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.