On August 17, 2015, the FTC filed a complaint in U.S. District Court in Arizona, seeking a permanent injunction against Tempe-based Vemma International Holdings, Inc., a long-time direct selling marketer of health-related products. The FTC was successful in obtaining a temporary restraining order, which shut the company and froze its assets. Further proceedings for a hearing on a preliminary and permanent injunction and other relief were set to the future.
Such a scenario has been a common approach for the FTC. The most recent actions resulted in permanent injunctions against BurnLounge and Fortune Hi-Tech Marketing. For a summary of the most significant federal actions during the past few decades, please see:
Jeffrey Babener (2013)
The primary accusation against Vemma is that its program focused on recruitment rather than sale of product to the ultimate user, thus rendering the program a pyramid scheme and a deceptive practice under FTC legislation. In addition, the FTC has charged that Vemma is deceptive in its earnings representations.
FTC vs. Vemma Litigation Bullet Points:
- (a) This case affirms the BurnLounge standard requiring emphasis on sales to ultimate users, which includes nonparticipant retail customers and personal use in reasonable amounts. Primary motivation for distributor purchases should be destination to ultimate users and not to qualify in the plan for compensation.
A Belgian appellate court declared December 3, 2013 that Herbalife is in fact operating in compliance with Belgian law, reports Yahoo! news. This ruling is in response to previous claims by the consumer organization, Test-Aankoop, that the international nutrition company was operating as a pyramid scheme.
Herbalife was established in 1980 and operates in over 75 countries. The company is the world’s fifth top direct selling company, with 2.7 million salespeople in roughly 79 markets, reports mlmlegal.com.
For additional information, read the following articles:
On July 2nd, several media outlets, including Kansas City Business Journal, announced that the original founders of Silpada Designs – Bonnie Kelly and Teresa Walsh – are reacquiring Silpada Designs from Avon Products, Inc.
In July, 2010 Avon agreed to purchase Silpada Designs for $650 million. At the time of the agreement of purchase, Silpad Designs was making $230 million in annual revenue and operated in the United States, Canada and the United Kingdom.
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MLMLegal.com and MLMAttorney.com offer a vast collection of MLM news headlines. MLMLegal.com offers news stories going back over ten years. MLMAttorney.com offers headlines organized by month and year.
Here are a few MLM news stories that we’ve recently highlighted from the beginning of this year:
Ackman, Herbalife and Celebrity Short-Sellers (1/1/13)
According to the Direct Selling Association (DSA), shares of wellness and services products have gradually increased over the past several years. This, of course, doesn’t mean that wellness and services are always going to be the most successful products in an MLM business model but they are right now. The DSA states the following about current MLM product success:
Wellness (including weight management products, nutritional supplements, health foods and beverages, etc.) and Services (including utilities, and financial products) has steadily increased for the last several years…
Easy access to information about health and wellness has contributed to increased consumer interest in such products… Direct sales not only offers desirable products in this category, but has the value-added benefit of personal interaction with a knowledgeable representative to help the consumer make their purchasing decisions.
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Direct Selling News (DSN) recently posted the 2011 winners of the Bravo Awards. A round of applause goes to Amway, ViSalus and Nu Skin!
Doug DeVos, President of Amway, won the Bravo Leadership Award for putting people first. This includes Amway’s three million independent business owners. Direct Selling News offered the following statement as to why Amway and President DeVos were honored:
It is for this unwavering commitment to the people of Amway and his leadership role within the direct selling industry on the local, national and international levels, that Direct Selling News presented DeVos with the 2011 Bravo Leadership Award.
“Any time you’re recognized in your industry by your peers, it’s a tremendous honor,” says DeVos. “You want to be part of the team. So this is kind of like my teammates having a vote and saying ‘thanks’ in a very special way.”
The Securities and Exchange Commission (SEC) shut down ZeekRewards.com for conducting Ponzi scheme activity. News outlets are reporting that ZeekRewards raised over 600 million dollars from over one million customers. Here are some links to the news reports:
SEC Shuts Down ZeekRewards as Scam – Wall Street Journal
Be sure to visit the blog at MLMLegal.com to read MLM Attorney Jeffrey Babener’s article, And the Leaves that are Green Turn to Brown – MLM Penny Auctions, of ZeekRewards’ recent allegations and to learn more about illegitimate direct selling companies.
You may also be interested in reading the following articles which help to identify pyramid schemes vs. legitimate MLM companies:
Tired of reading? Attorney Jeff Babener will explain pyramid schemes to you on video:
The direct selling industry hasn’t proved to be as vulnerable to a down economy as other industry sectors. Fledgling and startup MLM companies are either flourishing or remaining economically consistent (see our recent blog post on the DSA’s – Direct Selling Association – Annual Growth & Outlook Survey for the latest U.S. direct selling industry statistics). Proof for this can be seen in the latest MLM industry headlines, but also in the growing pending member applications under review by the DSA.
Four new direct selling companies have applied for membership with the Direct Selling Association, announced in a recent DSA press release.