Jack Osterhage is a far cry from the suburban moms who used to hawk Avon and Mary Kay around his neighborhood. With a pair of earrings and a beanie, he looks like he’s on his way to a costume party dressed as a hipster. He started studying physics and philosophy in college — the how and the why, he reasoned — and when one of his new friends said her job was hiring, it sounded like an easy enough way to start making some money.
He sent his friend’s manager a text, joined a Zoom interview with a handful of other recruits where he answered a few aimless questions from the millennial hiring managers about his “energy” and “vibe” and landed a job as an online kitchen knife salesperson. He’d been recruited to work at Vector Marketing, the direct selling subsidiary arm of Cutco, a company that’s been selling kitchen knives through a multi-level marketing, or MLM, network since 1949.
The old-school predecessors of contemporary MLMs famously sank their teeth into suburban women in the 20th century whose labor was tied to the home. Companies like Tupperware promised women the opportunity to generate an income and gain a sense of independence in the process. But today, MLMs don’t look the way they used to, no longer sending housewives door to door to host Mary Kay makeup parties with their friends. In fact, many direct-selling companies no longer refer to themselves as multi-level marketing schemes at all, choosing terms like “network marketing companies” and “affiliate marketing organizations.”
It seems that with changing times have come changing MLMs — or affiliate marketing organizations, if you will. Osterhage had seen his fair share of multilevel marketing spam emails and letters mailed to his house in San Antonio, which he’d decide were sketchy and toss out as they arrived. But he didn’t recognize his new employer Vector Marketing as one when he first signed on. That’s due, in part, to modern companies learning to take cues from internet-savvy marketing tactics and to separate themselves from pyramid schemes’ past battles with the Federal Trade Commission, or FTC. This refurbished business model has been able to turn around and face a new crop of potential direct-selling recruits: college students.
A 2018 AARP study found that 71% of MLM salespeople have yet to complete a bachelor’s degree, and almost half join in their twenties. Against rising tuition rates and correspondingly vast student debt, growing costs of living and an increasingly uncertain job market, today’s college campuses are hotbeds of financial anxiety. And for all their image rebranding, MLMs have been able to recycle their 1950s housewife messaging about “becoming your own boss,” “working when it works for you” and above all, generating an income that is at least supplemental, if not financially emancipatory, for students.
“It’s a grotesque distortion of business,” says MLM skeptic Robert FitzPatrick, the founder of the watchdog consumer organization Pyramid Scheme Alert and author of “Ponzinomics: The Untold Story of Multi-Level Marketing.” “It adapts with the internet. It goes after new groups. But it’s a swindle that is disguised as business.”
Vector Marketing began as a branch of Cutco over three decades after its founding that was designed to specifically recruit sales representatives from college campuses, and the subsidiary arm cemented Cutco’s tie to students. Today, a quick search through the company’s website won’t reveal any image of someone visibly past the millennial age threshold. For his employee profile photo, one of Osterhage’s virtual coworkers sent in a picture from his high school senior year photoshoot, sporting a Texas A&M polo. Osterhage’s manager wasn’t much older than him and had only just graduated college himself.
By the time he began scheduling virtual knife demos with potential customers, Osterhage knew he was part of an MLM, and he was aware of the stigma that followed his company’s distinctly pyramidal structure. But Vector Marketing delivered on its promises that he could schedule his own hours and make money at his own leisure, a vital allure to the new college student who didn’t see an equivalent alternative on local hiring boards.
But Osterhage’s friends were slow to excitement when he told them about his great new job. “They were like, ‘You know, you’re working for a pyramid scheme, right?’ I didn’t want to believe it,” he says now. “I was proud that I found a job that was making money.”
In the wild college frontier of wage-desperate students and poetically desperate Cutco recruiters, the MLM scheme found a new name, new look and a new direct seller source.
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“The official truth is that multilevel marketing is an income opportunity for millions of people,” FitzPatrick says. “It’s a new form of direct selling, and it’s endorsed by the Federal Trade Commission, which considers it legitimate.”
The FTC officially defines MLMs as companies that sell their products or services through one-on-one sales, in which employees sell their brand’s product directly to others. Pyramid schemes, on the other hand, are pointedly identified as scams.
