Is Market America A Pyramid Scheme? Everything You Need to Know

If you want to work in Market America, you may first need to know, “Is Market America a pyramid scheme?” Market America is a company known for selling various products, such as electronics, cosmetics, and clothing. 

It has been in the spotlight lately because of allegations and lawsuits questioning its business practices. People are worried that it might be running a pyramid scheme.

If you are concerned about Market America’s way of doing business and the allegations it is facing, you are not alone. Many wonder if it is a legitimate multi-level marketing company or a pyramid scheme. In this article, we will explore what makes a pyramid scheme and whether Market America falls under this category.

Is Market America A Pyramid Scheme?

Market America is often labeled a pyramid scheme because it focuses more on making money from its distributors than selling services or products. Those who work for this company must regularly buy inventory and attend costly meetings monthly, which can lead to financial strain.

Typical MLM companies would focus on selling existing inventory before purchasing more and prioritizing sales over recruitment. It is what Market America doesn’t do. Sadly, over 90% of Market America distributors lose money, with most not earning anything.

To become a Market America distributor, individuals must pay a $399 startup fee and a $129 monthly fee. In addition, representatives, who are considered independent contractors, must spend between $130 and $300 on Market America products. 

In addition to these costs, distributors need to attend training events and seminars, which can range from $20 to $200. Many end up spending thousands on these events and other fees.

What is Market America?

Market America was established in 1992 by James and his wife, Loren Ridinger. It is a multi-level marketing (MLM) company. James Ridinger was a former top distributor for Amway, and he started Market America to create his own MLM venture.

The company’s headquarters are in Greensboro, North Carolina, and it had about 800 employees as of 2016. Market America sells a wide range of products, including cosmetics, auto care products, weight loss items, electronics, skincare products, cleaning supplies, and food products. 

With its extensive reach, individuals who choose to sell for the company can sell to people or recruit people from anywhere. Because Market America is a complex company, people see it in different ways. Some believe it’s a legitimate business with a solid model, while others have doubts.

What is a Pyramid Scheme?

Before delving into the controversies surrounding Market America, it’s crucial to understand what multi-level marketing (MLM) is. In this unsustainable business model, participants are promised rewards mainly for recruiting others to join the network instead of making investments or selling services or products.

It’s typically considered a pyramid scheme when it focuses on sign-up fees, requires regular product purchases without a buy-back option, and strongly promotes recruiting more investors instead of selling products.

These schemes typically exploit people’s desire to make quick money by focusing on recruitment instead of the wholesale or production of services or products. A pyramid scheme is a deceptive money-making system that relies on recruiting more and more “investors.” 

The scheme starts with the primary promoters recruiting investors, who then recruit others, and it goes on. It’s named a “pyramid” because the number of investors grows at each level. The few promoters at the top rely on a large base of later investors to keep the scheme running by generating profits for the initial investors.

Pyramid schemes include selling distributorships or products. The current trend is to include sales of distributorships or products to appear legitimate. 

This is a strategy to avoid regulatory agencies because most state laws prohibit marketing in which profits mainly come from recruiting other distributors, not from selling products. However, the bottom line is that in every pyramid scheme, recruiting new investors is more crucial than selling products.

Explanation of Market America Scam

Some people still think Market America might be running a pyramid scheme, while others question its focus on recruiting new members. The company claims it’s on top because of its unique methods. People must research and think hard when checking out how Market America operates. 

Market America is like the newest, fanciest version of those multi-level marketing schemes that promise you’ll become rich quickly but often leave you feeling let down.

In Market America, the main scam is the people who want to be “Unfranchise Owners” or “Independent Distributors” who pay cash to sell items like kitchen gadgets, vitamins, and makeup. In addition, they have the freedom to recruit other independent investors who are fellow victims.

James Howard Ridinger is the CEO of this company, and his wife, Loren Ashley Ridinger, is also a founder. The remaining executive team has family members, including Steve Ashley and Marc Ashley. Why are there so many relatives on the executive team? If you were doing a scam, who’d you trust more than your relatives to help pull it off?

They used to use pyramid scams or classic MLM tactics. They’d bring in salespeople, who’d then bring in more salespeople, and so on. As some see them, these victims, or salespeople, were promised a portion of their sales and, more crucially, a portion of what their recruits sold.

This setup encouraged salespeople to build a “downline” of recruits to earn from their sales. Every salesperson usually had sales targets to meet to stay in the scheme and get commissions from their recruits. However, the products were way overpriced, so salespeople often bought them to meet the company’s requirements.

Imagine someone at the bottom of the pyramid scheme paying $100 for an overpriced vitamin pill. The person who referred him earns $5, the person above him earns $3, the next one $2, and the company earns $90. The actual cost of the pill is $5. So, why would the person at the bottom of the line spend $100 on a $5 pill?

Because they have been convinced that it’s the best pill, but more crucially, they have to fulfill targets to stay in the scheme and bring in more recruits. No one’s that foolish to spend $100 on a $5 pill, but they’re pushed to buy it themselves to meet their targets.

The chief operating officer of Market America and JR’s brother-in-law, Marc Ashley, said, “JR’s great gift is, well, a lot of guys can sell stuff, but JR sells belief.” He also said, “JR sells the idea that you, too, can be a great salesman. He sells that belief in yourself. Only the very top fraction of salesmen can do that.”

The aim of Market America and its platform is not about selling products. It’s a scam because the products of Market America are a cover-up. The leadership team openly says their main aim is convincing others they can get rich, too. It’s like the simplest form of pyramid scam recruiting.

Allegations and Lawsuits on Market America 

In 1999, Market America settled with the SEC over accusations of selling stocks. They neither admitted nor denied guilt but paid a settlement of more than $200,000 with interest and a $100,000 fine.

Market America experienced a federal lawsuit and allegations of running an illegal pyramid scheme. The scheme targeted Chinese immigrants, falsely promising them income opportunities that were impossible to achieve. 

Residents of California filed this lawsuit claiming that the company violated California state law and the Racketeer Influenced and Corrupt Organizations Act (RICO). One accusation is that investors were pushed to sell products to their friends and family members, especially in China. Also, they were rewarded more for recruiting other investors than for selling products.

Another lawsuit claims that the company focused on Chinese American immigrants who lacked access to regular legal support, leaving them vulnerable to rights violations. It also accuses the company of promoting a two-year plan that promised unlimited financial success if followed, with failure being attributed only to quitting.

Despite this, Market America’s owners earned 7.3 billion dollars of business valuation, while most complainants earned no money. The lawsuit also claims that people didn’t make money because the marketing strategy rewarded recruiting other investors over selling products. This resulted in more than 90% of investors experiencing average net losses.

Final Words

Deciding if Market America is a pyramid scam is multifaceted and complicated. Even though the company claims to offer a legitimate business opportunity, it’s facing controversies and allegations that call its credibility into question. 

Market America is tangled up in lawsuits related to multi-level marketing (MLM). Accusations suggest that the company prioritizes recruiting new members over selling products, which has negatively impacted some distributors. 

Numerous allegations and lawsuits raise concerns about Market America’s MLM methods, with some suggesting it might resemble a pyramid scheme more than a legitimate MLM.

Legal problems may affect Market America and MLM. The company’s allegations highlight concerns about MLM business techniques and prompt talks about regulations to safeguard investors and the industry.