The rich get richer, the poor blow bubbles

by Lionel Klee

Perhaps you have been recently offered the chance to earn $70 a week in part-time employment, then chances are that you live in a lower middle class area, chances are that there are Polynesian families living nearby. Promoters of pyramid selling are only too willing to exploit the hard earned savings of those uneducated in the realms of business and retailing. In spite of past dis-favour created in all cricles, the rip-off soap organisation Golden Products is still hanging around like the proverbial bad smell.

The drama starts with an intriguing message written in felt pen on a scrap of card which has been inserted in the letterbox. "Interested??"....the card gives a phone number which can be rung for an interview. The voice on the other end of the line introduces himself as a representative of an international organisation which is just beginning its operations in this country, and is looking for management personnel. When he receives an enthusiastic reply, a time for the interview is given at an address in Lambton Quay. The plot thickens already.....

Wearing the formal apparel which has been requested the interviewee arrives at the door of the building, and out of the shadows steps a sentry to interrogate the prospective management potential on his reasons for entry. He is then directed up the stairs, by now slightly perturbed, to the sweet sounds of background music. The scene is a large room divided by a curtain which successfully hides activity on the other side. An attractive secretary seated behind a strategically placed table takes down name and address. Having taken a scat for a brief time the voice on the phone introduces himself in the flesh.

"We are an international marketing organisation......registered in Geneva and operating in half a dozen countries.....selling automotive additives, burglar systems, lingerie, detergent.....we are looking initially for part-time workers....we would like to introduce you with a talk by one of our members on management... will you please come through...." Such is the stereotyped introductory interview.

Behind the curtain are a dozen rows of chairs, seated are 20 to 30 ordinary people, often more Polynesians than others. A blank blackboard awaits for the performance to begin, and the audience whispers excitedly. To the left a tiered array of household goods all manufactured by Golden Products. This is the first time that the name is communicated; there must be some reason for keeping its secret until this stage.

Suddenly a young, vigorous man saunters out onto the dias, checks the chalk and apparatus, flashes a beaming smile at the audience, and the show is on the road. The man produces a typical piece of a wall to wall carpet defiled by Johnnie from next-door's wax crayon. To the rescue comes Golden Products super-diluted, non-toxic biodegradable general purpose cleaner, to and behold the carpet is rejuvenated to its original state, a ripple of amazement runs through the audience. He ends his performance by relating how, in search of the good things in life, in other words money and the luxuries it can buy, he left his trade of panel-beating, after attending a similar Golden Products opportunity evening.

The salesmen are neat in grooming and appearance, the polish of their presentation matching that of their shoes.

Another slick young man bounds onto the stage and extol the opportunity offered by Golden Products, enthusiastically relating a comparable success, including an imminent management conference in Surfers Paradise which he will attend, thanks to Golden. This is yet another device for entrapping gullible applicants. They are promised paid weekend trips to Auckland for training, or even the prospect of journeying further afield to such romantic locations as Surfer's Paradise and Japan, all under the guise of a training stint. The slick young man then steps to the blackboard and uses it to explain the principles of selling and management. Pyramid selling, however, by any other name, still smells rotten.

At the conclusion of the spiel in front of the blackboard each interviewee is then individually probed to evaluate the degree of seduction. At this stage any query tends to produce a stereotyped reply, generally superficial to the problem. Question—To whom do I sell? Answer—all people use soap, don't they!; Question—Where could I find $1650 in order to become a direct distributor? Answer—If you required that amount for an operation to save your legs you could find it! and so on. If the interviewer establishes that the seduction has not been successful you will be politely told to piss of because you are not suitable for management. On the other hand, if the performers have succeeded in pulling the soap over someones eyes, they are allowed to fill in an application for consideration.

This means that some poor sucker is loaded with a pile of expensive, hard to sell, biodegradable golden junk. The Consumer Institute ran a test of G-15 washing powder, which sells in 5lb containers. They found that it contained less detergent than comparable products and was therefore not highly concentrated as claimed, it gave no advantage in washing performance, the claims of superiority even in regard to biodegradibility were found to be untrue. G-15 is more alkaline than other washing powders, and the economy of use claim is entirely erroneous—G-15 costs two or three times as much per ounce as other substitutes.

