Vemma verdict: FTC wins, preliminary injunction granted
You’ve read the opinions, you’ve read the mostly one-sided accounts of what went on at the September 15th preliminary injunction hearing, you’ve seen Vemma’s CEO declare god is on his side all week…
Now let’s take a look at the facts.
The whole purpose of the September 15th hearing was to have the court examine
whether the FTC has still met its burden to show that it is likely to succeed on the merits of its claims against Defendants and the balance of equities tips in its favor, in light of the arguments and evidence presented by Defendants.
Or in other words, did the FTC’s initial arguments hold up under scrutiny (provided via Vemma’s legal defense)?
The FTC charged Vemma were in operation of an illegal pyramid scheme and guilty of false and misleading representations.
Is Vemma a pyramid scheme?
As defined in Judge Tuchi’s order (citing Omnitrition and Koscot):
A pyramid scheme, like a simple chain letter, ensures that most of its participants will lose money and is thus, by its very design, unfair and deceptive under the FTC Act.
To establish this, Judge Tuchi sought to differentiate affiliates from customers:
Affiliates are those participants who seek to avail themselves of the business opportunity of promoting Vemma and/or selling Vemma products and thereby earn bonuses, as opposed to customers, who are solely or primarily interested in purchasing Vemma products for their own consumption.
The FTC had alleged Vemma by design focused on recruitment, and Judge Tuchi agreed:
While no purchase, payment or fee is required to become an Affiliate under Vemma’s policies and the Affiliate Agreement, in practice, Vemma strongly encourages any person wanting to become an Affiliate to
(1) purchase an Affiliate Pack—currently costing $600 and containing Vemma products, audio and video recordings, printed materials and branded items— upon which eligibility for certain bonuses is contingent, and
(2) sign up for $150 monthly auto-delivery of two cases of product to maintain eligibility for bonuses.
It is this focus that defines Vemma as a product-based pyramid scheme, but only so if this was the focus of the business.
To that end Vemma sought to manipulate its sales data, incorrectly redefining affiliates as retail customers.
Judge Tuchi shot this argument down:
(Vemma’s) proposed reclassification of Affiliates to customers is not based in fact.
(Vemma) have offered no evidence to support a finding that a Vemma participant who intended to be just a customer accidentally identified himself or herself as an Affiliate, or had any motivation to do so.
In addition, as the FTC points out, the reclassification proposed by Defendants would serve to misrepresent how many failed Affiliates there likely are.
Indeed, the present data shows that, between January 2013 and August 2015, more than 73% of Affiliates who received commissions did not earn enough to recoup their investment in Vemma’s programs.
I’ve been highly critical of data manipulation in the MLM industry, so it’s great to see it called out for what it is: deception.
Moving on:
Pyramid schemes are said to be inherently fraudulent because they must eventually collapse.
The Ninth Circuit employs the FTC’s pyramid scheme test as set forth in Koscot:
[A] pyramid scheme is characterized by the payment by participants of money to the company in return for which they receive
(1) the right to sell a product and
(2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to sale of the product to ultimate users.
As soon as I saw Koscot and Omnitrition evoked by the FTC in their original complaint, I sort of figured this was coming…
The first part of the Koscot test can be satisfied by a required purchase to become a distributor, or a required purchase of non-returnable inventory to receive the full benefits of the program.
The second part of the Koscot test — rewards for recruitment unrelated to sales to ultimate users — is the sine qua non of a pyramid scheme because it “tends to induce participants to focus on the recruitment side of the business at the expense of their retail marketing efforts, making it unlikely that meaningful opportunities for retail sales will occur.
The incentivization of recruitment over retail sales can lead to “inventory loading”—the purchase of product for the purpose of remaining eligible for bonuses.
In practice, distributors may themselves consume some inventory as ultimate users, and thus a program that permits internal consumption is not per se a pyramid scheme.
However, evidence that distributors purchase and consume product for the purpose of qualifying for recruitment incentives is evidence of a pyramid scheme.
How did Judge Tuchi relate that to Vemma?
The evidence before the Court leaves little doubt that the FTC will ultimately succeed on the merits in demonstrating that Vemma is operating a pyramid scheme.
There’s no way to sugar-coat that… it’s a smackdown.
Vemma’s bonus structure and training materials are designed to make new Affiliates buy a $600 Affiliate Pack, which makes payment for the right to sell a Vemma product if not a written requirement, a practical one.
So much for pseudo-compliance…
With regard to the second Koscot prong, the evidence shows that the bonuses Affiliates earn are primarily for recruitment of other Affiliates, not the sale of products.
In practice, (Vemma) affiliates are very likely engaging in inventory loading.
The great majority of Vemma product sales is to its Affiliates and under the current bonus system there is no way to unbundle the Affiliates’ intent to consume Vemma products as ultimate users from their desire to remain qualified for bonuses— bonuses that are largely driven by recruitment of other Affiliates.
You want to assert a large chunk of your affiliates are not affiliates? Sign them up as preferred customers or otherwise stop trying to bullshit everyone.
Otherwise, the rest of your income opportunity will instead be used to evaluate the actual intent of your affiliates. Which in Vemma’s case turned out like this:
(Affiliates) intent in purchasing Vemma products must be viewed in light of Vemma’s program design as well as its training and marketing materials, which explicitly provide that Affiliates should enroll in auto-delivery for the purpose of remaining qualified for bonuses.
In all likelihood, Affiliates’ purchases of Vemma products are incidental to the right to qualify for and obtain bonuses.
And speaking of pseudo-compliance;
Moreover, Vemma’s purported anti-inventory-loading safeguards are neither effective nor enforced.
Vemma contacts only 15 of its over 90,000 Affiliates a month to ask if at least 70% of their sales were for consumption or retail.
And Vemma’s Vice President of Legal Affairs admitted in her testimony that the script for those calls does not really investigate the reason an Affiliate purchased product or check for inventory loading.
Moreover, the Receiver found that, in practice, Vemma is five months behind on its inventory loading audits and has never suspended or disciplined an Affiliate who failed to make the requisite sales to ultimate users.
