ACN is a reseller of 2degrees plans but seems to rely more on recruiting people than selling product. Cameron Wilkinson does the maths and discovers a classic MLM scheme.
This story was amended on October 9, 2019 to reflect that the Federal Court of Australia found ACN is not a pyramid scheme. The Spinoff regrets the error.
Over the last month I’ve noticed news about a business expansion into New Zealand trending in my social feed. It caught my eye as I’m pretty interested in seeing what new businesses may be coming to Hamilton and also in supporting local startups and enterprises. But after a quick read of the posts I recognised something that I’m familiar with from previous experiences.
A lot of the posts had taglines like ‘Great business opportunities’, ‘life-changing opportunity’, or ‘nothing is more expensive than a missed opportunity’.
These were followed with questions like:
‘Do you want to earn an income off bills you pay each and every month?’
‘Sick of your controlling boss? We got you!’
‘Make more income? We got you!’
‘Sick of your results? We got you!’
‘Lack of vision? We will show you!’
These are generally the calling cards of multi-level marketing (MLM) companies. But the posts didn’t say who the business was.
It didn’t take me long to discover that the company they were recruiting for is ACN Pacific, the New Zealand and Australian branch of the North American-based telecommunications services multi-level marketer of the same name.
I started looking into what they provide and found that ACN is a reseller of 2degrees Pay Monthly products, directing new customers to sign up through 2degrees’ online shop. This is interesting, because there are already a lot of retail businesses reselling 2degrees phones and plans, as well as a wide range of other products.
Not only is ACN coming into a new market with no product of its own, it is also reselling a product that is pretty commonly sold in a lot of stores already around New Zealand. This got me thinking about how ACN might make the money it claims to, and from there I started looking into how someone would generate an income with ACN.
The first step is to become an ACN independent business owner (IBO). One key thing to know is that ‘independent business owner’ is a title that ACN uses for a contractor, and in signing up you agree to follow its policies and procedures. In no way are you actually an independent business owner in the sense of having full control of a business.
Signing up as a new IBO will cost you $449. The company also recommends you buy ‘Your Business Assistant’ at a monthly fee of $39.95. Then there is a recurring renewal fee of $170 per year to keep your IBO status. It also strongly encourages attendance at ACN events and training sessions, which IBOs also pay for.
So you begin your ACN journey at a minimum of $488.95 down. How do you start making money from that investment?
ACN provides a lot of resources including a ’10 steps to success’ guide which takes you through the basics of setting up your account. In ‘Step 7: Presenting the ACN Opportunity’ it reveals that IBOs achieve success in two ways: acquiring customers, and recruiting other IBOs.
It recommends you share the “ACN opportunity” and recruit people you know. That means that friends, family, your local community and anyone else in your network can expect you to have a go at either recruiting them as a new IBO in your team or selling them a 2degrees monthly plan.
So, now comes the fun part of maths and understanding ACN’s compensation plan to make that income and rise up the pyramid of levels.
How you earn money with ACN
For starters, remember we are going into this at a loss of $488.95 thanks to the sign-up fee and the first payment for our business assistant.
When you recruit a new IBO or sign up a new customer you gain customer points. Let’s say we’ve managed to get five people to switch to 2degrees through us; three of them are on the $55 a month plan, one has signed up for the $85 monthly plan and the fifth has taken the $129 plan. That’s $379 a month, and it generates 15 customer points.
This puts us into the 1% commission bracket, meaning that each month when these customers pay their bills we get $3.79 in commission.
To put this into perspective, at an hourly rate (spending 10 hours a week on the business) this equates to 9 cents an hour.
After the first month we are still at a loss of $485.16.
We then double the number of people we get to switch to 2 degrees, increasing the value of the business to $758.00 a month. We now have 30 customer points which put us into a new commission bracket of 3%. This means when our customers pay their bills we get $22.74 a month. Now you are getting 56 cents an hour for 40 hours of work.
After the second month we are $502.37 out of pocket. This is because even though we have made $22.74 we still have to pay $39.95 a month to keep our business assistant.
It is becoming clear that we need to recruit others so we can earn residual commissions. We get three friends on board, who sign up customers of their own. We’ll use our first example of five customers and a monthly billing of $379 each. This adds up to a total of $1137 a month, putting us on the first level of residual commission – 0.25%, or $2.84 a month.
