Visalus agrees to not run a pyramid scheme… for three years?
A settlement has been reached in the long-running Visalus pyramid scheme class-action lawsuit.
One of the conditions in the submitted settlement will see Visalus agree to stop paying on recruitment…
…but only for three years. What?
BehindMLM reviewed Visalus back in 2012. Among other things, we noted a slant towards autoship recruitment.
Visalus encouraged this by lowering self-funded commission qualification, compared to qualifying via retail sales.
In 2015 plaintiffs Timothy Kerrigan, Lori Mikovich and Ryan Valli filed a class-action lawsuit against Visalus.
In their complaint, Kerrigan, Mikovich and Valli alleged Visalus ‘depended more on recruitment of distributors than selling products to outside customers.‘
The lawsuit has been playing out and currently stands at 230 filings as of June 14th.
On May 23rd the plaintiffs filed a motion requesting preliminary approval of a settlement reached with Visalus.
As defined in the settlement, Visalus affiliates who signed up between July 9th, 2008 and June 16th, 2019, qualify as class members.
The calculation pertaining to a net-loss is determined by:
- $49 in signup fees (irrespective of whether a more expensive kit was purchased), plus
- Vi-Net subscription costs, plus
- affiliate membership renewal fees paid, minus
- commissions paid, minus
- the value of any free products received, minus
- the value of any VI Points acquired
The reached settlement provides Visalus class members with two options.
The first is a $25 to $50 payment, capped at $4,535,000 for the class.
If the total number of claims exceeds the $4.5 million figure above, individual payments will be decreased accordingly.
The alternative is referred to as the “Benefits Option”.
Visalus affiliates who elect for the Benefits Option retain their Visalus distributorship, and receive
- a 25% commission rate on all sales made (initial and recurring orders) for one year;
- a 35% product discount of up to $1000 (expires after one year);
- distributor fee waived for one year;
- free tickets to one Visalus event (must be redeemed within eighteen months); and
- a year of Vi-Net Pro for affiliates who were already paying for the services, and six months for everyone else.
Considering Kerrigan, Mikovich and Valli each alleged they’d paid $499 for a Visalus promoter enrollment package that went nowhere, getting back $25 to $50 (or possibly less) seems a bit lowball.
As class-representatives Kerrigan will receive $15,000. Mikovich and Valli will receive $10,000 each.
Probably well over what they lost in Visalus individually.
I’m also not really sold on the Benefits Option.
If you’ve lost money in Visalus because you believe it’s a pyramid scheme, signing on for another year probably isn’t going to turn things around.
This leads into the corporate reforms section of the settlement.
As a company, Visalus has agreed to:
- publish a retail pricing list on its website;
- clarify in its Policies and Procedures that product purchases by affiliates are optional;
- stop compensating affiliates “primarily for the act of recruiting or registering other” affiliates;
- maintain a buy-back policy that covers products for at least thirty days; from purchase;
- gear “sales-based bonus payments” or “incentives” around “reported levels of sales to end-user consumers” (retail customers) and affiliates “who purchase product for personal consumption”;
- not make “any false or misleading representations regarding (affiliates) who are parties to a special compensation agreement”;
- not make “any representations regarding its current or former relationship with Blyth, the Goergen family, or its sales activity between 2010 and 2014 that are false or misleading”;
Here’s the thing though; Visalus only has to do the above “for a period of three (3) years from the Effective Date”.
After that they can go back to building an MLM business focused on recruitment, otherwise known as a pyramid scheme.
Why the above corporate reforms aren’t permanent is beyond me, but nonetheless the court found
that the terms embodied in the Agreement appear, upon preliminary review, fair, reasonable and adequate.
Subsequently on June 14th the plaintiff’s motion seeking preliminary approval was granted.
Looking forward, a Fairness Hearing has been scheduled for October 1st.
Considering the admissions Visalus has made regarding retail sales in the settlement, you can’t help but wonder where the FTC is in all of this.
Seems like a slam-dunk case if they were to investigate Visalus’ revenue figures over the past decade.
Update 29th September 2019 – A motion for final approval of the settlement was filed on September 9th.
At the time of publication a decision on the motion remains pending.
Update 29th October 2019 – Final approval of the settlement was granted by the court on October 1st.