Ariix fined €960,000 EUR for consumer fraud in Italy
Ariix has been fined €960,000 EUR for consumer fraud by Italy’s Competition Authority (AGCM).
Following a complaint filed by the consumer protection group “Il Gatto e la Volpe Nel Web” in 2018, Italian authorities began investigating Ariix and parent company NewAge.
AGCM’s legal action commenced against Ariix Italy S.r.l. on May 24th, 2022.
As part of their investigation, AGCM established that Ariix made 30 to 40 million euros in sales in Italy in 2021.
Ariix was promoted in Italy through Unstoppable Generation, which AGCM initially tied to Unstoppable Generation S.r.l.
Unstoppable Generation is run by Claudio Capozza. In 2020 BusinessForHome cited as Ariix’s “no. 1 next gen leader worldwide”.
On LinkedIn Capozza cites himself as an “Officer” of Ariix’s corporate team.
AGCM’s investigation found that, outside of Ariix, Unstoppable Generation generated 118,000 euros for Capozza in 2021.
In investigating Ariix, AGCM examined whether:
- Ariix’s “sales system” was a pyramid scheme;
- promotion of Ariix’s products on social media by Unstoppable Generation failed to disclose the business and relationship the poster had to the business; and
- the products Slendeeriz Gocce Day&Night” and “Tahitian Noni” were sold without approval by the Ministry of Health
The investigation saw AGCM visit Ariix’s and Unstoppable Generation’s registered offices in Italy.
In June 2022 Ariix and Unstoppable Generation provided AGCM with additional requested information.
AGCM’s investigation concluded on November 7th.
Based on information provided, AGCM established that, for 2021, 50% to 55% of Ariix’s sales volume was distributor purchases.
Upon further analysis, AGCM concluded;
- Ariix’s marketing materials focused “on expanding the number of (recruited) affiliates rather than sale of products”;
- “over half” of Ariix’s sales volume was generated via distributor purchases (as opposed to sales to retail customers);
- what retail sales volume existed within Ariix, was not enough to sustain the business;
- Ariix’s “economic sustainability” was “directly related to the number of (distributors)” it has;
Based on these findings, AGCM concluded “conditions for a pyramid sales system existed”, and that “Ariix’s sales system has the characteristics of a pyramid scheme”.
With respect to social media, AGCM found the only identifiable link to Ariix was use of the hashtag #ariix.
The sales strategy adopted by Ariix induces sellers not to disclose the commercial purpose (of their posts).
Ariix’s guidelines encourage the sharing of experience or (product) consumption (which might) not (be) necessarily authentic.
From the guidelines provided by Ariix to its sellers, it emerges that they are encouraged to propose themselves essentially as consumers, making extensive use of social networks, building their own image publicity of seller/consumer, without insisting on the need to disclose the commercial purpose and advertorial nature of the content, in order to recruit new members.
A hashtag is not suitable for revealing the context in which social interaction takes place.
AGCM concluded posts made on social media by Ariix distributors were misleading, in violation of the Italian Consumer Code.
On Ariix’s products being registered with the Ministry of Health, AGCM deemed there was insufficient evidence to prove a violation had occurred.
In handing down Ariix’s penalty, AGCM separated Unstoppable Generation S.r.l. from the proceedings.
Unstoppable Generation S.r.l.
isn’t involved in the business of selling Ariix/NewAge products and is a legally distinct entity from community called “Unstoppable Generation”, made up of Ariix sellers.
AGCM determined Ariix be fined a total of €1.2 million euros. This amount however was reduced to €960,000 EUR, owing to NewAge’s recent bankruptcy in the US.
Breaking down the 960,000 EUR fine, Ariix was fined
- €800,000 EUR for running a pyramid scheme and
- €160,000 EUR for using social media to mislead and deceive consumers.
AGCM’s judgment against Ariix was handed down on December 13th, 2022.
The judgment was published on page 212 of a January 2nd, 2023 bulletin.