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Market America, a multilevel marketing company founded by JR Ridinger, is facing a Federal Racketeering lawsuit.
The case alleges Market America operates an illegal pyramid scheme scamming unsuspected immigrants into believing that the company is a great business opportunity ever existed on earth.
This Federal Racketeering lawsuit brings to light the danger and risk of investing in the MLM business opportunities.
The purpose of this Market America review is to expose the business secret behind the Multilevel Marketing scam. This federal lawsuit is a great way to start this discussion.
One Market American distributor, Yang, lost $35,000 in investing in products, seminars, and fees to Market America scam.
Read this review to protect yourself and to learn a better way of making money without getting involved up with MLM scams.
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Market America Review
Facing the Federal Racketeering Allegation
Clement Erhardt, the company’s attorney, claimed Market America is not a scammer, and “it has never been accused by any federal, state or international regulator of being anything but a legitimate business enterprise,”
Is this the truth? To know the answer, we have to look at the business of Market America.
What is Market America?
Market America business is structured as a Multilevel Marketing (MLM) company.
This company was established in 1992 by James Ridinger and his wife Loren Ridinger, both were former star Amway distributors who decided to start their own MLM company.
Market America is currently employing more than 200 staff in its Greensboro, N.C. It also claims to have over 650 employees globally, including in its international operations in Hong Kong, Taiwan, Austria, and Canada.
The company acquired Shop.com in 2010, an online comparison shopping engine, to help boost their online presence and sale. Today, people also know Market America as Shop.com.
Market America product
Market America operates as an online retailer providing more than 35 million products and services to distributors and customers from books and videos to other products including home goods.
The company also has its own line of more than 2500 products under Market America branded including Ultimate Aloe Juice and their Isotonix range of products. These products are also offered in partner stores like Best Buy, Apple, Target, Victoria’s Secret, Nike, Barnes & Noble, and Bloomingdales.
Here are a few category lines of product offering by Market America:
Health & Nutrition
Home & Garden
One of their most popular line of products is the one represented by Scottie Pippen back in 2010. It is a line of nutritional supplements called Isotonix. They are selling around $70 for a bottle.
This is just a small list. You should know that I am not going to list everything they sell in this Market American review. It is just impossible.
Market America independent distributor,
an Unfranchise business
An Unfranchise business is a slogan that Market America promoted its distributor program.
I get it, no one wants to pay a franchise fee. But the cost to start a business with Market America is not cheap.
If you want to become an independent distributor of Market America, the startup fee is $399 along with monthly payments of $129.
The charges are for a web portal which gives distributors an online presence as well as the ability to promote more than 35 million products that the company deals with to earn commissions.
Distributors are required to purchase a product selection worth $500-$1,100 according to your product choices from Shop.com and are also required to attend seminars and training events, which cost between $20 and $200.
The total cost to become a Market America independent distributor cost over $2,000 to start. This is not including promotional and marketing materials cost.
Can you make money as a distributor of Market America?
Market America critics have argued that very few distributors earn a significant profit.
The Federal Racketeering lawsuit alleges majority of Market America distributors “were doomed from the start by a Market America marketing plan that systematically rewards recruiting distributors over the sale of products.”
The action also alleged “Over 90% of Market America distributors average net losses. No persons, except individual owners and secretly placed individuals in the ‘representative’ tiers of the owners, make any money.”
Market America is specifically targeting people looking for part-time work or home-based business, such as stay-at-home parents. This group is drawn into the company to sell Market America products to their friends and family, however, both lost money to Market America.
From the fact of this lawsuit, you can say that over 90% of people will lose their investment in this multi-level marketing.
This is because most multilevel marketing programs charge distributors substantial startup and unnecessary products & training materials fees to supposedly learn how to sell overpriced products in exchange for a very skimpy commission.
Under the Market America compensation plan, distributors earn money from buying products, selling products, and recruiting new members to their sales team.
Here is a quick overview of the Market America binary compensation system.
Earn cashback Commission from personal purchases
Market America calls this a commission, but I call this a discount. When distributors purchase Market America products for their personal use, they get a discount in a form of cashback up to 35%.
However, distributors only receive a discount from eligible products on Shop.com, and they have to be Market America-branded products.
If you are looking to earn cashback, you better off joining Ebate. This program pays you $10 to Join and offers up to 20% discount on everyday purchases.
