Litigation

Mainstream media recognizes Mary Kay Cosmetics as a product based pyramid scheme

By Tracy Coenen

The success of multi-level marketing companies and pyramid schemes has been based partly upon favorable media coverage of the industry. The MLMs put out plenty of positive press releases, resulting in numerous fluff pieces in newspapers and magazines over the years.

Mary Kay Cosmetics encourages fluff pieces, especially whenever a new Mary Kay national sales director is appointed. The company hounds local newspapers to run these stories, and the newspapers fall for the bait that makes the stories sound compelling:  only 500 national sales directors worldwide, millions of dollars of products “sold” by the teams created by these women, huge accomplishment to get to the top of the pyramid, etc.

But this article in the Salt Lake Tribune turned out a little differently than Mary Kay intended it. Thanks to the investigative reporting by Steven Oberbeck, he got readers to consider the “other side” of the Mary Kay issue.

Utah woman a star in pink
Gladis Camargo reaches top level in Mary Kay’s sales force
By Steven Oberbeck
The Salt Lake Tribune
05/15/2008

During the past 13 years, Camargo has built up a marketing organization of nearly 40 sales directors who in turn are responsible for leading, training and motivating more than 3,000 independent beauty consultants.

Later this summer, she will be recognized at Mary Kay Inc.’s annual seminar in Dallas for achieving the position of “independent national sales director” - a ranking only attained by about 500 women during the company’s 44-year history.

[snip]

The company, though, isn’t without its critics, many of whom focus on Mary Kay’s pyramid-like marketing structure but acknowledge the company’s operations aren’t violating any laws.

Under such multilevel marketing arrangements, independent sales associates can earn a commission on merchandise they sell. More importantly, they get a piece of the sales from new distributors they recruit, and on down the line.

Tracy Coenen, a forensic accountant who runs the Web site www.pinktruth.com, believes Mary Kay is just such a “product-based pyramid scheme.” She said it relies on an endless recruitment of new people who purchase inventory so those at the top of the marketing organization can collect large commission checks.

Camargo said she doesn’t listen to such criticism.

“I’m happy with the business I’ve built and the career I have,” she said. “And I’m grateful for the opportunity I have to help other women because I know what this (Mary Kay) can do for people. It can change lives.”

[snip]

This article represents a big step for journalists on the issue of multi-level marketing. Until the media recognizes MLMs as legalized pyramid schemes, consumers will only hear positive things about these companies. Here’s hoping for more truthful articles about Mary Kay and other MLMs in the future.

And hats off to Mr. Oberbeck for having the courage to write this article.

Full post as published by The FRAUDfiles Blog on May 24, 2008 (boomark / email).