We are also now an Executive Team Leader and we can earn a bonus of $80 when our friends become Customer Qualified IBOs within 30 days of signing up.
So, at the end of three months we are making $22.74 in commissions, $2.84 from our residual commissions and get a $240 bonus from recruiting our three friends – a total of $264.48. But we are still at a loss of $277.84 from when we first began, and have been putting in more hours each month to boot.
In the ACN compensation plan’s fine print you’ll also discover that your commission amount can change, and you only earn off your customers for a maximum of 24 months. If they leave 2degrees you also lose your commission from their business.
It becomes crystal clear that to make money with ACN you need to recruit IBOs and earn acquisition bonuses. Those bonuses can also change month to month.
The combination of the sign-up fee and the bonus incentive to recruit more people raises some big red flags, and this has not been lost on the regulators. In 2005 the Australian Federal Court found that the scheme operated by Australian Communications Network Pty was an illegal pyramid scheme in breach of the Trade Practices Act. However this decision was overturned on appeal later that year.
ACN also appears well aware that most people will lose money on its scheme. Fewer than 1% of IBOs earn at the top level and their success stories are “not typical”, it says in its disclaimer.
“Earnings as an ACN IBO are based solely upon the successful sale of products to customers and their usage of those products. Individuals will incur expenses in operating their ACN business, such as the sign-up fee and renewal fee, as well as other possible operating expenses. As with any business, earnings and success at ACN are not guaranteed but depend primarily on the individual’s commitment, persistence, and effort. Individuals may not earn income and may lose money as an IBO.”
A study into 350 MLM compensation plans worldwide found that on average 99.6% of participants lose money.
So how are MLMs getting people to join up?
I have mentioned the social media posts about a “business opportunity” and making money off monthly bills. Here is another example of how MLMs use social media.
This type of marketing hones in on the dream lifestyle of being your own boss, taking control of your life and being able to do anything you want with it. This is a pretty common marketing tactic used by most MLM companies.
The scripts they provide for IBOs to use also double down on the ‘making money on the side’ and ideal lifestyle aspect:
“I’ve just started a part-time business from home, helping people save money on their monthly bills. (Share your reason why),” says one.
“You know what… I thought of you when I saw this opportunity but maybe the timing isn’t right for you. We’ll talk soon!” is another line.
The reality is most sellers make under a dollar an hour and over 20% never make a sale. You have higher odds of making money by gambling than working in an MLM. I also don’t recommend gambling.
What can we do about it?
If you know a friend or family member who is involved with an MLM, show them videos such as John Oliver’s famous take on how “fucking awful” MLMs are in 2016. Or there’s this piece from Vice following ex-consultants for LuLaRoe. And there is the documentary Betting on Zero about Herbalife. Maybe you can save a friend before they start selling out their own family and friends.
Signs to look out for include:
- Claims of making large amounts of money easily
- Events talking about business expansion
- You have to pay to join up
- It’s complicated to figure out how much you would make
- You get paid on commission
- You’re told you will be your own boss
- They don’t say what the company is they’re recruiting for.
There is also a great website called isthisanmlm.com which lets you enter a company name and it tells you if it is an MLM, and then provides some information about the organisation.
As always, if it seems too good to be true then it most likely is.
Following publication of this story, ACN provided the following statement:
ACN Pacific Pty Ltd (ACN) is a customer acquisition-based company, and a reputable and
long-standing member of both the New Zealand and Australian Direct Selling Associations.
ACN has been a member of the New Zealand Direct Selling Association since 2005 and
commenced operations in New Zealand in 2006. The ACN group offers the ACN Business
Opportunity in twenty-six countries.
ACN operates in a strict regulatory environment and operates a rigorous and responsive
compliance programme with regard to the activities of its Independent Business Owners and
the operation of its Compensation Plan, and rigorously complies with, and enforces
compliance by its Independent Business Owners, of the New Zealand Direct Selling Association’s Code of Practice. ACN is proud to say that the DSANZ has never received a complaint in relation to the conduct of ACN or its Independent Business Owners.
Cameron Wilkinson is a Hamilton small business owner with an interest in MLMs and exposing the harm they cause.