The commission flags four pyramid scheme identifiers: extravagant promises about recruits’ earning potential, further recruitment as the real way to make a profit, high-pressure and manipulative sales tactics and sellers’ need to buy company products that they can then sell themselves.
Because of these practices, pyramid schemes are very much illegal. Yet Osterhage only approached Cutco, a major multilevel marketing company, because recruiters assured him that he could generate a profit. Throughout his time pitching knife sets to customers, his higher-ups pushed him to get his friends and family to join. Cutco ran timed sessions that pit Osterhage against his fellow direct sellers in a competition to see who could schedule the most demos at once, and his manager made a habit of sending him long text threads about his duty to his team. The company required that sellers have their own set of Cutco knives, which can run over a thousand dollars, to use for customer demos. Still, Cutco is allowed to keep operating.
When women began emerging as a major labor and consumer force in the 1950s, companies started churning out home and beauty products that women could buy and sell alongside a slew of promises about financial success that catered to their socioeconomic needs and anxieties. “Well, we have a business that’s from home, you don’t leave home, and it can pay you far more than any job,” FitzPatrick says, echoing the direct-selling model’s appeal to midcentury women. “Well, that’s perfect.”
Companies found a multilevel marketing structure that works. Employees sell a company’s product, which could be anything ranging from shampoo to synthetic motor oil. Oftentimes, they need to first buy a share of that product to use in demonstrations or to sell from themselves as their stock. And almost always, their higher-ups will pressure them to recruit more new sellers.
The final verdict from the FTC seems contradictory. In a 2011 report for the FTC detailing the convoluted legality of multilevel marketing schemes, Consumer Awareness Institute President Jon M. Taylor put it plainly: “Worldwide feedback suggests that MLMs are also extremely viral and predatory. They feed on the product investments of a revolving door of new recruits, each subscribing to product purchases to qualify for commissions or advancement in the pyramid of participants. But for almost all newcomers, they are being sold a ticket on a flight that has already left the ground.”
In lieu of a dramatic legal takedown, the FTC urges that jobseekers exercise extreme caution and lend a critical eye to multilevel marketing recruiters who may still borrow tactics from supposedly obsolete pyramid schemes. And while the jury remains out on the legality of multilevel marketing schemes, companies have been free to run amok and exercise their modified, legal practices on that revolving door of new recruits for decades.
FitzPatrick points to Herbalife, a major multilevel marketing corporation that sells dietary supplements and has landed in hot water with the Federal Trade Commission in recent years. By 2016, an estimated 60% of Herbalife’s sellers were Latino, many of whom were undocumented immigrants who couldn’t work elsewhere at companies that asked more questions and required more paperwork.
“So, Herbalife comes in and says, ‘We’ll deliver you from all that,’” FitzPatrick says. “‘We’ll solve all your problems.’”
According to FitzPatrick, who has spent decades overseeing legal fallouts over MLMs and advising national regulatory trade associations, recruitment strategies follow patterns of socioeconomic exploitation, shifting from homebound women to immigrants and, finally, to students.
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When FitzPatrick first began his research in the 1990s, college students weren’t among the mothers and immigrants that MLMs had made a habit of targeting. “You might take a part time job when you’re a student, but you really weren’t under a heavy financial pressure, and you didn’t need a lot of money,” he said. “Well, I mean, my God, that’s certainly not the case today.”
While crippling student debt and an insurmountable cost of living may seem obvious and financially devastating to anyone who’s glanced at a tuition bill on this side of the new millennium, ultimately inexperienced students are their own worst enemies when MLM recruiters swoop into college campuses.
Osterhage isn’t a business student, and his too-trusting nature has landed him in more than a few odd positions before Cutco. (There was, he confesses, a fleeting affair with a religious cult in Boston.) So naturally, he didn’t ask many questions when he signed on with Cutco and Vector Marketing, and he didn’t see any obvious red flags in his first weeks selling knives over Zoom from his dorm room.
“This job showed up on my doorstep. I was in need of money,” Osterhage says. “And then I was like, yeah, what could go wrong?”