Earn commission from retail sales
Distributors earn a retail commission from all their direct personal sales.
Market America calls this a commission, but in fact, this is just the markup margin on each product by a distributor. The amount of markup margin is different by product and by the distributor own decision. Some end up losing money if their markup is below the cost.
Distributors are also required to carry inventory purchased at wholesale at the time of joining and sell it themselves at retail to recoup their investment.
These purchased inventories are normally used as recruiting gifts of distributors to bring friends and family members into their network of preferred customers who then continually order from them online each month on a monthly auto-ship program.
Most Distributors never make a profit from the initial inventories.
Downline Team Earnings
Under the Market America system, a distributor must develop two teams of representatives, one on the right and left legs to qualify for downline team commissions. Commissions are paid out based on the weaker leg, or the one has lower sales volume. Also, earning under this category is capped at $3,600 per week.
Market America reported $7912 million in revenue in 2016. However, based on the binary system, most of the profits go to the two owners and top company officials. Very little commissions are paid to distributors.
This payment system is contrary to Market America claims that its compensation model is the industry-best.
Market America Pros and Cons
Should you become a distributor?
There is always a bad and good side to every company. We want to invest in companies with more positive stories than bads. Market America seems to have more bad stories, especially with lawsuits after lawsuits. The biggest one is this Federal Racketeering.
The good news is that Market America is not a scam, but rather a multilevel marketing company.
You can make money as a distributor, but it is not as easy. You will have to work hard at recruiting people into your network to make money.
Market America offers distributors a chance to earn money online by acquiring Shop.com. This is much better than most MLM companies that rely solely on traditional face-to-face marketing methods.
This can be both Pro and Con
You can be rich with Market America if you are a member of an inner circle of the owners’ network. This is stated in the Federal Racketeering lawsuit. Bad news for other distributors.
The initial investment is too expensive. The least is $2,000 and it can go as high as $35,000. It all depends on the level of initial inventories that you purchase.
Most products and services are extremely high priced which makes selling them at retail very difficult. This is why most distributors use their purchased inventories as gifts to entice new people to join their network.
IMPORTANT WARNING BUSINESS ISSUES
Market America directly competes with its distributors at the retail level by making their products available in stores like Best Buy, Apple, Target, Victoria’s Secret, Nike, Barnes & Noble, and Bloomingdales. Ask yourself this question, who would buy from you if they can get the same products from a big department store at a cheaper price?
Earning is capped at $3,600 per week. This means every dollar that your business generates over $3,600 belongs to Market America, not you as a distributor. This doesn’t sound like a business at all. Well, most Market America distributors believe this is a good business idea.
This business is all about recruiting. Most distributors make money on new people purchasing start kits. If you are not a good recruiter, you will lose a lot of money. This happens to about 90% of the people involved with MLM.
Too many legal troubles, this Federal Racketeering lawsuit is not the first one. In 1999, Market America reached a settlement with the Securities & Exchange Commission paying $235,498 to a fund administered by the SEC plus a fine of $100,000.
Market America reviews by the Better Business Bureau
This company has an A+ rating with the Better Business Bureau (BBB) at the time that I am writing this Market America review. You should visit the BBB for a better update of this rating.
An A+ rating with the BB does not mean anything. The BB only collecting complaints from customers and most distributors do not complain about losing money. Some bring a lawsuit because that’s the only way for them to recover their losses.
A few entrepreneurs rely on the BBB rating to invest in a company, this is not wise. Business investment should be viewed from the financial point, not from customer complaints.
A good company for investors is the one with strong earnings, a positive future business outlook, and a great return on investment (ROI) to recover the initial costs, not the BBB rating.
Is Market America a good home-based business?
In my opinion, Market America is not a good home-based business. Not because this is an MLM company, but because of all the negative business outlooks, especially the Federal Racketeering lawsuit. I certainly do not want to get involved with this mess.
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I just want to say one thing to all Market America distributors. I have nothing against this company. I am just reporting the truth. If you are struggling to make money as a distributor, I believe this is the time to reevaluate your business with Market America.
I just want to help everyone build a real business, a business that they are proud to own and pass on to their family. Under MLM, you are not truly the owner of an MLM network. The moment to stop recruiting, your business will die.