Is Mary Kay a Pyramid Scheme?

A new Harper's article claims that the direct-sales beauty empire is merely a "pink pyramid scheme."
Wed August 1, 2012 1:02 am
AP Photo

A reporter went inside the pink heart of Mary Kay, dropping more than $1,800 on cosmetics to become a decorated beauty consultant with the company to see what makes it tick.

In her piece for Harper’s, Virginia Sole-Smith concludes that the Dallas-based direct-selling company is merely a “pink pyramid scheme” for most involved:

A business in which only a select few earn real money while everyone else pays to play sounds a lot like a pyramid scheme. The Federal Trade Commission distinguishes between recruiting salespeople to sell a product, which is perfectly legal, and making money exclusively through ‘fees for participation,’ which isn’t. What constitutes a fee is, of course, vague, but the FTC has charged some multilevel-marketing companies with employing pyramid schemes. In those cases, the majority of sales occurred between company and salespeople; the retail products were essentially decoys. The FTC has never taken action against Mary Kay, and an agency spokesperson told me that he was ‘unable to confirm or deny’ whether the company had ever been investigated.

Sole-Smith expounded on that thought in an interview with Marketplace’s Tess Vigeland last week: “Really, the only way to make money is by recruiting other people to sell products as part of their sales unit, which they then get paid a commission

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