The Young Living Controversy: Legit Business or Pyramid Scheme?

Multi-level marketing (MLM) has become one of the most controversial business models over the past decades. However, they have more recently made headlines for events like the Young Living controversy.

Usually associated with pyramid schemes and scams, MLMs have attracted investigation from regulators and major outlets over the past years. Back in 2016, Last Week Tonight’s host dedicated his show to take on MLMs reaching a massive audience and posting a video that now has over 34 million views.

MLMs appealing to health and well-being have profited greatly from millions of clients, often marketing through exaggerated claims. This, combined with their complicated business model, can often make for a dangerous recipe. Aromatherapy in particular has managed to convince a huge number of people while showing little to no evidence about therapeutic uses. Is it all smoke and mirrors, or can we derive true value from this practice?

Essential oils and aromatherapy have been around for centuries, having received both love and hate throughout history. The reason is simple: their often exaggerated claims don’t rely on science most of the time. Some of these claims can be relatively harmless such as their effect on mood while others can be much more serious and represent a hazard to both individual and public health. 

Some people have claimed essential oils can be used for conditions such as infections, some injuries, Alzheimer’s Disease, ADD/ADHD, and more. Up to this day, there is no evidence of essential oils having a considerable impact on any of those. However, this has not prevented members from MLMs like Young Living from claiming that essential oils and other alternative medicine elements can cure these diseases and even COVID.

A Troubled Past

Young Living checks all the boxes to spark controversy: a dubious business model, claims based in pseudoscience, and a cult-like community of members. After rising to prominence in a market valued at over $18 billion, the company has found itself as the eye of the storm on several occasions.

Back in 2020, a class-action lawsuit was filed by ex-member Julie O’Shaughnessy in a Texas federal court “for damages and other relief under RICO” (Racketeer Influenced Corrupt Organizations Act). While the company attempted to enter arbitration through a motion, this was denied. The lawsuit came around the same time when members of the MLM claimed the products sold by the company were effective against Covid19.

The company was also forced to pay for the importing of illegally harvested ingredients back in 2017, which resulted in $760k in fines, restitution, and community service payments for the “trafficking in illegally harvested wood and timber products”

Despite Young Living claiming that its members were not authorized to speak on behalf of the company and the claims were against their policies, the company benefited in many ways from these claims. Not only did the claims facilitate the selling of products but also have a significant impact on the recruitment of new members.

The recruitment of new members becomes increasingly difficult as the size of the pyramid expands. Newer members are more likely to lose money as most of the profit comes from recruiting instead of selling. While this goes against the business guidance established by the Federal Trade Commission, the regulator has been known for not taking a hard stance against companies following this business model.

Meet Young Living’s Founder

Born in Idaho in 1949, Gary Young was a controversial figure even before founding the company that now has his name. He was the protagonist of several scandals long before creating the company he is most known for, Young Living. He produced a long list of false claims and projects involving pseudomedicine.

Perhaps the most shocking of these unusual events is the death of his baby daughter during delivery. The baby was delivered in a whirlpool bath in 1982, a strange method of childbirth. This involves leaving the newborn in a sterile saline solution before cutting the umbilical cord. The coroner who examined the baby’s body found no indications of poor health. He also stated that she would have probably lived if delivered in normal conditions. Her mother suffered from hemorrhages and needed medical attention after childbirth.

That same year he opened a clinic that was promptly closed a year later, after a police investigation. Gary ended up pleading guilty to practicing medicine without a license, after saying he could detect cancer and deliver babies.

In 1986, he was pointed at by a few news articles exposing his claims once again. He claimed a 90% cure rate for lupus, as well as being able to cure cancer. Young also started a clinic in California that was shut down by a judge’s order. This was the result of several serious charges, as the services of the clinic were not up to medical standards. They falsely claimed to have the ability to identify thirty-four medical conditions and sold unapproved medical devices and drugs.

Remember, all of this was before starting Young Living, and are not the only strange businesses with which Gary was involved. By portraying himself as a medical professional, and often claiming to be one, he enticed desperate people into these schemes.

25 years after founding Young Living, Young would die in May 2018 after a long life of shady practices and issues with the law. However, despite his passing, the company he founded has remained controversial and has been the focus of multiple scandals.

What Is Young Living?

Young Living Essential Oils is one big company that has been accused of incurring several dangerous practices. Founded in 1993, it has grown to nearly two million active members, forming a huge sales force. It reported over $1.5 billion in yearly sales for 2017 despite having been surrounded by many controversies by then. Criticism is based on two huge aspects of the company: claims around its products and its business model.

The main product line offered by Young Living consists of different types of essential oils for different application methods. Some are to be rubbed in the skin, others are evaporated into the air by using diffusers. There are also products containing these oils that are made for oral consumption. Young Living also sells other products such as meal replacements and dietary supplements. All of these are commercialized for different uses and often mention improvements in health that have no scientific basis.

The business model employed by this company is also highly criticized, albeit similar strategies are used by many legit companies. This model involves multi-level marketing, a widely popular marketing strategy that we will cover later on in this article. The main criticism of this strategy is that it generates cultish behavior and many people who get involved actually lose money. Those participating can often pass down unverified claims regarding the products through word-of-mouth. 

This was the case with claims made by a Young Living member who posted back in 2014 claiming that Living Young’s essential oils could fight diseases like Ebola. This prompted the FDA to warn the company against such practices, with the company claiming that instructions were given to its members to avoid such actions. However, this practice has continued to occur over the years as members of Young Living and other MLMs try to increase their sales.

All in all, selling essential oils fits perfectly with this sales model. Those who believe false claims about the products find support from distributors as well as other clients. This often happens within closed doors, with a load of anecdotal evidence being passed around, and little to no statistical data. At the same time, the promise of great savings and profits tempts people to participate in the distribution process. In the end, extremely few of them are able to make a good living out of these sales.