And Vemma does not even attempt to apply a rule similar to the ten customer rule that was found to be a reliable way to control inventory loading in Amway.
What Judge Tuchi is politely saying, is that what little pseudo-compliance Vemma had was all bullshit. It served no other purpose than to show Vemma had a compliance program on paper, but in reality was a lip-service farce.
To be fair, Vemma aren’t the only company guilty of this. Pseudo-compliance is a widespread practice throughout the MLM industry that needs to change.
Left with no leg to stand on, Vemma’s answer to its compliance issues was that
it had recently made changes to both its procedures—such as its anti-inventory-loading safeguards—and its training and marketing materials.
As such, Vemma assert(ed) that, because some of the FTC’s evidence is not current, the evidence is insufficient to show Vemma is a pyramid scheme at the present time.
Vemma believed the recent changes would absolve them of compliance incompetence prior.
It didn’t.
Under Section 13(b) of the FTC Act, the FTC is entitled to injunctive relief only for continuing violations or violations that are likely to recur—“the statute does not mention past violations.”
The FTC’s evidence is certainly sufficient to show Vemma was operating an illegal pyramid scheme through 2014, and although evidence is not yet complete for 2015, the Court notes that Vemma’s 2015 “Two & Go” program contains the same indices of pyramidal structure as the former programs.
And not only do changes to compliance not exempt Vemma from being a pyramid scheme, Judge Tuchi even went so far as to call out the changes as being superficial (more “we changed stuff but didn’t really” pseudo-compliance).
(Vemma) have not produced evidence that the critical defects in their programs have been remedied since 2014, and the Court thus has no reason to believe at this stage that Vemma’s violations of the FTC Act are not continuing or likely to recur in the absence of injunctive relief.
In sum, the Court finds the FTC has again met its burden to show a likelihood of success on the merits in demonstrating Vemma and Mr. Boreyko are operating a pyramid scheme, even in light of the argument and evidence provided by these Defendants.
Tom Alkazin, a top Vemma affiliate named by the FTC as a defendant, did manage to score a win though, with Judge Tuchi finding
While the FTC has provided evidence of Mr. Alkazin’s participation in the promotion of Vemma’s business opportunities, there is no evidence that, even as a top Affiliate, he had control over Vemma’s structure, operations, or bonus and compensation structure.
Accordingly, the Court denies the FTC’s request for a preliminary injunction against Mr. Alkazin with regard to the operation of an illegal pyramid scheme.
Yeah Tom Alkazin participated in and profited from the operation of a pyramid scheme, but he didn’t have any direct control over it… so he walks.
Not sure how I feel about that. But I suppose the clarification doesn’t preclude Alkazin from clawbacks so in that sense his Vemma fortune is as good as forfeit.
I guess that’s punishment enough, not to mention his MLM career is now likely all but over.
False and misleading representations
With Vemma concluded to have been a pyramid scheme up to 2015, and judged likely to continue to operate as one into 2015, next we move onto the FTC’s allegations of “false and misleading representations”.
At the center of these allegations is the misrepresentation that ‘Vemma Affiliates are likely to earn substantial income‘.
In the same contexts, (Vemma) failed to disclose that Vemma’s structure ensures that most Affiliates will not earn substantial income, and that (Vemma) furnished Vemma Affiliates with promotional materials—or “means and instrumentalities”—for use in the recruitment of new Affiliates that contained false or misleading representations.
Basically we’re looking at whether there was any truth to Vemma’s marketing, or if the income opportunity was primarily advertised on a mountain of bullshit.
Judge Tuchi’s decision on this issue mostly relied on Vemma marketing materials submitted as evidence by the FTC.
As is common in pyramid schemes, the evidence shows that most Vemma Affiliates have very low earnings—in both 2013 and 2014, more than 93% of Affiliates earned less than $6,200, and that amount does not account for their expenses in purchasing Vemma product to remain qualified for bonuses.
However, the FTC provided the Court with numerous examples of Defendants’ representations in print, web, audio, video, and live presentation of exorbitant Affiliate earnings.
Many representations have no “results not typical” disclaimer at all, and others have a disclaimer that is difficult, if not impossible to read, and in many instances is only intermittently flashed on the screen for a few seconds at a time.
Likewise, content rarely indicates that the structure of the Vemma program ensures that the vast majority of Affiliates cannot achieve substantial income.
In their defense, Vemma pulled the “what about” defense. This saw Vemma all but ignore the damning evidence presented against them, and instead try to persuade Judge Tuchi to look elsewhere.
(Vemma) contend that the FTC offered to the Court only a small, and thus unrepresentative, portion of the universe of materials in which Defendants made income representations.
Unfortunately for Vemma, A does not cancel out B. And even upon consideration of other examples of Vemma marketing material:
The Court disagrees.
The FTC provided innumerable examples of Defendants referring to unusual earnings that can only be achieved by a select few within the Vemma structure in a way that made those earnings seem easily within reach to the reasonable listener.
(Vemma) did so in every form—including print, web, audio, video, and live presentation—for every purpose—including advertising, promoting, recruiting and training—and to both the public and to the internal Affiliate organization through “Back Office” content.
Alex Morton’s marketing efforts in particular are cited by the Judge.
While the Court recognizes that referring to a small portion of a presentation does not allow for a net impression, the Court has reviewed the myriad videos and other media provided by the FTC in their entirety, and they are replete with deceptive income statements such as those cited above.
Some Vemma material also contains representations the Court would characterize as ridiculous—bordering on absurd—such that a listener could not reasonably be expected to believe them.
But numerous Vemma content contains income representations that are likely to mislead consumers acting reasonably under the circumstances, and that content is thus deceptive under the FTC Act.
Likewise, the Vemma content on income potential cited by the FTC rarely informs its audience that the structure of the Vemma program ensures that the vast majority of Affiliates cannot achieve substantial income, which is a material omission.
