Vemma & FTC settle affiliate reclassification issue
Despite being given permission to restart business operations weeks ago, to date Vemma’s business operations remain in stand-still.
The reason is due to Vemma wishing to automatically reclassify their affiliates as retail customers. The FTC opposed and the two parties have been in deadlock.
Through two separate court filings, the matter was set to go to court. In a filing made late this afternoon however, it was revealed that a settlement has been reached.
In summary, the settlement prevents Vemma from going ahead and reclassifying affiliates as retail customers.
Vemma had wanted to use an opt-out model, which would have seen anyone who met certain criteria have to contact the company and opt-out of the reclassification.
Anyone who didn’t respond would automatically be classified as a retail customer, based on nothing more than their non-response.
This was a problem for obvious reasons, and the FTC instead proposed Vemma used an opt-in model.
Under this model, Vemma affiliates would have to opt-in to being classified as retail customers. This would see them lose their Vemma affiliate membership status and access to the Vemma MLM income opportunity.
Due to their wanting to use the manipulated retail customer data, Vemma objected to the FTC’s proposal. Not to the extent they were willing to go to court and let a Judge decide on the matter though.
As per communications between the FTC and Vemma;
Vemma will communicate and implement affiliate re-classification using the specific terms (the FTC) proposed.
Only those affiliates that indicate affirmatively that they wish to be classified as customers … will be re-classified as customers going forward.
Vemma will contact affiliates who meet the specified criteria by email, phone and online when affiliates on autoship access their backoffice.
If they so wish, these affiliates can then opt to be reclassified as retail customers.
The settlement also sees unchanged product descriptions and price lists (absent promotions and incentives) not classified as new marketing or sales materials”.
This in turn means any communications from Vemma including as much do not require prior FTC review and approval.
Any mention of Vemma’s compensation plan (actual or proposed) will however still require an FTC review and approval.
This was an issue raised by BK Boreyko’s “Vemma relaunch” email dated September 28th, which the FTC argued violated the court’s orders.
Vemma initially claimed the email wasn’t marketing material that was subject to FTC review, but as per the settlement agreement have since backflipped.
All in all the FTC got what they wanted on this one, with Vemma dropping the opt-out model and agreeing to submit any material regarding their compensation plan for review.
I don’t know what changed in a week, but Vemma went from being quite aggressive on the above points to decide to roll over.
I certainly hope it wasn’t a certain someone’s stubborn pride eventually capitulating to otherwise solid legal advice.
Certainly in moving forward, how many of Vemma’s affiliates now opt-in to lose their affiliate memberships and continue as retail customers will be of great interest.
At stake is the claim that made by Vemma that a sizeable portion of their affiliates are infact not interested in the business opportunity.
As part of the settlement, both Vemma’s and the FTC’s motions on the matter were dropped. This was accepted by the court on October 7th.
It is expected that, pending any review by the FTC of Vemma’s marketing materials, that the company will restart business operations either late this week or early next.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Vemma and FTC’s respective motions to withdraw, along with Judge Tuchi’s October 7th order granting the same.
Vemma is probably “testing the resistance”. It already knew that FTC wouldn’t accept an automatic reclassification based on passive non-response. But FTC may accept some other methods.
“By email, phone and online” means that Vemma can do something to actively try to reclassify affiliates.
The scripts used in those communications have to be submitted for review to the FTC.
PPblog has some news about Vemma Europe and Vemma Australia under bankruptcy restructuring.
FTC is playing hardball and make sure Vemma don’t get away with anything.
“Power of the default”, i.e. “Default effect” has been offered as the explanation why organ donation is so low in the US: we have an opt-in system vs. other countries with opt-out system.
FTC wants to make sure that people who signed affiliate agreement with Vemma actively opt-out of being an affiliates, rather than Vemma take the lazy / default way out, i.e. all affiliates are really self-consumers.
ppblog has also reported that:
chapter 7 liquidation means the company assets will be sold off to pay creditors ie the company will shut down?
does this mean boreyko is planning on shutting down vemma europe and australia?
on oct 4th, boreyko emailed a european affiliate, saying that after resuming deliveries to the US and canada this week, he would focus on the europe market:
facebook.com/photo.php?fbid=935551676518915&set=p.935551676518915&type=3
how come affiliates are not informed about vemma’s plans? many affiliates have been supporting boreyko, and waiting patiently for vemma to restart.
