World Ventures lose Norwegian Trial Court appeal
Last February the Norwegian Gaming Board found World Ventures to be an illegal pyramid scheme.
This was met with an appeal, in which World Ventures declared:
WorldVentures considers both a number of the factual and legal aspects of the Gaming Board report as unfounded and associated with failure.
Through filing their appeal, World Ventures was able to continue business operations in Norway. This ceased when a decision was made on the appeal, denying it in full.
A few days later World Ventures formally ceased business operations in Norway, announcing simultaneously that they were going to sue the Norwegian government (Gaming Board) in a Trial Court.
A case appealing the Gaming Board’s decision was filed and heard on the 2nd of January, with a decision on the matter published late last week.
In lodging their appeal, World Ventures pulled out the usual pyramid scheme excuses:
- but affiliates have access to…
- but affiliates don’t have to….
- but affiliates can…
And so on and so forth.
The reality of World Ventures business operations in Norway though (and likely the rest of the world), is that
about 95% of turnover in from Norwegians in reality referral and that and that product sales represent less than 5%.
95% of World Ventures’ revenue is derived from affiliate signups.
Norwegian law requires that an MLM ‘company must demonstrate that revenues are due to the sale or consumption of goods or services and not others recruited to the system‘.
The threshold for this is set at 50%. With a 95%/5% split, clearly World Ventures falls well on the wrong side of this ratio.
In true pseudo-compliance fashion, World Ventures argue that no commission is paid on the signing up of a new affiliate – despite 95% of the company’s revenue being sourced from affiliates signing up and buying World Ventures member packages.
Quite clearly the number of people buying World Ventures membership who aren’t affiliates is wholly insignificant. The reality, as noted by the court, is that the vast majority of memberships are purchased by new affiliates, which generate revenue for World Ventures and pay commissions to the affiliates who recruited them.
The Trial Court noted that, despite all the waffle about value and what affiliates can and can’t do, that ‘justification of why it is in reality the way it works (was) not shown’ in World Ventures filing.
World Ventures also argued that “the application of law” by the Gaming Board was incorrect, and that the Board ‘built (their case) on incorrect facts‘, despite said facts being provided to them by World Ventures themselves.
They even claimed that the Gaming Board erred in comparing non-affiliate membership sales with affiliate membership sales, thus rendering the Gaming Board’s findings legally “invalid”.
Yeah, the logic behind that particular argument escapes me too. Especially when one considers that
One review of financial flow (of funds reveals) that there is not enough real economic activity – sale of travel – to cover (World Ventures’) expenses.
The majority of sales are related to redistribution of wealth within the company.
How World Ventures thought they’d argue they are engaged in anything but recruitment sales, when the little travel they actually sell doesn’t cover basic operational expenses, is beyond me.
Furthermore the Gaming Board was adamant to negate any mention of travel altogether, emphasizing that any travel sold through third-party Rovia had nothing to do with World Ventures’ own MLM business operations.
The State emphasizes that the membership of the travel club does not involve any direct right to travel, it involves a right to buy discounted travel.
Membership gives thus only access to an offer of a product.
Most participants go into WV to earn from others participation fees, not to get access to cheaper travel stay.
As per our World Ventures review, we too also identified that World Ventures merely offer access to third-party discounts. They themselves sell nothing other than World Ventures memberships.
Upon hearing arguments from both sides, the Trial Court made a number of findings.
The first pertains to World Ventures memberships (merely access to third-party discounts) constituting the sale of products and services.
It follows from Proposition. No.. 97 (2004-2005) page 6 that
“It is envisaged that such business where over 50% of revenues stemming from referrals are covered by the bill. (Businesses) outside of this fall under a pyramid sales system that primarily sell products.”
The court takes this into account. The decisive (factor) in relation to this condition (is that) about at least half of WVS revenues (are) derived from (the) referral of new members / sales representatives.
WV’s quotation relates to the assessment of income flows / income seems to (suggest) that membership fees should be included in the record which includes revenues from sales of products, while the Gaming Board’s decision assumes that membership fees do not constitute real consideration for a product, and thus (is) largely attributable to (revenue) that includes income due to others (being) recruited to the system.
