MLMFacts

Reports coming out of Australia indicate that the Office of Fair Trading in the Australian state of New South Wales (NSW) have declared that Liberty League International is an illegal pyramid under the 1987 Fair Trading Act. The OzSoapBox blog has a post including a scan of an official letter which states -

Liberty League is an American based company which markets lifestyle coaching products via independent promoters in Australia and internationally. The Scheme has been examined and found to be a pyramid sales scheme within the meaning of the Fair Trading Act 1987 (NSW).

Section 60U of the Fair Trading Act prohibits participation in or promotion of a pyramid sales scheme. The maximum penalty for a contravention of that provision is $22,000 for individuals and $110,000 for corporations.

Liberty League (perhaps not coincidentally recently renamed Polaris Media Group) ostensibly sells 3 products, a 90 day home personal development course Beyond Freedom, a 3 day personal development seminar Liberty 3 day Conference and a 5 day personal development seminar Summit 5 day Conference. According to the Liberty compensation plan, in Australia these cost (retail) -

• Beyond Freedom   $1495
• Liberty 3-day          $7995
• Summit 5-day         $12995

Now, without getting in to the compensation plan let’s first look at these prices. Are they competitive compared to other similar programs? Let’s have a look at one of the “gurus” of personal development, Tony Robbins, and what he offers -

• Liberty League Beyond Freedom – 3 CDs, 1 DVD, Workbook, Journal - $1495
• Tony Robbins Personal Power II – 25 CDs, 1 DVD, Workbook, Journal, $100 seminar coupon and more -  $360*

Beyond Freedom is 3 CDs compared to 25 and more than 4 times the price of Tony Robbins

• Liberty League 3-day Liberty conference - $7995
• Tony Robbins 4-day Unleash the Power Within conference – $995 to $3995

The 3-day Liberty League conference is more than twice the price of front row seats with private lounge at a Tony Robbins 4-day conference, and more than 700% the price of a general admission ticket.

• Liberty League 5-day Summit conference - $12995
• Tony Robbins 6-day Date with Destiny conference – $5995

Liberty League is more than twice the price for a shorter conference – and no Tony Robbins of course!

Now, it’s possible the Liberty League products are worth that much more than Tony Robbins, but well … frankly I’m skeptical, and I’d suggest the NSW Office of Fair Trading is as well. Section 60T(4) of the Pyramid Selling Scheme definition says -

(4)  In deciding whether a scheme that involves the marketing of goods or services (or both) is a pyramid selling scheme, a court may have regard to the following matters in working out whether participation payments under the scheme are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments:

(a)  the extent to which the participation payments bear a reasonable relationship to the value of the goods or services that participants are entitled to be supplied under the scheme (as assessed, if appropriate, by reference to the price of comparable goods or services available elsewhere),

(b)  the emphasis given in the promotion of the scheme to the entitlement of participants to the supply of goods and services by comparison with the emphasis given to their entitlement to recruitment payments.

Does the price of the Liberty League products bare a reasonable relationship to their value? Well, to be honest I can’t judge. I’ve never tried them. At that price I wouldn’t.

So why would people by them? That’s where it really gets interesting – you can make money selling them, and look at the profit margins!

• Beyond Freedom home study course
  retail $1495 “wholesale” $495 – $1000 profit
• Liberty 3 day conference
  retail $7995 “wholesale” $2995 – $5000 profit
• Summit 5 Day conference
  retail $12995 “wholesale” $4995 – $8000 profit

But that’s not all. If I understand correctly, for each of the three packages, you have to “sell” 5 of them before you earn any commission at all – unless you buy one yourself first … then you only have to sell 2 “Beyond Freedom” packages, and you don’t need to sell any of the Liberty or Summit packages to profit from them – you just need to buy a ticket yourself.

In other words, there is a huge incentive to purchase the packages, not for any inherent worth – but for the money you make when other people enroll. And they then have the same incentive driving their enrolment, and so on, and so on. The “profit” from selling packages could easily be seen as a “payment for recruiting” – they classic sign of an illegal pyramid scheme. In the United States the FTC has a few simple “tests” of the legitimacy of a business opportunity, one of which is “can the last person to enrol make money?” ie can they simply sell the product to someone who has no interest in the business opportunity. Every person considering joining Liberty League, and every current member, should ask themselves a simple question – are the Liberty League personality development courses really worth so much more than even the best of the competitors?

* price converted to AUD 2009-09-02