As Judge Tuchi’s decision continues, Vemma take alot of blows in this area. Not surprisingly, particularly in the area of pseudo-compliance (again):
(Vemma) argue that their content contains disclaimers such as “results not typical,” and that newer content contains more disclaimers.
But numerous advertising recruiting and training materials are still available both to the public and through the Vemma Back Office that contain misleading income statements with either no disclaimer or a disclaimer that is impossible for the reasonable viewer to notice, let alone read.
In live presentations, when Vemma speakers include “results not typical” disclaimers with income representations, they often follow the disclaimer with a statement such as, “I hope you’re not typical,” to weaken the disclaimer.
As a result, the net impression is still that a Vemma Affiliate is likely to earn substantial income, which is deceptive under the FTC Act.
Those snarky “your not typical” disclosure statements affiliates across the MLM industry throw into their videos? They stop now (David Wood, I’m looking at you).
The FTC has also provided ample evidence that Vemma provides the “means and instrumentalities” for Affiliates to deceive consumers by providing them with promotional, recruiting and training materials containing false or misleading income representations, which is a further violation of the FTC Act.
All in all Vemma got pretty savaged on whether or not they’ve been making false and misleading representations. Ditto on whether they’d actively enabled their affiliates to do so too.
And despite his protestations, Alkazin was also found guilty on this one:
Mr. Alkazin again attempts to distinguish his conduct from that of Vemma and Mr. Boreyko by arguing that he updated his Roadmap to Success Affiliate training brochure in 2015 to include an income chart and that the materials the FTC provided to the Court were not complete and did not include disclaimers and references to actual income statements.
But the income chart included in the revised Roadmap to Success is both misleading and difficult for a reasonable consumer to understand, and it does not suffice as a means to inform consumers of their likely income as Vemma Affiliates.
Moreover, as is the case for Vemma and Mr. Boreyko, content either available through Mr. Alkazin’s website or sponsored by Mr. Alkazin, such as the Affiliate training event in Pleasanton, California entitled Super Saturday Business Opportunity, contained income representations that are deceptive under the FTC Act.
Accordingly, Mr. Alkazin is not distinguishable from the other Defendants with respect to false and misleading representations.
The Court finds that, even in light of the argument and evidence provided by Defendants, the FTC has met its burden to show a likelihood of success on the merits in demonstrating Vemma, Mr. Boreyko and Mr. Alkazin are making material misrepresentations and omissions, as well as furnishing Vemma Affiliates with the means and instrumentalities to make material misrepresentations and omissions, in violation of the FTC Act.
Is the granting of a preliminary injunction in the public interest?
With Vemma a pyramid scheme and guilty of false and misleading representations, we now turn to whether shutting them down is in the public interest.
Congress enacted the FTC Act in part to combat consumer deception.
The public interest in halting Defendants’ deceptive acts under Section 5(a) of the FTC Act outweighs Defendants’ interest in continuing to operate their private business.
As a result, the FTC is entitled to a preliminary injunction against (Vemma).
Is it in the public interest to shut down a false and misleading pyramid scheme?
You bet it is.
The particulars of the preliminary injunction
Evidence of (Vemma’s) past conduct, including its seriousness and deliberate nature, leads this Court to conclude there is a substantial likelihood of continued unlawful practices in the absence of injunctive relief.
Or in other words, Judge Tuchi felt that if he didn’t shut down Vemma, they would continue to scam people through their false and misleading product based pyramid scheme.
To be fair though, there is some retail activity taking place in Vemma:
The Court’s finding that some significant amount of Defendants’ product is sold to persons not pursuing the business opportunity persuades it that, while the FTC has shown that aspects of Defendants’ marketing program likely constitute unlawful activity as discussed above, not all aspects of the business are necessarily pyramidal or otherwise illegal.
And to that end Judge Tuchi sought to preserve it.
Injunctive relief “must be tailored to remedy the specific harm alleged, and its terms narrowly focused “to remedy only the specific harms shown by the plaintiffs, rather than to enjoin all possible breaches of the law.”
Viewing all the evidence in light of this case law, the Court concludes that measures less drastic than some of the relief the FTC seeks are available to remedy the harms shown.
Thus, the Court will tailor injunctive relief to preclude components and practices of the Defendants’ marketing program that would promote pyramid activity and misleading statements, but will not prohibit all business activity.
Those tailorings did see a preliminary injunction ultimately granted against Vemma, but with the following caveats:
- there is to be no Receiver, with Judge Tuchi instead appointing a “Monitor”
- Vemma corporate and personal accounts will be unfrozen
- “other assets” of Vemma’s will be subject to ‘alienation to ensure their availability to satisfy monetary relief’ in the event of Vemma losing at trial
This will be accomplished by the Monitor’s reporting to the FTC and the Court on the business operations and expenditures of the Corporate Defendants, and by an injunction against the alienation by Defendant Boreyko of any of his real estate holdings during the pendency of this action.
Robb Evans and Associates, LLC have been appointed Monitor of Vemma, with the role seeing them take a less hands-on approach with Vemma. Instead, as a court-appointed Monitor, Rob Evans and Associates will take on a more supervisory role.
The appointed Monitor will be charged with observing Defendants’ business practices to ensure that the Corporate Defendants are complying with the preliminary injunction, and is to have access to all operations and records of the Corporate Defendants.
The Monitor shall also observe whether the Corporate Defendants’ assets are properly spent on ordinary and necessary business expenses.
The Monitor will not have direct control over the Corporate Defendants’ business operations or assets, but if a violation of the Preliminary Injunction were observed, the FTC is authorized to seek an appropriate remedy from the Court.
Vemma and their affiliates are also prohibited from engaging in
promotion that implicates false and misleading representations, including making any representations about income potential without adequate disclaimers and ready referral to accurate income potential disclosure.
Vemma’s current and past income disclosures have been ruled “inadequate”, and will need to be reworked ‘not only in their processes but also in their actual practices‘.
Any new Vemma marketing material must also be ‘provided to the FTC for review and right of objection in advance‘.