From this report Vemma Europe and Vemma Australia are already in liquidation.
Its stated that Vemma was considering filing bankruptcy in the US but under what Chapter of the Code is not mentioned.
then why the hell is boreyko stringing affiliates along worldwide!
is it because he first wanted to reclassify nonrecruiting ‘autoship affiliates’ as ‘customers’, before informing them of the liquidation?
if he can increase his ‘customer’ numbers substantially, he would be better placed to face the FTC in court in the near future.
it will be incredibly dishonest of boreyko to ‘use’ his affiliates in this manner and then dump them.
a few days back boreyko posted an old video of himself giving away ‘vemma’ to kids in some church program. he duly breaks down into tears, because he couldn’t get over his own kindness!
his FB page is also full of ‘feel good’ messages. not a word about being in liquidation and europe and australia!
i honestly thought boreyko was redeemable, but now i’m not so sure.
@Anjali
People (Boreyko) don’t start MLMs to help affiliates. They do it to collect money from the marks (affiliates) and make themselves rich. This is the intention from the get go. Get it?
Boreyko doesn’t give a rat’s ass about affiliates unless he’s able to siphon money out of them.
Here’s another victory for VEMMA! Receiver ordered by Judge to return a substantial amount of money he withdrew from VEMMA’s corporate accounts during his roughly 2 week period as Receiver.
Funny how you forgot to mention this!
asdupdates.com/wordpress/archives/6686
By the way, the reason for the delay in opening has nothing to do with the re-classification issue.
One final note: regarding Europe, Simon Grabowski was a co-owner, his young son is dying, and he has decided to withdraw and focus on his son, hence a possible re-organization regarding Europe… sometimes what you think is happening, or why it is happening, is either not what is really happening or why it is happening.
@char
i completely understand and support businesspersons setting up businesses to collect money and make themselves rich.
bad business people, or just bad people, wont give a rat’s ass about their employees or affiliates or whatever.
boreyko’s behavior has nothing to do with MLM, it has to do with ‘badness’.
I guess its because his top priority is to save whatever parts of his businesses are saveable (which on balance might be good for the men and women who actually retail products).
Still its not surpising to find that Vemma was investigating its bankruptcy options while at the same time carrying on with business as usual.
@Anon
It was brought up in the comments. Kind of a non-issue as they Receiver was withholding the funds until it was made clear they wouldn’t be held liable for Vemma’s debts.
That was passed so a quarter of the funds withheld were returned (to be used for bills or something from memory).
The Receiver is still likely to get paid. But anyway, like I said, it’s pretty insignificant.
…cut the crap.
Prior to agreeing to the FTC’s terms Vemma were unable to restart business operations (communicate with affiliates about a new comp plan, advertise new prices etc.).
Well there’s that, and the fact that Vemma are losing millions of dollars.
But no, I’m sure the dying kid is the reason hey (my condolences).
And since you didn’t offer a better reason and explanation, how do you expect ANY one to believe you, hmmm?
From where did you get that explanation?
People will normally not shut down a business because of reasons like that. They will hire someone to run the business for them (or promote someone to do the job).
However, they will shut it down / file for bankruptcy if the business already is losing money and can’t be saved — business reasons rather than personal ones.
Personal reasons are typically used as excuses when people want to avoid questions about a decision.
Receiver’s are private individual’s appointed by the Court. They are paid using assets of the company they manage and here the Court allowed the Receiver to withdraw funds consistent with his anticipated duties.
However the Receivership was dissolved in favor of a less costly monitor…so Vemma was due a refund.
Describing a refund as ‘another victory’ is not allowed.
…and a partial refund at that.
The court filings say otherwise.
…and a partial refund at that.
Vemma.pl (Poland) has this popup message:
“Vemma Australia in liquidation”
Vemma is actively trying to shrink its organization in multiple countries and regions. It was decided shortly after the September 18th verdict.
