Market America pyramid scheme and the lawsuit that followed drew global attention due to its implications for the company and impact on multi-level-marketing and pyramid schemes. The company is known for its global operations and independent distributors whose earnings depend on two factors: selling products and connecting others with the company. However, a Chinese American person revealed the company’s deceptive practices. In this article, we will know about the Market America Pyramid Scheme, MLM scheme, allegations, and lawsuit of 2017 to make an informed decision.
Market America: Overview Of The Company
James Howard Ridinger and Loren Ridinger founded Market America in 1992. Its headquarters is in Greensboro, a city in North Carolina, USA. James Howard Ridinger worked as a distributor at Amway earlier. Later, he and his wife, Loren Ridinger, decided to open their own company using an innovative business method.
Business Model Of Market America
Market America sells products like health supplements, cosmetics, electronics equipment, jewelry, household cleaning equipment, etc. According to the company, they don’t manufacture the products; rather, they only help market and sell them. Market America connects people who become sellers or UnFranchise owners of the company.
Acquisition Of Shop.com
In 2010, the Company bought the shopping firm Shop.com to sell its products online. This acquisition increased the profit of the company as it was not solely dependent on the people to sell the items. However, this company earns more with its networking program rather than selling products.
Market America Lawsuit 2017
In 2017, Market America was sued by Chaunjie Yang and Ollie Lan, who claimed that the company was operating a pyramid scheme. The lawsuit gained attention because it alleged that the company was misleading its distributors and focusing more on recruitment than actual product sales. This raised questions about whether Market America’s business model was a legitimate MLM structure or an illegal pyramid scheme.
Was Market America A Pyramid Scheme?
Pyramid schemes focus on recruiting new members rather than selling products. Participants make money by bringing in new recruits instead of through product sales. The plaintiffs alleged that Market America misrepresented potential earnings, with only those at the top earning significant amounts of money, while most distributors faced financial losses. This raises the question of whether the company prioritized growing its network over selling products.
Allegations Faced By Market America
Several key allegations were made against Market America:
- False Income Claims: Market America was accused of attracting people with exaggerated success stories and promises of high earnings. However, most participants did not earn as much as advertised.
- High Costs for Distributors: The plaintiffs claimed that Market America charged distributors high costs for maintaining active status and attending meetings. These expenses made it hard for most distributors to make a profit.
- Targeting Immigrant Communities: Market America was accused of targeting Chinese-American immigrants, encouraging them to recruit family and friends into the scheme, which helped to sustain the pyramid structure.
Course Of The Lawsuit
The lawsuit was initially filed in California but was later moved to North Carolina, where Market America is based. It was then combined with similar lawsuits. Despite these legal challenges, the lawsuit brought attention to Market America’s practices, leading the company to defend its business model. This case was an important moment in examining the MLM industry and its practices.
Impact Of The Lawsuit
The lawsuit against Market America had big effects on the company and the MLM industry. It hurt Market America’s reputation, making people worry that it might be a pyramid scheme. The lawsuit also cost the company a lot of money for legal fees and settlements, but the exact amount isn’t public. Truth In Advertising (TINA) looked into Market America and found that the company had made lots of misleading claims about how much money people could make. Market America had to take down about 750 false statements from its websites and social media.
The case also made it clear that the MLM industry needs better rules and more transparency. The Federal Trade Commission (FTC) and other agencies want MLM companies to be more honest about how much money people can make and how much it costs to join so that people don’t get hurt financially.
Final Verdict: Market America Pyramid Scheme
The 2017 lawsuit against Market America serves as a reminder of the risks linked to MLM companies and potential pyramid schemes. It raised important questions about the legitimacy of Market America’s business model and drew attention to the deceptive income claims often associated with MLMs. For those thinking about joining MLM companies, this case highlights the importance of understanding how these models work and being cautious about promises of high earnings.
FAQs
Who is the founder of Market America?
It was founded by J.H. Ridinger and his wife, Loren Ridinger in 1992. Its headquarters is in Greensboro, a city in North Carolina, USA.
What was the impact of the Market America lawsuit in 2017?
This lawsuit raised questions about the practices of the company and the fraud of MLM and pyramid schemes. The image of the company was tarnished globally.
Why Market America is not listed in the stock market?
Market America was a public company till 2001 but then J.H. Ridinger and his wife bought all the shares of the company and it became a private entity.