In an effort to cease Vemma committing fraud through it’s pyramid scheme, Judge Tuchi ordered recruitment incentives in Vemma’s compensation plan gutted:
this will include a prohibition of the sale of Affiliate Packs, and the linking or tying of an affiliate’s eligibility for bonuses or accumulation of qualifying points to their own purchases of Vemma product, whether through participation in the auto-delivery program or otherwise.
The injunction will also encompass the “Two & Go” Program, which falls under the above prohibition.
Bye-bye self qualification for commissions through a Vemma affiliate’s own purchases.
And I can’t stress this enough, this is a landmark MLM decision in and of itself.
Judge Tuchi has essentially ruled that affiliate’s self funding their PV commission qualification is a key tenet of a pyramid scheme.
Conclusion
Vemma is a pyramid scheme. It has been over the years and given little has changed this year, was most likely functioning as one right up until a TRO was granted against them.
To that end the components of Vemma’s business model that saw the company profit and pay commissions out on affiliate recruitment are gone.
What’s left is retail sales. Vemma affiliates do appear to still be able to profit on their downline’s orders but they can no longer fund their own commission qualification.
That means they need retail customers, or no commissions will be paid out.
You want to take a stab at how many Vemma affiliate’s were self-funding their monthly commission qualifications?
Here are the takeaways from today’s decision as I see them:
How long off a trial will be I have no idea, but it’s probably not going to happen in 2016. Or at least not in the first half.
Do Vemma stand a chance at trial? Of course not. Legally speaking they were absolutely obliterated at the preliminary injunction hearing.
Specific to the pyramid scheme and false and misleading representation allegations, every defense of Vemma’s was shot down. And given those are the two most serious charges leveled at the company, are a pretty strong indicator Vemma will lose at trial.
In the meantime, with the autoship recruitment side of the business gutted, I’m predicting revenue in Vemma will plummet.
With no commissions paid out on self-qualifying PV orders, perhaps now we’ll see just how many of Vemma’s affiliates were truly in it “for the product”.
I suspect a large number of them will cease ordering Vemma, with a small number finding retail customers and continuing on.
Unfortunately this isn’t going to be a significant enough number for Vemma to be viable. They were already losing millions as they operated as an illegal pyramid scheme, with those losses only set to climb as Vemma’s recruitment bubble bursts.
Come what may in the trial (or settlement), RIP Vemma as an MLM business opportunity.
Now the analysis of what this decision means for the rest of the MLM industry begins…
(You hear that Herbalife? You can’t assert your affiliates are retail customers unless you can prove it.)
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Judge Tuchi’s Vemma Preliminary Injunction decision.
Oh, you know what Vemma will say… This is not a formal decision, merely deciding on the potential merits of FTC allegations. Blah blah blah.
In your opinion, is there any network marketing companies that the FTC would not consider a pyramid?
I was a Vemma representative and I loved the product, but the whole point of joining a network marketing company is the possibility of making substantial income.
We were looking at LifeWave and Ariix, but we’re still confused as to what the FTC considers a pyramid.
How do we know whether a company is FTC compliant? What companies do you believe are bullet proof. Are LifeWave and Ariix two of those companies. We are all a bit confused!
Good.
I’m sure this will leave a few “legitimate” MLM companies quaking in their boots.
If the majority of your commissions aren’t derived from sales to retail customers, you’re probably doing something you shouldn’t be.
How do you know if your MLM is an illegal pyramid scheme or not?
How about starting by evaluating the Product (price, quality, availability, shipping costs, etc) before focusing on the Money?
Is the same (or similar) product available thru existing retail channels at 25% to 50% less?
If so, ask yourself this question:
Since MOST people resist SALES, how is the average person going to sell a product to their friends, relatives and contacts at INFLATED PRICES?
It comes down to common sense which is not so common anymore.
The decision had some interesting elements, e.g. the reduced assets freeze and Monitor rather than Receiver — not a full shutdown.
It’s actually a half victory for the defendant(s).
I don’t believe Vemma is sustainable without recruitment. Revenue is going to plummet and that’ll be that.
They were already losin millions as recruitment slumped these last few years, removing it entirely leaves just a trickle of revenue.
And that’s assuming retail figures stay stable. They won’t, because the failed affiliates will stop ordering (they no longer have a recruitment dream to chase).
No idea how that’s a win but alright.
Justice feels good.
What’s up next for BK? God’s Recipe, Vemma.
Any guesses? We know he’s not going away…
Vemma are prohibited from paying
Based on Vemma’s internal data, the Receiver said retail sales constituted just 14% of global Vemma sales volume (probably less because Vemma corporate intentionally excluded Asia).
How many affiliates do you think are going to stick around now that they have to have 51% or more retail sales just to get paid?
I made some comments about that “I would have tried to protect the AP&P production plant, where most of the assets are located — a part of the business that easily can be separated from the alleged illegal part”.
It means I would have accepted the pyramid charges in an attempt to save other parts of the business. So I would have argued “lost production jobs” and some other social factors — factors that easily can be seen as legitimate by a court.
Those assets are frozen in the event Vemma lose at trial. They are operational but effectively no longer Vemma’s assets (pending conclusion of a trial or settlement).
Edit:
Actually I’ll conceede I’m not 100% sure what “real estate asset” covers. I assume it’s Boreyko’s personal RE properties as well as that of Vemma (he owns them), but I’m not 100% sure.
Any legal minds want to weigh in?
Oz – exactly! The Model is Broken….not just Vemma.
I am amazed at how some posters here (and other message boards, forums) have this “thumbless grasp” on how MLM today actually works. Yet, they post hundreds of posts each month on the subject, each time dancing around the issues.
The MLM Model is all about selling Hope and Opportunity and not products! PERIOD!
And make no mistake about it – – the insiders know what they are selling. Go watch the videos they post on youtube about the “secret” to building an MLM business and then come back and tell us how much time was spent on SELLING the Product vs the Opportunity.
I just watched a TV commercial for Allstate – – remember, the “Good Hands People?” If you recall, they used to be ALL about the service.
Watch their commercials today and you will see how they too have shifted to LOW PRICE.
