Monat is a global multi-level marketing (MLM) company that sells hair care products, including shampoo, conditioner, and different oils. They have also recently branched out and started selling skincare and wellness products too.
Although the company has had its share of controversies, it is technically not a pyramid scheme.
Why Monat is Not a Pyramid Scheme
Before diving into why Monat is, in fact, a legitimate multi-level marketing company and not a pyramid scheme, it's important first to understand what a pyramid scheme is.
Pyramid Scheme Definition (Source: Investopedia)
A pyramid scheme funnels earnings from those on lower levels of an organization to the top, and are often associated with fraudulent operations. The vast majority of pyramid schemes rely on profiting from recruitment fees and seldom involve the sale of actual goods or services with intrinsic value.
Pyramid schemes are sketchy business models, essentially making people pay for a membership with nothing in return unless you recruit more members.
Monat is not considered a pyramid scheme because, although you do make more money if you sign up new members/recruits, you still need to sell products to make any profit—you can't make money just by recruiting.
Why the Controversy?
Over the years, Monat has built a reputation for low-quality products, misleading marketing, and various lawsuits concerning shady business practices.
Despite all these claims, Monat is still in business and isn’t considered a pyramid scheme since its focus is not on recruitment but product sales. They have also moved away from typical MLM practices and have started using young influencers and social media to get their product out there.
Monat has not been accredited by the Better Business Bureau (BBB), which could be due to the number of complaints they receive about the quality of their products and lack of genuine customer service. Monat has been in business for about eight years, and in the last three years alone, they have received 600 complaints on the BBB website.
There are numerous claims that Monat’s products are causing severe hair loss and, in some cases, scabbing of the scalp. Monat distributors, also known as market partners, were encouraged to tell people to continue using the products despite hair loss. This was part of the detoxification process and would get better soon. Needless to say, those who continued using the products found themselves losing more hair, developing bald spots, with some seeking medical attention.
Misleading Marketing Practices
Monat also was under fire for their misleading marketing practices alongside these claims of selling low-quality and potentially dangerous products. Almost every complaint found on the BBB website relates to the difficulty in obtaining a refund. In addition, there has been an overwhelming number of people who were unaware they had been signed up for a VIP account until they started noticing unauthorized charges on their card.
Signing up for a VIP Monat account sounds like a lot of commitment, which is probably why most people avoid doing it. Here’s what it looks like:
- Pay a $19.99 joining fee.
- Make at least three autoship or “flexship” orders (minimum order of $84 each).
- Pay a $25 cancellation fee if you don’t make the required orders.
Most of the complaints came from VIP members that had no recollection of signing up for the program. A majority of the people who were signed up for the VIP membership shared that their sponsor was the one who ordered everything for them and didn’t inform them about being a part of any membership.
Market partners make a $60 bonus for every four VIP members they sign up within a month, which is likely the cause of many people being signed up for VIP membership without authorization.
One person even noted that they hadn’t ordered or talked to the market partner who sold them their Monat product in almost three years, but they recently saw a charge on their card. Apparently, her market partner had been signing into her account and pushing back the flexship order, but she had to change the password then forgot to push the flexship order back, so the flexship order went through.
Since these complaints result from sketchy actions by market partners, Monat generally takes no responsibility and refers people back to their refund policy.
Monat’s Issues with the Law
All of these complaints and stories have led to multiple lawsuits. As a result, Monat has had to pay some hefty fines, refund their customers, and sign an agreement with the following conditions:
- They won’t use any more misleading advertising.
- They can’t lie to customers about their product being approved by a government group, such as the U.S. Food and Drug Administration (FDA).
- They can’t lie to their customers about their products detoxifying rather than burning someone’s scalp.