These products must sell in a situation divorced from price and quantity comparisons, in the home or at work, usually to a friend, relation or associate. This allows the seller to create a monopolistic situation, as the consumer no longer has the relative safety of the supermarket shelf, where products lie packaged and priced side by side, or even the media where all advertising however extravagent, is still not directed from a one-to-one level. Many people find it hard to say no when face to face with a glib and practised salesman. The fact that these products are not conventionally known to the purchasing public means that the seller is able to make excessive claims of superiority, such as those related to G-15.

The pyramid system itself is about as straight as average American politicians. Once established, it is largely an autonomous process as far as those at the top are concerned. People try to work their way up the pyramid, recruiting new sellers, finding new buyers. Initial investors who work hard will accrue reasonable profits and at this stage the organisers higher up make their fast bucks. But—even assuming the soap market is monopolised by driving the competition out of business (Unilever—RIP) the market must slow when sales are reduced to replacement purchases only. This would probably occur before everyone in New Zealand was selling soap to the next person.

At this stage the producers are happy, but the $1650 a time or more mugs towards the bottom of the pyramid are left blowing bubbles with unsaleable biodegradable. The golden sellers are relatively safe with only a nominal investment and relatively little soap. The danger lies for the get-rich-quickers who have invested in above their heads, at the direct distributor level or above.

The Golden Products contract has been described as an iron clad document; it comprises 24 legally worded clauses that are printed in such minute print that it is even difficult to discern through a microscope. A legal opinion has described the contract, which incidently appears on the reverse side of the form which the applicant is filling in, as a document skillfully drawn up to suit New Zealand law.

The contract aims to tie down the franchise system and give Golden full control over the distributor, without Golden being responsible in any way. Naturally pricing and supply remain fully under the control of the Golden boys at the top.

The contract insists that a bank cheque, not a personal cheque, must be received before the delivery of goods. It also requires that the distributor pays freight costs except on large orders e.g. $2000. Yet another clause prevents the distraught soap seller getting rid of his unwanted goods by auction or sale in bulk lots. The seller must obtain prior written permission from the company to do anything bar walking, talking and sleeping. It is legally unbelievable that a person should not have the right to sell his distributorship, but the bubble boys have made this virtually impossible under the contract.

It is nigh on impossible to see the slightest resemblance to the originally expressed idea of part-time evening work or the superficially attractive promises made at the blackboard during the opportunity meeting. Those interested in selling are told to sell $100 worth of soap in five days, then order another $100 in ten days. The speaker presses them into believing they can easily satisfy these requirements and earn at least $100 per month part time.

The category to which most are gullibly attracted is "direct distributor". Lured by a reputed earning capacity of $700 plus per month, and the possibility of promotion up the pyramid to earn $2000 month, the listeners rush to give their $1650 without eally being aware of the realities of selling $2000 worth of soap, within a year.

In pure legal terms this contract is incredibly binding and constrictive. In fact so much so that if contested in court, it may be rejected outright in favour of the seller who is contesting it. A similar contract has been rejected in court already.

However due to the submissions to the government by the Consumer Institute (Golden Products accused the Consumer Institute of being in league with Unilever), and other interested parties, new legislation emerged in the Commerce Bill. January 1, 1975 has been chosen as the day on which the big biodegradable bubble will burst with one helluva bang.

Nevertheless Golden Products have boldly stood up to such criticism. Commenting to the National Business Review, the apparent head of Wellington distribution compared criticism of Golden Products with the initial reception given to Jesus Christ and Henry Ford. Chances are that Christ and Ford probably would not succeed in today's world anyway; after January 1, 1975, the day when the new legislation is brought into effect. Golden Products' continued operation will be as likely as the survival of a soap bubble in a furnace. While previous government legislation (like the Land Speculation Act) has quickly been circumvented, this new bill is much more likely to succeed, with pressure applied from conventional businesses who are threatened by pyramid selling, from the Consumers Institute and the Police.

Golden are undoubtedly aware of this, and are in the process of making a last money-making charge before the fall, thus the recent upsurge in their operations after a period of dormancy. When Golden Products began operating in New Zealand the question was asked, who would get the chop if the biodegradable bubble bursts. The men at the top of Golden are shrewd businessmen—they will not lose when the company ceases to operate. It will be those at the bottom of the pyramid that will be left with piles of unsaleable soap under the bed and in the garage, they will have lost most of their hard-earned savings in search of obtaining quick wealth. Next time, perhaps, they will be a little more wary.