The entire world’s economy (with few exceptions) is in that same mode.
So, try to sell overpriced products to consumers – – good luck.
And, with this FTC decision today, the days of FOCUSING on Selling the Opportunity, along with ValuePaks and Autoships, are gone too.
The Dead Tree Comparison
The Roots (MLM MODEL) are dead but the Leaves (MOST DISTRIBUTORS) don’t know it yet.
The FTC (Man with a chainsaw) just removed the TREE for many.
Will this cause a Chain (saw) reaction? Who is next?
I used the arguments “can easily be separated from alleged illegal parts” and “can easily be accepted by a court”.
Now comes the blame game where denial runs deep. And Herbalife takes a dump in after hours trading.
Expect to see Aikman bought FTC to kill Herbalife long play or such conspiracy next, as well as insiders, still in denial, try to rationalize how much self consumption won’t incur wrath of FTC.
You can throw in without having to buy carton lots and without delayed delivery to the mix as well
A post seen on facebook:
Denial is a powerful force.
Without sales to affiliates and the constant churn fueled by reward for signing up new people there is no Verve.
And there is no “clinical family of formulations” in Vemma or Verve (no idea about Bode, haven’t looked that way). All they have was two studies of less than 100 people in China.
Commentary: Alkazin walked because he was acting as a minion. A top level minion, but he wasn’t operating his own recruiting / lead-selling op in Vemma, AFAIK. So he can’t really be named as a “mastermind” alongside BK. In this case, he truly could say “I was following orders”.
Don’t expect Shawn Dahl and other marketing company owners AND downlines of whoever to get the Alkazin treatment in the future though.
most of us here were right, that vemma due to its affiliate pack and autoship requirements, was an inventory loading pyramid scheme, where most could not recoup their investment in the joining packs and autoship.
but there is a victory here for vemma too, in that the court has allowed the business to continue with monitoring, and by removing the ‘pyramid aspects’.
i have not had the time to go through the court order, but if vemma is allowed to make some pricing changes which ‘incentivizes’ retail, and removes the [almost] mandatory autoship, it can restructure itself as an MLM where commissions are paid on ‘product sales’ to both affiliates and retail customers.
all vemma needs to do, is ensure that less than half of its sales are coming from autoship sales, and it will be in the clear.
congratulations to both the FTC and vemma, and i hope vemma does not fritter away this huge respite that the court has gifted them, to get in line.
the front loading and mandatory autoship model is now dead. its back to the amway model.
@ anjali
In all due respect, you still don’t get it. You said, “if Vemma is allowed to make some pricing changes which “incentivizes” retail.”
My jaw just dropped.
Where is this additional “incentive” supposed to come from? There are only 100 pennies in the US Dollar. And, I am fairly certain that Vemma is using the same dollar as the rest of us.
The extra cost associated with the MLM method of distribution simply will not support the your premise.
You said, “I hope Vemma does not fritter away this huge respite”
MLM companies do not sell PRODUCTS. They sell Hope and Opportunity.
What part of this basic truth do you not understand?
The Vemma Model, as it was being promoted by the MLMers, was nothing more than a product-based pyramid scheme.
So, if you don’t get that basic concept, how can you come back to this board and claim to have been among those who where right?
did i say vemma needs to Raise its prices? i said ‘pricing changes’.
currently the vemma plan sells product to affiliates and retail customers At The Same Price. there is no margin for retail. there is no incentive for a customer to become an affiliate EXCEPT to get a 10% discount on autoship purchases and QUALIFY for commissions.
vemma needs to REDUCE its price for affiliates, leaving at least 20-25% retail margin. autoship should be available but not promoted as the only way to make commissions.
when affiliates get products at cheaper rates without autoship, their motive for joining and purchasing vemma products becomes clear – it is for the discount. vemma can then pay commissions on the amount of downline sales of affiliates, as these commissions are paid on sales of product to discount customers.
the autoship choice should be available but not encouraged. those who are on autoship should be made to follow the amway protections of 70% and 10 customer rules or even 50% retail rules as this order of judge tuchi specifies.
the world seems to be going crazy because judge tuchi has barred vemma from:
what everybody seems to forget is that these conditions have been made in the Specific Case of Vemma arising from its Specific Plan.
there is no difference between an affiliate and retail customer of vemma, unless an affiliate pack is purchased and/or an autoship is subscribed to. this means – if you are not inventory loading you are not an affiliate. there is NO Other Reason for a person to sign up as an affiliate in vemma except for the business opportunity. this is why the judge has ordered 50% retail sales.
vemma should change it’s pricing and commission structure and work with the FTC to achieve a program, where it can be proved that product sales is to ultimate users.
right now vemma has no bonafide self consumption, and if it can create conditions for bonafide self consumption, along with the retail it has already convinced the court about, the need for 50 % sales purely from retail will Go.
if vemma is smart it will follow my suggestion ! 🙂
well, the courts from koscot to burlounge and now vemma are trying to guide MLM back to selling products. why should anyone have a problem with Reform.
if there is a problem, fix it. railing and flailing don’t help.
duh, well.
i’ve been saying all along that vemma’s program is a product based pyramid scheme.
if they can repair that, now that the court has awarded them an opportunity, good for them. otherwise they deserve to die.
You can’t repair what what was never whole to begin with.
But I will play along out of just sheer curiosity. You say all Vemma has to do is “incentivize” retail sales. OK. Where does this extra money come from?
The MLM Model that Vemma was using was broken. You will eventually figure it out.
MLM, for the most part, sell overpriced products as a SIDE SHOW to the main PRODUCT, which is Hope and Opportunity.
Period!
for beginners, vemma should have a Retail Margin, so that affiliates are ‘incentivized’ to sell product at retail. this retail margin has to be created by reducing the cost of product to all affiliates, without any autoship requirements.
right now vemma don’t have a retail margin.
oh well, then the FTC will try to shut down all MLM, and the courts will agree. or better still, some legislation will be passed making MLM illegal.
till that happens, you don’t have a case.
Fix it? Well, you just told me everything I need to know about your limited knowledge of how Real Retail works AND the MLM Model as it is being promoted today.