What Are ‘Essential Oils’?

Essential oils are liquids that contain compounds from plants, extracted through distillation or other chemical processes. There are many plants that are processed in this way, such as lavender, rose, myrrh, grapefruit, and peppermint. They are often used for perfumes, soaps, and other products, but have also been subject to claims of numerous health effects. Many of those claims have been tested through rigorous scientific studies that proven they provide little to no therapeutic benefits. A study published in the British Journal of General Practice states: 

“Aromatherapy appears to have a transient effect in the reduction of anxiety but there is no evidence of a lasting benefit from its use.”

While the reduction in anxiety is seen as a positive by many practitioners, this benefit is not seen as different from the placebo effect offered by any other alternative practice. However, depending on how it is marketed and used, misinformation about essential oils can lead to health problems. This is especially true when belief in its effects leads to ignoring scientific-based treatments for risky conditions. 

In addition to this, Essential Oils are not always as safe as they are marketed. While allergic reactions can happen, which by itself can already be a big risk for an unsuspecting user, there are bigger risks like poisoning. According to the National Capital Poison Center: 

“Since essential oils generally are not regulated, it can be hard to know exactly what is in the essential oil bottle – what species of plant, what concentration of an active ingredient, or whether there are any contaminants.”

This should not come as a surprise, as many plants and essential oil ingredients can cause allergies and have reactions with drugs. In fact, some of the chemicals in essential oils can disrupt the workings of the endocrine system, like boosting estrogen and inhibiting testosterone.

Another concern regarding aromatherapy is that it could replace legitimate medical advice in the mind of patients, making them suspend other therapeutic approaches. Finding a medical professional, or more than one should be first on anyone’s list before trying any alternative medicine.

Does Science See Any Benefits of Essential Oils?

While many believe that science seeks to debunk alternative medicine like essential oils, Scientists have looked into the potential benefits of alternative medicine for decades. In fact, several studies suggest there could be several benefits to their use for the treatment of different conditions.

Some research suggested that tea tree oil could help in treating acne, which could prove this extract is truly useful. Another study, published in the Journal of the American Medical Association showed using aromatherapy massages could help in treating hair loss. That could lead to legitimate, tested ways to treat some conditions.

Research published in the Journal of Applied Microbiology shows that citrus essential oils kill pathogens that grow on food. This could help mitigate the growth of several causes of food poisoning.

The International Journal of Neuroscience published a meta-review of 18 studies about essential oils that met strict criteria. Some of these studies showed possible uses for the oils, mostly related to mood. This does not mean that aromatherapy should be recommended for anxiety or other disorders, but further research could provide additional insight.

It is important to keep in mind that some extract being “natural” does not mean it is good or even safe to use. Both medicine and poison can be made from plants, as well as from synthetically made compounds. 

Multi-level Marketing: Young Living’s Business Model

Multi-level marketing (MLM) is a strategy employed by some businesses that recruit non-salaried people to distribute their products. This practice is controversial, as many of the distributors end up actually losing money. Several names have been used for similar practices in order to avoid the negative image of MLM. Some of these alternative names are “affiliate marketing”, “home-based business franchising”, “pyramid selling”, or “referral marketing”, all using the same core strategy.

Participants are recruited with promises of big profits if they take part in the distribution of products. Revenues are often obtained in two ways: commissions earned through direct sales, and commissions earned by sales of new recruits. This incentivizes members to find new recruits constantly and provides the possibility for “exponential growth” in theory. New members often have to pay a certain amount of cash upfront to start their “business”.

The model ends up shaping a sort of pyramid, with a large number of distributors in the lower levels. As members move up the pyramid, higher levels consist of fewer people who receive huge earnings. Each position is named with enticing names going from distributor up to royal crown diamond. The latter, which received an average of $1.6M back in 2018, represents less than 0.1% of all the members. Distributors and star rank members, which represent over 96% of all distributors, can expect an average annual income below $248.

Young living is not alone in this strategy. Some companies using MLM that you probably heard about are Amway, Avon, and Herbalife, but there are many more out there. While there is a chance some MLMs set to be legitimate businesses, most of them rely on pushing this sales model to the limit, which has proven to be unsustainable.

The Consumer Awareness Institute published a g study analyzing 30 MLM companies and the findings are shocking. Of all people participating in these sales models, less than 1% end up making a profit. The odds are stacked against those at the bottom of the pyramid. Those participants will have a very hard time progressing through the ranks enough to make a living off their sales… Which is not known by members before joining these companies.

Psychology of Multi-Level Marketing

MLM models have been accused of being cultish and for good reason. There are many psychological tricks employed in marketing in general, especially in these MLM structures. Often, new recruits are deprived of important information and are convinced that becoming a distributor is a secure deal. This is done through anecdotes of people earning large sums in little time, deceptive information about the products, and other diversion strategies. Grandiose meetings are often part of the introduction too, making potential or new recruits feel included in a valuable project.

Within the pyramid, people can organize in different ways and often form groups like “motivational organizations”. These groups can often behave in ways that are very similar to cults, even encouraging participants to give up relationships with those who are skeptical. Fake news and information can run like wildfire within these groups, whose members are often biased by their beliefs in alternative medicine. 

This often results in people making extraordinary claims about the products, such as those marketing essential oils as cancer or coronavirus cures. In another case, essential oils were marketed as a way to fight the Ebola virus. None of these claims are backed by any sort of research, and most “facts” surrounding them are outright lies. However, the incentive structure of these organizations pushes their members to make such claims in an attempt to increase their potential gains and escalate the pyramid.