* Vemma Australia on September 24th = one week after September 18th
* Vemma Europe on October 2nd = two weeks after September 18th
Vemma is actively trying to reduce payouts to affiliates, employees and other creditors in those countries or regions. That’s based on business decisions rather than on personal reasons.
If you have people in downline, they will most likely find the same information I found. It was relatively easy to find — I just googled “Vemma Europe liquidation” and “Vemma Australia liquidation”.
Are these voluntary or involuntary windups?
Voluntary in the sense Vemma has initiated them, but involuntary in the sense it’s because they can’t sustain business operations in those regions under the terms of the preliminary injunction (no recruitment).
I gave full quotes of the sources, and I also provided the addresses. It’s liquidation bankruptcies, not restructuring.
oh yes, I reread the notice.
Yes, Like a Chapter 7 in the US I would say.
So please explain to me who in their right mind would continue with this business as an affiliate?
I mean wouldn’t be simple to take the entire team to another MLM Scam and continue to buy a useless product and get paid?
This is going to very interesting i predict a Chapter 7 in the USA soon.
BK dishonest? What a novel idea.
don’t just make a ‘comment’ – explain it.
why is saying that boreyko is ‘dishonest’ a ‘novel idea’?
can you explain why after putting vemma europe in liquidation on oct 2nd, boreyko wrote to a european affiliate on oct 4th, saying that he would be addressing the business in europe, after getting the US and canada on track?
can you explain why boreyko was speedy enough in informing affiliates about the new compensation plan, but thought it unimportant to inform affiliates that he was shutting down a large part of the vemma business ie australia and europe?
such behavior is unacceptable when your affiliates are supporting you, and looking at you for guidance.
Predicted that couple days ago. There is no saving Vemma. BK’s best bet now is to sell off the different brands and/or formulas either to a competitor or form a new company.
There’s barely enough assets to pay the bills… if at that. BK may even have saved a couple million when the infusion of cash was stopped.
If he wants to hang in there, doubt any bank would give him a line of credit into that black hole. It’d have to be really private funding at some huge interest rates and with collateral.
oops 🙂
apologies to cindy for shoveling questions at her!
New Vision –> Vemma –> ???
BK’s already shown his aversion to the law. And just a few months ago before the FTC took away his toys, he added suppliments in the form of pills to his line.
Ironically, he’d touted the drinks as a way to get to get everything you needed without hard-to-swallow pills. Maybe he’s discovered a formula for pills that aren’t hard to swallow, and was preparing for BK 3.0.
I suppose it remains to be seen, but I think it would be foolish to count him out.
Bode. They own the trademark, and it’s not as “tainted” as Verve and such.
That’s my wild-*** guess. 😀
Has there been any discussion of of the email Vemma sent out to it’s customers/affiliates, or did I miss it?
It doesn’t sound like Vemma’s rolling over to me, but I could be totally confused.
If this is new, anyone want a little cut-and-paste?
I mentioned the part I found interesting here (new merchant processor) – https://behindmlm.com/companies/vemma/why-is-vemma-going-into-liquidation/#comment-349245
The details of the reclassification settlement are still as they were, that being Vemma agreed to opt-out and FTC review of any comp plan material.
The only thing that’s change is they’re taking product orders again. That and corporate silence regarding the liquidation of EU and AU.
This is from the most recent email:
I may have misunderstood this when I first read it. I’m thinking you should go to your back office to ensure your status hasn’t been changed to “customer”. But, if you logged in, autoship would start up.
However, if you cancelled autoship before Vemma shut down, you should be able to log into your back office and nothing will change.
Does any of that make sense?
Totally snarky fun fact: BK says, “… I wished I went to school…”
I, too, wish he’d GONE to school (for any profession). It would have avoided all this nonsense.
I think he’s just advising those who wish to login and verify their autoship status can do so.
Nothing should have changed regarding affiliates being reclassified as customers without their consent, nor making any changes to existing autoship orders that a customer didn’t initiate.
That’s per the settlement agreement Vemma and FTC reached.
I thought those were the terms, but the email seemed a little sketchy to me, and that logging in would default to autoship. Thanks for the clarification.
And remember, no inventory loading is taking place…
(404 link removed)
^^^ Got 404 not found on that link.