I am not sure which is the case. Is it that you don’t get it or refuse to acknowledge the obvious?
100 pennies in a dollar.
Based on your weak positions, MLM companies magically find 25% to 50% extra money in the economy that others don’t see.
<<<<>>>>
Others on this board have said the same thing with you being the ONLY hold out to that basic understanding.
Why is that?
@ anjali
Let’s think about your most recent “fix” for Vemma.
As you suggested, Vemma is going to reduce the cost of the product and then pay that money to the distributor who acquires the customers.
Who pays for the cost to ship the product to the distributor who is selling the product? Compare this to a consumer just reaching down and grabbing their energy drink of choice off the shelf at their local store.
Plus, appears Vemma is already having financial difficulties. Add to this the fact that several top distributors have already left and took their leaders with them. That is how the game is played in the world of MLM.
Plus, it is my understanding, that distributors are required to inform the prospective distributor of the FTC appointed “monitor” now. (Can anyone confirm this as fact?)
Plus, that same “monitor” is going to be watching to make sure everyone abides by the new “rules” which require Retail Sales.
Plus, Vemma will learn that defending yourself against the government is expensive as they use taxpayer money to fight you and have unlimited resources.
By the way, I know of a company that actually won most of their lawsuits against the regulators but the bad publicity is what put them out of business.
Plus, the regulators will issue media updates to keep the story going. This way, they win without ever stepping foot in the courtroom.
In fact, the media has already jumped on the story with headlines reading:
“Court keeps controversial Vemma energy-drink firm under receiver”
“Vemma Ruling In – Judge Makes Profound Decision”
“How energy drink firm Vemma ended up in feds’ sights”
“Court keeps controversial Vemma energy-drink firm under receiver”
“Judge bars Vemma Nutrition from resuming full business …”
“Vemma Pyramid Scheme [Video] – Internet Crime Fighters …”
Anjali – you try hard and I praise you for your efforts. However, many of your conclusions are based on your naive notions about how business actually works, which is fine.
Please explain to me how ANYONE is going to give their products away now much less sell them?
Here’s a clue: Check out Craigslist, eBay and Amazon and note how many NEW listings have been added over the past 10 days.
Now, watch what happens after people take time to read and understand what just happened today.
Vemma’s “fix”?
Actually have the affiliates go out and sell stuff. That’s the ONLY way that matters. And ONLY reward them for the stuff they sell, Amway safeguard rules enforced (10 retail / 70% reorder).
By encouraging self-consumption, ALL THREE safeguard rules have been violated.
The problem is this is so fundamentally DIFFERENT from the company culture, I’m not sure they can manage it.
But that’s what MLM was supposed to be about: sell unique stuff retail. Avon did it. Amway did it.
Until the Product-based pyramid schemes (that smells much like MLM) started perverting MLM by promoting self-consumption, and took over DSA from within.
I wrote long time ago that MLM had lost its soul, and if it failed to fix itself, don’t blame anyone else when FTC came through like a kaiju, or at KT put it, Leviathan.
no, MLM companies don’t magically find extra margins for commission. all companies have these margins which are the difference between the manufacturing cost and the retail price, which consists of sales&marketing costs.
companies like amway and herbalife have competitively priced products, and still have upto 50% margins to share with the distributors.
we’ve been through this before, in another thread. i’m not up for a revisit.
yes, my suggested fix is for vemma’s compensation plan, it is not a Magical Wand which will make vemma Successful.
you have painted such a negative picture of vemma’s future, that inspite of a court awarded chance to repair itself, you would prefer vemma to curl up and die.
you seem to have this fatalistic view about most things including MLM. cant be a pleasant way to think!
if vemma fails, it fails, but let them not go without trying!
even the FTC/amway case recognized affiliate self consumption as a legitimate end destination for products.
recently burnlounge brought self consumption back to the forefront, and vemma once again establishes the finding in burnlounge that:
i do not take an extreme position against self consumption, and neither do the courts.
self consumption under ‘the right conditions’ is perfectly all right and normal.
Anjali – actually, I proved my case that MLM products are overpriced and got tired of trying to explain it to you.
I even gave you a cost per load analysis between Amway and Tide only to see you find an EVEN CHEAPER DETERGENT and claim victory. Now, that was classic Anjali! Hell, THAT was my point. 🙂
Most of my posts have been basic common sense with a few personal opinions thrown in.
MLM does not sell Products. They sell Hope and Opportunity.
It appears that some regulators are FED up with this money-game model and are taking companies like Vemma to task.
@ K Chang
“Until the Product-based pyramid schemes (that smells much like MLM) started perverting MLM by promoting self-consumption, and took over DSA from within.”
You bring up a great point. By adding self-consumption to the old MLM Model, these companies were able to shift what used to be Retail Margin to the Override side of the compensation plan.
If you want to attract the MLM Players, you need to “show them the money” quickly. If you take the 25%, that is usually paid out to distributors who sell the products to customers, and “incentivize” the Recruiters instead, the volumes grow much faster. And, the checks follow!
These Players use that check to raid existing downlines, crosslines and even uplines with the promise of quick money. I have heard some call this the “cocaine habit” that is hard to break.
That IS the Fix they seek….not more retail sales requirements.
yeah, you showed that a random tide product was cheaper than amway, and hence claimed that amway was expensive.
i showed you a product cheaper than tide, hence proving that by your yardstick, even tide was expensive.
i showed you products which were similarly priced to amway. i showed you products which were more expensive than amway.
no wonder you got ‘tired’ of explaining your skewed comparison methods!
Then it’s time to discourage them, right? Since all they can do is recruit, and people they recruit are clones of themselves, i.e. recruiter. They don’t really sell, and thus are useless from a corporate view. The ONLY way you can make use of recruiter-clones are make them consumers, thus self-consumption model.
