Market America Lawsuit: Pyramid Scheme Claims are True?

Market America Lawsuit involved allegations that the company operates as an illegal pyramid scheme. Plaintiffs Jinhua Zou, Yu Xia Lu, and others in similar situations claimed that MarketAmerica promised them financial success through a “two-year blueprint”, yet over 90% of distributors experienced financial losses.

They accused the company of prioritizing recruitment over actual product sales. It alleged that they mislead new distributors about potential earnings and targeting vulnerable groups.

Notably, the Market America Lawsuit was filed to seek compensation for losses, punitive damages, and regulatory changes to the company’s business operations. All while preventing further deceitful practices.

What is Market America?

Market America is a multi-level marketing company. It was founded in 1992 by JR and Loren Ridinger. It is headquartered in Greensboro, North Carolina.

We can say that Market America has now positioned itself as a “product brokerage and Internet marketing company” that utilizes direct selling and social shopping to market a variety of products across numerous categories.

It offers a range of products including dietary supplements, cosmetics, personal care items, auto care, home and garden care products, and much more. All these products are typically sold under their own brand names, such as Isotonix for supplements and Motives by Loren Ridinger for cosmetics. In fact, Market America have affiliations with other companies as well.

You should know that Market America operates on an MLM business model, referring to its distributors as “UnFranchise Business Owners” (UFOs). This model allows individuals to become independent distributors by paying a startup fee and ongoing monthly fees. These distributors earn money through product sales and by recruiting other members to join their sales teams.

Interestingly, Market America emphasizes that its system differs from traditional franchises—as it offeres more flexibility and requires less capital investment.

However, it is worth noting that Market America is critiqued for its business practices. For instance, higher distributor costs, the pressure to purchase products, and attend expensive events. Worldwide critiques argue that such practices make it difficult for distributors to earn a sustainable income.

What is Market America Pyramid Scheme?

Firstly, you need to know that “pyramid scheme” refers to a business model that recruits members via a promise of payments or services for enrolling others into the scheme. It doesn’t involve supplying investments or selling products.

Market America has faced allegations and legal scrutiny regarding whether it operates as a pyramid scheme or not.

We all know that Market America is classified as a multi-level marketing (MLM) company. This is surely a legal business structure. However, the distinction between a legal MLM and an illegal pyramid scheme can often be nuanced. It depends heavily on the company’s focus on recruitment versus sales to the general public.

Market America has consistently defended its business model.They emphasize that their distributors can earn through product sales without necessarily recruiting new members. In fact, they also state that they provide adequate disclosures about potential earnings and the risks involved.

What is Market America Lawsuit?

It was March 2019 when plaintiffs filed a class-action lawsuit against MarketAmerica in a California court (Case No. 19-cv-1282, N.D. Cal.). The lawsuit targeted the company’s founder, nineteen top-level executives, and twenty-seven top distributors.

It was claimed that MarketAmerica operates as an illegal pyramid scheme—which rewardes participants mainly for recruiting others—but not for actual product sales.

The plaintiffs specifically allege that the company targets Chinese-American immigrants. This group is chosen because they often lack accessible legal channels to defend their rights, making them particularly vulnerable to exploitation.

It is worth noting that America allegedly leverages the connections of Chinese-American immigrants to sell products to their family and friends in China. This help expand their market reach into Asia and exploit immigrants’ ties to potentially recruit a broader network of participants into the scheme. This strategy is referred to in the legal complaint as “affinity fraud,” which preys upon members of identifiable groups.

The Market America Lawsuit also stated that despite the company’s claims of potential financial success through its “two-year blueprint,” over 90% of its distributors have lost money.

Consequently in September 2019, authorities transferred the case from a California court to a North Carolina court (Case No. 19-cv-954, M.D.N.C.). This changed the jurisdiction overseeing the proceedings.

After a month in October 2019, the plaintiffs filed an amended complaint against MarketAmerica. This reinforced their allegations that MarketAmerica operates as an illegal pyramid scheme.

Interestingly, in January 2020, a magistrate judge granted MarketAmerica’s motion to compel arbitration. This decision moved the dispute from open court to private arbitration. Notably, the court administratively closed and consolidated this case with Market America v. Yang (Case No. 17-cv-897, M.D.N.C.).

Final Words – Who Won Market America Lawsuit?

The Market America Lawsuit was administratively closed after a judge granted a motion to compel arbitration in January 2020—moving the dispute to private arbitration. The outcomes of this arbitration are not publicly disclosed. Therefore, the final conclusion of the lawsuit remains confidential.