Surprisingly the Supreme Court agreed ‘that membership in itself may in principle be a product‘, but that
the question is whether the price for membership in this specific case is higher than (what is) actually receive(d) (via) consideration (of the product), and thus in reality constitutes a revenue related to referral.
The Court finds, in accordance with the Gaming Board’s decision – to assume that approximately 95% of all sales representatives in Norway are also members of the travel club.
When this actually is situation, (the court) can not find the right reason in assessing (a reason) to distinguish between the two groups.
That (there) happens (to be) separate registration and that there is no compulsory membership for a sales representative, the court nevertheless (believes this to be) not decisive for legal assessment.
The court Joins Gaming Board’s assessment of this and adds that a distinction here appears to the court after presentation of evidence without sufficient reality.
The Court finds it is not necessary to decide whether members of WV provide direct payment for participant status.
When consideration does not correspond with the real values of member benefits, this is in any case is in reality an indirect purchase of participant status covered by the provision.
Basically World Ventures’ pseudo-compliance arguments just got shut down. Arguments about what affiliates can and can’t do, or have the option of doing are entirely irrelevant when in reality 95% of your revenue is derived from affiliates buying your memberships.
The correlation between the two are inseparable for the purpose of analysis, and certainly can’t be explained away with pseudo-compliance reasoning.
Ditto World Ventures arguments about the selling of travel, which in reality have nothing to do with World Ventures the MLM business opportunity:
WV has argued that the remuneration members pay has a real value in terms of the right to discounted travel, rewarding (the) whole participation fee that can be used for travel purchases, concierge service, to perform volunteer work, price guarantee and increase in proportion transport.
In the court’s view, these member benefits (Except for concierge services) with a potential value – member receives no benefit directly but under the condition that the member booking travel (Dreamtrips).
Member Benefits as described has no economic reality before a trip through the company ordered and paid.
Basically what you do after signing up for World Ventures and paying your membership fees does not matter.
The core of the business is signing up affiliates and getting them to pay for World Ventures memberships (95% of World Ventures’ revenue in Norway).
The Court notes that membership does not trigger any advantage or consideration without one paying (extra) for it (with a discounted price).
A member who has not purchased discounted (travel) services will therefore in (effect) … not having paid for something other than the ability to (earn) revenue (due to) recruiting (others into the) business.
The value of World Ventures’ concierge service (which it asserted provided real value to World Ventures affiliates) was also rubbished by the court:
(World Ventures) has held that similar concierge services in Norway are being sold on a monthly basis for $700 NOK per month and that this confirms that the service has a significant value.
The court does not agree.
Beyond the testimony of Roberto Canales in WV, there has been no documentation submitted to the court about this.
Moreover, it is unclear whether the services are comparable. Canales explained, moreover, that statistics are available, but that he is unfamiliar with what they show. (Ozedit: Hahahaha!)
In any event there is no concrete evidence that concierge service in Norway is being used to an extent of significance in this context.
Services whose use of are not documented, in this context, may not be attributed as particularly valuable for those who have purchased the service.
World Ventures basing legal arguments on unsubstantiated claims? Whodathunkit.
In view of the above it is the court’s conclusion that the proceeds of WV (primarily) stem from recruiting new participants into the business.
The condition of the Lottery Act § 16 is after this fulfilled. The Court has reached the same conclusion as the Gaming Board.
Similarly, World Ventures’ arguments about misapplication of the law and the Gaming Board’s procedural errors were also swept away.
The Court concludes that (World Ventures’) main claim is not substantiated, and that (the) conditions to decide preliminary injunction without a probable primary requirements are not fulfilled.
It is therefore not necessary for the court to consider the other conditions to decide temporarily injunction, including hedge reason and proportionality.
The petition is not accepted.
In addition to losing the appeal, World Ventures was also ordered to pay $70,607 NOK ($9262 USD) in legal costs.
Update 30th December 2015 – A footnote on this article provided a link to the decision on the Norwegian Trial Court website.
Direct access to the decision has since been disabled by the court. The trial court website now requires a login to access the information, so I’ve removed the links as of today.