I actually covered this in my article: six types of MLMers. Most MLM stars are recruiters. A few are sellers or hybrids.
kschang.hubpages.com/hub/Six-Types-of-Network-Marketers-which-type-are-you
Quote,
Which means they need retail sales people. Look at these two statements,
OR
There is nothing wrong with being a salesperson if that’s your thing, but how many MLMers want to be one. Can you see some of the leaders ringing doorbells? Lol
The second issue is even if you sell, ANYONE can sign up and pay the affiliate price. An affiliate’s ‘good’ customers would be inclined to do so and get the discount. This makes the retail margin moot if you ask me except for the oddball dollar profit here and there. This will not incentivize the sales person and is a catch-22.
Thirdly, the MLM owners shouldn’t want retail customers anyway – it ends the chain which is their life source. An affiliate is really a customer to the founders, and they are trying to get more of these types of customers, who try to get more.
As I’ve stated before, MLM cannot exist if not operated as a scheme – not in real life anyway. It appears to be only be legal on paper. The amount of affilates who are compliant would not allow the company to survive.
Speaking of compliance, how will they enforce it? Amway has been getting away with lying for years about 10 customers. This brings us back to my first point, how many IBOs are in Amway to sell soap?
The MLM system needs to go. Go ahead and change it, but then it wouldn’t be MLM which is precisely my point! It’s a pyramid scheme in and of itself.
That’s part of the disconnect of the MLM dream from reality. They sell the idea that this is democratized opportunity: everybody has a chance (much like everybody born in the US has a chance of being president).
But “retail” can be of friends and family. 10 retail is not a lot, and if you go long term subscription it’s not that hard either, once you have established client base.
The problem has always been the wrong emphasis being placed on recruiting vs. selling. And since recruiting alone doesn’t move products, thus the heavy push toward self-consumption and various excuses used to disguise it (some to drink and some to share! I was only in it for the discount! etc.)
here are some initial responses of vemma to the judgment, according to az central news:
well, lets see what boreyko’s plan is !
I understand, but I think it’s more difficult than it seems. Enter “MLM broken models” arguments about price, competition, quality, and I’d like to add human habits.
Also, these are the same friends and family who are targets to be recruited. Another catch-22.
i disagree partially with your statement.
if an MLM has reasonable amount of retail going on, then people joining for a ‘discount’ is a perfectly credible explanation.
IMO extremist views need to go.
It doesn’t make any sense from a business perspective.
For retail sale to have any function in business, it must be motivated by profit — the sales person and the business must make a profit on the sale.
It CAN be motivated by other factors too, i.e. some sales may have other functions than the direct profit (e.g. Herbalife distributors can sell at “near loss” to get rid of some products).
If you don’t have that profit motive then people will try to cheat the system. They will pretend they have real sales. They will become cheaters rather than sales persons.
Vemma and Boreyko took a hit and are hobbling for the moment.
If BK truly loves his company, he will be gathering extra resources to be in full compliance with the ruling with a vision to “make Vemma better”.
Which means more money to spend on the “new model” of business.Which could mean cutting costs and restructuring in some form or other.
Might even mean revamping the comp plan to pay out less than what it currently pays.
Not sure how Vemma will fare in the long run after all is said and done. But as has been noted, this could affect the company in a not so good way from this point forward.
Vemma does appear to have a loyal global customer base, based on the many testimonials from product consumers.But if the company was losing money before the FTC hit,it might not make much of a difference.
The challenge, of course, is still complying with the 50% retail sales to ‘non-affiliates’ aspect.
If Amway is still in business and continues to thrive after getting hit, Perhaps Vemma can survive based on that model.
Time will surely tell.
a rereading of the order, leaves me confused.
the court has barred vemma from ANY marketing program, that does not have majority of sales to persons, who are not members of the marketing program. though the court has defined what a ‘marketing program’ is, it has not defined what ‘customer’ or ‘member’ is.
the court says:
the court seems to suggest that an MLM program in which majority sales does not come from retail, is not an legal MLM.
there seems to be no precedent for this decision, and this is a new standard established by the court, without explaining the Reason for such a decision.
up until now, the courts have held the view, that deciding whether a particular MLM is a pyramid or a legal MLM, is a fact driven inquiry.
in vemma the judge says as much:
by suggesting that ‘ANY’ MLM program should have majority of sales from retail, the court has removed the need for any fact intensive inquiry.
ANY MLM program can just be tested for retail vs internal consumption directly, and deemed to be either an MLM or a pyramid scheme. this is a simple one step test, no matter what the MLM’s structure or functioning is. there is no need for fact intensive study anymore.
IMO this ^^ point in the order is a genuine mistake, or it will get appealed.
i believe that if an MLM is autoship driven, or has some upfront inventory loading, it would be fair to expect the 10 retail customer rule, or even 50% retail.
however MLM which is based on discount buying, with clear observable retail, need not have retail sales as its primary engine.
lets see what happens. this is not about mandatory purchases anymore, this goes much deeper than that.
Whose profit are we talking about? Company or affiliate?
MLM, by its nature, has three tiers of cost/benefit analysis: customer, affiliate, and company. Each tier has its own cost/benefit.
Customer’s c/b is simple: they are paying a reasonable price for a product they believe will benefit them in some way.
Company’s c/b is also simple: they need to move products at a profit to sustain and grow the company.
THe affiliate is caught in the middle and is the middleman: they need to move the products to the customers… AND earn a reasonable profit in the process either by retail or by downline commissions.
Affiliate must be taught to achieve retail… THEN teach RETAIL to downlines. There must be at least equal, if not MORE retail than recruiting. The 10 retail rule in Amway, if enforced, may have been effective to ensure retail.
The MLM dream of living off labor of others, i.e. build an effective organization, is doable… as uplines transition into a more leader/manager role (hypothetically and ideally) by teaching techniques and product orientation and such, but again, by Amway decision the upline must earn NOTHING if downline don’t make sales.
Allowing self-consumption to bypass this is bull**** if not clamped to a trickle.
Agreed Chang, but without strict enforcement, we have this human nature thought process issue.
I am the upline, a business owner, and I’m going to teach my downline do the work. Or is my downline their own upline? Who will do their work? Is my upline someone’s downline who is my upline wanting me to do their work? Surely not, I own my own business.
