Before you go dismissing this as just another academic paper, consider the authors: FTC senior economist and pyramid scheme expert Peter Vander Nat and Bill Keep, dean of the business school at The College of New Jersey.
In 2002 they co-authored a highly regarded paper explaining what differentiates a legitimate multi-level marketer from a pyramid scheme.
In this piece, which doesn't pick on any company in particular, Vander Nat and Keep give an exceptionally well-spelled-out history of multi-level marketers, but then dive into the deep-in-the-weeds legal decisions and "continuing concerns."
Perhaps nothing in the paper is more compelling to multi-level marketing aficionados as their discussion of internal consumption. This is when distributors get compensated for sales to themselves and other distributors. A key issue in the debates on Herbalife (HLF), Nu Skin (NUS) and others is how much compensation comes from internal consumption vs. genuine external sales.
It's such a critical issue that last year Nu Skin, on its Web site, included the question of whether internal consumption "indicates a business is a pyramid scheme" among FAQs on its Web site. As part of the answer, video of showcasing Joseph Mariano, president of the Direct Selling Association -- the industry trade group -- dispelled the concerns.
Beneath the video is a paragraph from a 2004 FTC staff letter in response to an "internal consumption" question raised by the Direct Selling Association. This paragraph is pointed to by the industry and individual companies when the issue of internal consumption arises. I certainly received it from Herbalife when I was doing research for my CNBC.com documentary, Selling the American Dream.