stopped enforcing the law.
The agencies’ decision to stop enforcing this law has been the subject of intense debate recently. I won’t wade in here, but I do want to stress three undisputed points. First, in December, the FTC brought its first RPA claim in decades – charging Southern Glazer’s, a massive alcohol distributor, with giving favorable pricing and rebates to large chains while denying them to small stores. Second, while that action drew two dissents, Chair Ferguson affirmed that RPA is not a dead letter, and can and should be enforced when the facts support it. And finally, last month, the FTC’s complaint against Southern Glazer was sustained by a federal judge.
That opinion restates the four-part test to establish what is called secondary line discrimination – discrimination that harms the sellers’ customers, dividing them between favored and unfavored purchasers. Plaintiffs must show “(1) the challenged sales were made in interstate commerce; (2) the items sold were of like grade and quality; (3) the seller discriminated in price between the disfavored and the favored buyer; and (4) the effect of such discrimination may be to injure, destroy, or prevent competition to the advantage of a favored purchaser.” To prove the fourth element, the “permissible inference of competitive injury may arise from evidence that a favored competitor received a significant price reduction over a substantial period of time.”
Now apply that to MLMs. In a recent FTC complaint, the agency alleged that lower-level distributors could purchase products at a 35% discount, distributors one rung up could purchase at a 42% discount, and distributors closer to the top could purchase products at a 50% discount – allegations that don’t sound too different than those leveled against Koscot and Holiday Magic.
Now of course, I am not suggesting based on complaint excerpts that this firm was violating RPA. But I do think it’s time to take a closer look industry-wide. In many MLMs, workers at the bottom already face extraordinary disadvantages. They’re less experienced, have smaller networks, and often lose money. Add unlawful price discrimination to the mix, and it becomes structurally harder for them to succeed.
Reviving RPA could change that. A successful RPA case wouldn’t just penalize discriminatory pricing – it could preclude it, which would help ensure a level playing field for low-level workers.
To be clear, no two MLM compensation plans are alike, and the majority of MLMs I have looked at compensate participants based on sales and recruitment, which does not necessarily implicate RPA. But in instances where MLMs are harming smaller distributors by charging them higher wholesale prices, I would urge enforcers to examine whether they are engaging in illegal discrimination.
Importantly, discriminatory pricing is not the only way lower-level distributors can suffer. To the extent top-level MLM distributors are afforded special promotional allowances, merchandising payments, and other rewards, these benefits – if offered in an unequal manner – can run afoul of Sections 2(d) and 2(e) of the RPA. I won’t focus on these provisions here, but the FTC has provided comprehensive guidance around their application.
Today I’ve briefly discussed the potential reach of a revived RPA, but I would encourage all those who care about fairness in the MLM industry to take a closer look at the law themselves. Notably, RPA is enforceable not only by the FTC but by private parties. MLM workers who are harmed by discriminatory practices can recover treble damages, creating another layer of accountability for discriminatory practices.
To be clear, RPA is not a substitute for other key tools, and it is critical that the FTC continue to enforce vigorously Section 5’s prohibition on schemes focused on recruitment over sales. But given the many challenges in this industry, I believe enforcers should be looking at every tool they have to protect MLM workers from wasting their precious time and hard-earned money, including tools that have been gathering dust.
Conclusion
Having laid out a suite of proposals to make the market more fair for MLM workers, I want to step back and consider what broader lessons this work offers – in particular, how consumer protection can complement both labor and antimonopoly work to better protect American workers.
In today’s economy, the boundaries between workers, consumers, and entrepreneurs haven’t just blurred – they’ve been deliberately engineered into ambiguity. And no sector understood this sooner than multilevel marketing.
Predatory MLMs were early adopters of opaque compensation structures, murky incentives, steep power gradients, and information asymmetries as a business model. But we’re now seeing these same dynamics ripple out across the broader workforce. Take the gig economy. Visit any rideshare forum and the same frustrations can be heard – algorithmic pay systems no one can decode; gamified incentive programs that never seem to pan out; deplatforming with no explanation or recourse; and business practices that may be suppressing earnings through anticompetitive tactics.
MLMs, for their part, are also adopting gig-style tools. Gig platforms helped normalize real-time worker surveillance and output tracking. Now, an increasing number of MLM-directed apps monitor downlines and generate performance analytics. Tools like these can raise concerns that cut across different legal areas – they can violate workers’ privacy, facilitate wage-fixing, or give employers a degree of control that raises questions about whether “independent contractors” are actually employees.
The lesson is clear: just as gig platforms and MLMs have blurred the legal and economic categories that traditionally defined work, so too must our response blur disciplinary lines. Consumer protection alone is not enough. Nor are our labor laws or our antitrust laws. To keep pace with an evolving economy, we need policy agendas that span enforcement silos and build shared understanding across fields.
Today I have offered proposals to do so, drawing from both our antitrust and consumer protection toolkits. But those who have long worked on behalf of MLM fairness bring far deeper expertise in a business model that has quietly become a blueprint for other industries. I would urge MLM experts to bring that knowledge to the antitrust scholars dissecting wage-fixing. To join forces with privacy advocates challenging workplace surveillance. To seek out labor lawyers looking to modernize worker classification tests. None of us can do this alone. But together, we can build a more coherent and effective response to economic exploitation, whatever form it takes.
Samuel Levine is a Senior Fellow at the UC Berkeley Center for Consumer Law & Economic Justice. He previously led the Bureau of Consumer Protection at the Federal Trade Commission. This post is adapted from a speech delivered on May 8, 2025, in Washington, D.C.