Weaponizing Rhetoric to Legitimate Regulatory Failures

Abstract

Pyramid schemes are illegal. According to the courts, they are fraudulent because they must eventually collapse, disappointing or exploiting the members at the bottom. This illegality, largely governed by the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC), is narrowly construed to encompass only very specific instances of activity. In essence, the specificity of the law allows MLMs to argue that they are 'not a pyramid scheme' to obfuscate exploitative conditions within the company. We take Lularoe as a case study of the ways in which this discourse is weaponized to obfuscate the harms of multi-level marketing. We conduct thematic text analysis on a popular internet discussion forum to study how ordinary people understand law surrounding multi-level marketing companies and how MLM law affects legal consciousness and cynicism about the protective capacities of law. We argue that a narrow legal interpretation of "pyramid schemes'' serves to further exploit the very people that illegality is meant to protect.