I don't know the exact mechanics used in the scaling, but i can tell you it doesn't scale nearly enough.
Single player difficulty is fine for me, but my 4 man multiplayer party completely obliterates everything in its path in like 3 seconds flat. We had to rush through normal and epic (shortest path) to be low enough level to actually fight some enemies that we won't breeze through like they're nothing in legendary. And it's still not remotely challenging! This might sound like bragging, but it's very annoying to have the game this easy.
I have a whole bunch of gripes with multiplayer (way too short xp range, lag) but this is the biggest one, there is absolutely no challenge unless we split up and solo.
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