Law Articles
2021-08-06
MLM
How the Wave of Artificial Intelligence Will Impact the Direct Selling Industry
【Partner Lawyer Charlotte Wu/ Lawyer Dan Yang, Zhong Yin Law Firm】
charlotte.wu@zhongyinlawyer.com.tw
charlotte.wu@zhongyinlawyer.com.tw
Due to COVID-19 preventive measures, interpersonal distances have widened to avoid unnecessary contact that may pose health risks to friends and family. In the multi-level marketing (MLM) industry, it is common business practice to promote and sell products through personal networks, gaining financial rewards and community support. As lifestyles evolve with technology advancements—such as food delivery platforms, fintech, smart appliances, and other products or services—new living styles emerge. Therefore, in this era where technological tools spring forth rapidly, exploring how they will guide the MLM/direct selling industry forward and how the industry responds to these technologies is a crucial topic.
Artificial Intelligence (AI) refers to a set of codes and algorithms enabling machines to perceive and react to real-world variables. Simply put, AI enables programming to perform perception, reasoning, planning, and even learning[1]. By leveraging the depth of machine learning and the breadth of big data, AI assists humans in achieving goals more efficiently and enhancing convenience in life. How to harness this power to advance the industry is the focus of this article.
The following explores the interaction and integration between AI and the MLM industry in terms of products, systems, management, and marketing, creating new opportunities for transformation.
Product Aspect
When developing a product or business model, companies usually detect or create market demand. This search and creation of demand relies heavily on experience. AI, as a tool for large-scale data collection and analysis, helps companies expand their experience and discover or create market demand.
In product development, the efficacy and convenience of products can be simulated with pre-designed models or optimized repeatedly based on pilot data, enhancing market acceptance and profitability, which is one of AI’s supporting directions.
For the MLM industry centered on food, cosmetics, and skincare products[2], AI can assist in developing new product types or business models that fit MLM channels for smooth marketing, thus driving industry transformation.
It’s noteworthy that overseas pioneers have explored using "health big data" and "genetic data" to extract meaningful, valuable, and potentially profitable information, often combined with direct selling for maximum user reach via person-to-person networking. Early on, hardware and software limitations hindered breakthroughs. Recently, thanks to advances in chip performance, AI technology, and societal attention, several direct selling companies have begun collecting biometric data from members via smart wearable devices, anonymizing data for cloud storage and meaningful computation. Such data could benefit drug and medical device development and spawn profitable business models. Whether this can transform the direct selling and health industries remains to be seen.
Marketing and Management
Effective marketing requires understanding consumer behavior. Traditionally, limited information and platforms were used for advertising plus market surveys to gather consumer preferences. Now, AI analyzes data to enable companies to gain consumer insights and target advertisements efficiently. Social apps and websites utilize algorithms and big data to gauge consumer attention and habits, then target ads accordingly.
Another AI application is chatbots, which help companies handle routine customer service, reducing consumer frustration from long waits and saving manual labor time by systematically answering common queries. This is a powerful tool for maintaining consumer relations.
MLM companies can also use AI to collect distributor sales behaviors, building algorithms to recommend optimal sales methods under specific scenarios, maximizing profits and bonuses, thereby strengthening distributor relationships and increasing sales.
AI can also analyze effects of various MLM compensation plans—such as single line, binary, or hybrid systems—each with pros and cons. Both traditional and new MLM companies can simulate variables like products, consumers, and distributors using AI to find system designs that maximize profits.
Regulatory Aspect
In the AI era, regulatory technology enables governments to efficiently monitor behavior and investigate misconduct, reducing human judgment errors and increasing objectivity, making legal standards more predictable and understandable, thus improving governance and public trust. For example, AI helps financial sectors track money laundering or manage suspicious accounts, and traffic authorities optimize signals to improve road safety[3].
The author collaborated on a project assessing food advertising legality under food safety laws, which prohibit false, exaggerated, misleading, or medical claims. Regulators’ standards often require case-by-case judgment, increasing legal risks for companies. AI can analyze regulatory rulings on advertising language, helping companies evaluate risks[4].
In MLM, societal concern centers on fraudulent schemes, which present legal risks. AI could simulate conditions triggering distributor misconduct or system failure, potentially avoiding illegal MLM practices and regulatory crackdown. Also, AI-assisted proactive investigations could detect online recruitment and investment scams early, curbing illicit MLM activities. This is an area for MLM managers to develop.
Conclusion
AI technologies have already reshaped lifestyles. How MLM industries adapt to this AI wave is a topic for companies, distributors, and consumers alike. From product design, marketing, to regulatory oversight, AI applications offer transformation opportunities.
However, reflection is needed as AI relies on extensive “technological surveillance” through phone OS tracking clicks, travel routes, language, and habits—making individuals “products” or “objects” under criticism[5]. Companies must ensure proper consent mechanisms, respecting privacy and data protection, which will shape the future of MLM in the AI era. The author hopes this article sparks industry discussion.
If you have any comments or are interested in learning more about the above, please feel free to contact us.
Charlotte J.H. Wu
charlotte.wu@zhongyinlawyer.com.tw
tel +886 2 2377 1858 ext 8888
References
[1] See the Wikipedia entry on Artificial intelligence: https://zh.wikipedia.org/wiki/%E4%BA%BA%E5%B7%A5%E6%99%BA%E8%83%BD
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[2] According to the Fair Trade Commission’s official data, in 2019 the multi-level marketing industry’s revenue share was: nutrition/health foods 65.08%, beauty and skincare 15.83%; other categories such as cleaning products and health equipment each accounted for under 4.5%.
[3] For example, Taipei City has used an intelligent adaptive traffic-signal system to improve traffic conditions. See Apple Daily, March 4, 2021: https://tw.appledaily.com/life/20210304/BACZE4WEDJBBNLUDGB57SOMYXE/
[4] For details, see my article: “Is Food Advertising Lawful? Let AI Take the Pulse First,” Direct Selling Century, no. 335, November 2020, p. 58.
[5] Related reference: Shoshana Zuboff, The Age of Surveillance Capitalism, China Times Publishing, 2020. (Translators: Wen Zeyuan, Lin Yiting, Chen Siying.)