FitzPatrick notes several things that could go wrong when MLMs seek out students. “You [have] got youth, inexperience, insecurity, fear, worry and real, absolute real, economic pressure,” he says. “And, plus, not a whole lot of experience to enable them to do a lot of due diligence or critical analysis of [new job opportunities].” They are, FitzPatrick says, perfect candidates to be duped by these companies’ flimsy promises.
Osterhage’s recruiters delivered their own string of claims, making the same promises of workplace and financial freedom and independence that MLM recruiters told 1950s housewives with few necessary tweaks, despite well over half a century separating those first promises from Osterhage’s Cutco interview. Run into an MLM recruiter, and you’ll run into the same empty, timeworn buzzwords that have peppered recruitment pitches since before Osterhage was even born.
While companies like Cutco that have been around since the 1940s learned later in their lifespans to resuscitate their dated brand images and latch onto students, MLMs born in the 21st century have been able to follow their predecessors’ footprints to find eager young recruits with little friction.
When Nivjana Minga posted about her internship search on her Snapchat story, an old friend from her high school reached out to her with a “marketing” opportunity at Monat, a haircare company that began in 2014. “She used a lot of those pretty words, like ‘business owner’ and ‘independent,” Minga says, describing her friend’s initial pitch.
In a FaceTime call with Minga, her friend’s team leader rattled off a series of unconventional work benefits. But Minga had more than a few questions when the recruiter shared that she had sold enough Monat products to win a free car. Even though she doubted she would ever win an SUV herself, Minga liked the sound of financial freedom that the Monat recruiter promised enough to entertain the unusual anecdote.
Osterhage ran into a similar bizarre seller incentive at Cutco: whoever had booked the most product demos with customers by the end of a given timeframe would win a free knife. But with a shred more experience as a business student and a more critical eye, Minga found Monat’s offbeat incentives and impossible promises suspicious and turned down her friend’s offer.
“As a college student, it’s always been about finding success early on. I think people are kind of in love with this romanticized idea of, ‘I’m an entrepreneur and I work for myself,’” she says. “Which is strange, because someone else is signing your paychecks,” she added.
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Even after he realized he was part of a multilevel marketing scheme, Osterhage stayed with Cutco — it was his job, after all — and reasoned that as long as he didn’t recruit anyone else to join, he was more or less alright. But when his manager, Caleb Santana, began cranking up the pressure to recruit more sellers, he decided to cut his losses and sever his ties with Cutco.
“He would want me to DM as many people as I knew on Instagram. He wanted me to download Facebook at one point so that I could communicate with my clients and then also show off what I was doing and attract more people,” Osterhage says. “Text, Snapchat, any form of communication, except for email. They didn’t use email that often because it’s outdated.”
Osterhage started to give the more irregular parts of his job that he’d once been content to overlook a second glance. That list began with Santana himself. “He was a 24-year-old, had just graduated college and had his own branch, his own office, and was running it. He was running the show,” he says. “That was my boss. Doesn’t it just look kind of sketchy?”
But leaving Cutco wasn’t as easy as joining. Once again, Osterhage found himself on the receiving end of several of Santana’s iMessage monologues about his obligation to the direct-selling team. He even offered to relocate Osterhage to a Vector Marketing hub in his hometown in Texas.
FitzPatrick isn’t surprised by Santana’s reaction. “Separating you from your friends, getting you to abandon your identity, dominating your time, playing upon your emotions. These are all things that normal businesses would never do,” he says. “You know, if you go to an MLM meeting, they don’t sit down with you and say, ‘Well, here’s how this business works. And here’s how you get paid.’” Instead, they make promises about easy financial success that are difficult for students in need to pass up. In Osterhage’s case, they fill a Zoom call with energetic but meaningless platitudes about “vibes,” which is all technically legal, if otherwise questionable.
Even after the FTC’s legal blessing, decades of shifting social and economic pressures and changing generations of hungry jobseekers, MLMs are still wrapped up in manipulation. Only this time, college students are getting caught in the crosshairs.
But all wasn’t for naught for Osterhage. That red flag that requires sellers to have their own stock of products to use left him with a set of lifetime-guaranteed Cutco knives.
“I’m set for life now,” he says. “I do this one job, and I have the full suite of kitchen utensils.”
KARISSA KORMAN 