In 1998, with promises of riches to be made, a close friend recruited Leo (who requested that his last name be withheld) to join a company called Quixtar. Though he was a full-time employee at a national insurance company, after meeting “very positive and up-tempo” people who appeared to be earning a considerable income as Quixtar distributors, Leo was eager to join their ranks.

Like Leo, those in his Quixtar community were African-American.

“[Being a part of Quixtar] was a good feeling,” he says. “A lot of us look alike, and we were rubbing elbows with those who appeared to be prosperous.”

That sense of community kept Leo going for years, even though he made no money. Quixtar was a multilevel-marketing enterprise that shared a parent company with Amway. Critics of MLMs (and their illegal incarnations, pyramid schemes) say these companies count on and exploit that sense of community by using emotionally manipulative tactics to retain recruits, most of whom invest more money than they will ever earn, and to placate them should they ever leave, as Leo eventually did.

PYRAMID SCHEMES: A LEGAL EXPLAINER

Rather than brick and mortar stores, MLMs market their goods through independent distributors who sell the products to customers, usually beginning with friends, family and others in their community. The distributors generally pay a fee to join and make an initial investment to acquire an inventory of products. Distributors also recruit their own salesforce, known as their “downline,” and make money both from selling products to their downline and from a percentage of their recruits’ sales to customers.

Manipulation is an inherent part of marketing, says Dr. Claudia Gross, who studies the culture and structure of MLMs at the Institute for Management Research, part of the Radboud University Nijmegen, in the Netherlands. But, she says, manipulation has an outsize effect with MLMs because of their organizational structure and the lax regulatory environment in which they operate.

“It’s the combinations of these factors all together that make MLMs morally problematic and particularly dirty,” she says.

In addition, Gross points to a structural characteristic that makes MLMs unlike other business models. Participants in MLMs are caught in a situation in which they are not strictly self-employed, because they are part of an existing company, whose rules they do not set. So while they have some of the benefits of the self-employed — such as the ability to set hours and determine which markets to operate in — they also lack the support of unions or other intermediaries they can rely on for help when needed.

This makes participants in MLMs particularly vulnerable, experts say, built as they are on personal relationships and atypically structured. Any emotional manipulation employed in this environment makes it easier for participants to believe the unbelievable, ready to silence any doubts, unquestioning of failure and unwilling to act against the company.