Sunday, December 4

This was the pyramid scam that deceived Argentines

Famous Argentines fell into the networks of this fraudulent financial operation

The phenomenon is not new, but it became a scandal in Argentina due to the combination of quarantine, social networks and fame. With the population locked in, hyper-connected and facing an unprecedented economic crisis, the number of virtual celebrity posts promoting Nu Skin products increased exponentially. Also your earnings at the expense of lack.

“In this context of isolation, many people around me began to promote or invite me to join the company. These people had a common link, which is that they were left without their source of work due to the pandemic,” said Martina Garbarz, journalist who investigated from the inside and exposed the pyramidal and deceitful operation of the system in the independent news site El rocket a la luna.

Nu Skin uses a business model known as multi-level marketing. Each distributor sells products directly to potential customers, but the real business is recruiting and training new distributors to receive a percentage of their commissions. The company pays them with the profit margin on the products they personally sell, as well as a performance bonus based on the sales of the distributors they have recruited.

“Each user or ‘leader’, as they say using a euphemism, has a point system; if you add more points you ascend [y cobrás porcentajes mayores] and if not you stay at the base of the pyramid. On the one hand, they tell you ‘I sold products’, which is what you think you are going to do when you enter, but you quickly realize that to grow you have to recruit people to go to a higher level. Those who remain at the base always lose money, “Garbarz explained.

The company of American origin, which landed in Argentina in 2011 and began its expansion first in the interior provinces, reported that it multiplied its sales by five and that more than 20,000 customers bought its products locally.

Their clients are generally new recruits because there is always a limit to the ability to sell retail without a street-level structure or the hassle of selling door-to-door to strangers. Its structure works from a network of autonomous distributors, not employees, which is always expanding.


Manufacturers of lies

It all starts as a friendly invitation. It can be a friend, a relative, an acquaintance, who offers you a unique opportunity. The trainings (before quarantine) are carried out in auditoriums, where the promises of salvation and financial independence and the testimonies of assured success enchant the ear with the language of ontological coaching or executive training; motivational and fantasy sellers.

“The trainings have names like ‘Learning to undertake’ or ‘Mentoring for leadership’. They have an entrepreneurial language, which makes people believe that they are part of something very serious, focused on economics. There is no entry fee, But right away they ask you to buy one product or a kit of many, to access a greater discount, which are the ones that you are going to sell, “said Garbarz.

Although the company no longer requires an entry fee (they did a few years ago), the products that the distributor is going to try to sell must first be purchased from the company, they are not assigned on consignment and there is no possibility of returns . If you don’t sell them, you lose money. If you don’t recruit to sell the stock of accumulated products, neither will it.

The star product, which is the one that went viral due to the promotion of the famous, is a facial cleansing machine, which costs more than 20,000 pesos (approximately $ 300) and a complete kit, which includes creams, costs 76,000 pesos (an estimate of 1,100 dollars).

Garbarz’s research showed that the same products can be purchased in alternative stores for prices 20 times lower than what the company charges its distributors. Nu Skin workers are your customers. Forced to sell so as not to lose money, the scammed become scammers. It’s just a matter of time.

“At some point that pyramid is exhausted. People at the bottom stop having others to recruit and they stop having money to invest in products. It is a chain of lies, it is a deceptive business and people get into debt and bankrupt It has a predatory logic, “warned the journalist.

Exposure without conviction

On May 21, 2020, the Secretary of Internal Commerce, dependent on the Ministry of National Productive Development, charged Nu Skin Argentina for providing false and misleading information for the promotion and sale of its products.

Every corporation has a pyramidal structure, based on a hierarchy: a boss, several subordinates. But these pyramid schemes to which the complaints point are accused of fraud since, unlike a company, where an employee can rise through the ranks to a higher position, in this type of systems what are created are unlimited lower levels to sustain the gains of those at the top, who eventually become saturated, and those who lose are those at the bottom, who have already got into debt.


The machinery is transparent

In 2015, the company reported in the US that 93% of its distributors did not generate commissions in a typical month. In 2018, 81% of salespeople received zero annual earnings, while 66% of the income went to managerial salaries.

In Argentina, the scandal included celebrity celebrities, who quickly came out to defend themselves, and many with good reason: they are not necessarily guilty of ignoring the background. What those who continue to defend the company and the business that their exposure allowed them to set up do not seem to understand is that they are becoming accomplices in the eventual ruin of others.

“Celebrities do not enter the pyramid by the bases but in the middle, with an assured profit because they have many followers, which are possible recruitment opportunities, in addition to some advertising commission they could receive. In addition, there is a common trait that is the ashamed of feeling humiliated for having fallen for the scam and fear of threats from the company and the networks, “Garbarz added.

The complaints about the unfair actions of Nu Skin are not new and are not limited to Argentina. As early as 1992, the company, created in 1984 in the US, was accused of misleading advertising and inflating the profits of its distributors. In 1994 and 1997, the company had to pay a total of $ 2.5 million to the US Federal Trade Commission (FTC) to resolve allegations of misleading advertisements.

Allegations of operating as an “illegal pyramid scheme” erupted in China in 2014. The Asian giant’s government launched an investigation that led the company to pay $ 47 million in 2016 to resolve a class action lawsuit. Today, Nu Skin is present in 54 countries and generates revenues of more than 2.68 billion dollars annually.

Nu Skin is not the only company to operate with a system of this style, with millions of customers around the world, multimillion-dollar profits and co-optation systems like a sect, where you enter looking for a quick exit to earn easy money, but they end up trapped, in debt and ashamed. Other multilevel corporations mentioned are giants like Herbalife, Amway, Avon, Mary Kay or Natura.