As you said, all affiliates must be taught [required] to sell. To whom I’m not sure?
Will corporate be happy with a person buying a tube of mascara every three months? Wouldn’t corporate rather an affiliate dangle an income opportunity and have the new prospect stock their cabinet of non-negative products purchased from ‘their’ company?
Damn that catch-22.
@ Anjalie
I wouldn’t say that I got “tired” of explaining. I was just disappointed that you didn’t get the point. It is plain for anyone to see.
Allow me to help you in this rather (for you anyway) steep learning curve.
My point is that MLM ADDS COSTS to the consumer. You agreed with me that Vemma and Monavie had overpriced products. So far….so good.
I posted a similar product that was CHEAPER than Amway soap. It was cheaper by 50%. You counter by posting an EVEN cheaper product and then claimed victory in the discussion!
So, you actually proved my point – – that MLM ADDS costs to products.
I do get “tired” when my students fail to see the nose on their face.
Here is some homework for you. We both proved that Amway soap is overpriced. To prove my point ever further….try and find a soap detergent that is priced HIGHER than Amway detergent.
@anjali
Why are you confused? I’ve been banging you over the head with this for years.
Buying clubs and ultimate users = nobody cares.
To All Board Members:
Question: Are these statements true with respect to Network Marketing?
The first criteria of legitimacy is a quality product at a competitive price . . . that stands on its own in the marketplace.
AND
The products should be economically competitive with similar products, i.e., fairly priced.
Oz to Anjali –
You have trying to explain this basic concept to Anjali for YEARS!
Got it.
I will take your cue and move on. Thanks.
Fantastic product and I will continue to buy it!
Vemma Preliminary Injunction Order…..First take.
The fencing in language is specific to Vemma as a penalty for past abuse.
The Order is an Order. It is not case law and is not case precedent.
Actually, if the Order were suggested to be precedent, it would not be consistent with case law or Koscot or BurnLounge.
Effectively, the Court is saying that Vemma spent so much time telling people they “must buy” that the Court inferred that recruits’ primary intent was to qualify (rather than buy for resale or personal use) because that is what they were told to do by the company.
In the absence of a concerted marketing system that pushed “qualification”, the Court recognized personal use as sale to an ultimate user.
However, the Court ruled that the systematic “pushing” of purchases for qualification renders those purchases as incidental to the business opportunity as opposed to intent for resale/personal use for an ultimate user.
The net result, opined the Court, was that Vemma foreited its right to rely on personal use for qualification and commission purposes.
This is a big message to all companies, ie, get your act together on how you promote your product and opportunity.
It is a mixed decision.
The old approach was problematic, but product was recognized as real. And so, the court continued the injunction to allow the business to continue, but under severe restraints.
The business will be allowed to continue in possession of the owners, not a receiver, but under view of a “monitor” with restrictions to avoid old offensive behavior
The one major problem that renders Vemma less competitive among other consumables direct sellers:
Paragraph 4 of the Order only allows compensation if sales are greater than 50% to non-participants
This paragraph is not only ambiguous and hard to understand (is this per rep or for the entire program?) and is inconsistent with 9th circuit case authority in Koscot and BurnLounge, which merely prohibits compensation unless paid on sales to “ultimate users”…. and, in which ultimate users are recognized as non- participants and distributors who purchase for personal use in reasonable amounts.
One possible interpretation of Paragraph 4:
If a rep has volume, compensation for the reps personal or group volume, compensation cannot exceed 49 percent of the personal or group volume for sales to the rep or his down line .. Ie. The company can pay commissions on personal use or inventory sales volume, up to 49% of the total volume.
Effectively, personal use is counted as a half sale…. which is at variance with every other direct selling company.
Again, this result is not consistent with Koscot or BurnLounge.
The District of Arizona is in the 9th circuit and bound by case authority. Since the matter before the Court is fashioning a preliminary injunction order which balances the harms to the parties, rather than entering a formal ruling in the case, the Court designed an interim order with “fencing in” language specific to this defendant and the circumstances pending a formal trial on the merits. It split the baby… kind of….
It would appear that the court is not saying paragraph 4 is precedent or the standard, but that it is an appropriate price to pay for allowing the business to go forward, in light of Vemma’s practices which tainted the market and left the wrong impression with reps as to why they should buy….
Ie, some relief here, but no free pass…. the auto is allowed on to the turnpike, but its speed restricted to 40 miles per hour.
The facts here are not BurnLounge facts.
This case is distinguishable from BurnLounge in which commissions were paid on primary revenue from sale of web hosting sites, which the court found were sales tools and not consumer products… Although some product was added to the bundle.
The court found that distributors were really paying for a bundled opportunity and that the web portal purchase was a gateway to participate in the comp plan.
Similarly, although real consumer products were sold in Vemma, the company’s promotional materials which focused on purchase, qualify and recruit, rendered the sales into the category of a primarily purchasing a bundled opportunity for qualification in the plan rather than purchasing for use by the ultimate user, ie., for resale or personal use.
And thus Vemma was penalized for its historical promotional emphasis on purchase for qualification.
In a different, but parallel fashion, the courts concluded in both BurnLounge and Vemma that purchases were incidental to the opportunity.
But because Vemma was selling consumer products and not sales tools, some redemption was possible, albeit requiring Vemma to market in a fashion that is not competitive with the rest of the industry and in a restricted approach not consistent with the state of the law on personal use.
It is possible that Vemma will ask for a rehearing on this issue and may seek an interlocutory appeal on this issue. It will not likely get relief, at least in the immediate future.
After a period of time of demonstrated “good behavior”, the court might reconsider this “hamstring”.
The message: Actions have consequences. As Collin Powell said in his Pottery Barn metaphor, If you break it, you own it.
No other direct selling company operates this way and it is also inconsistent with the 2004 FTC Staff Advisory.
It is clear the court is fashioning the order more strictly in response to past abuse.
As Marsellus Wallace noted to Butch in Pulp Fiction: “You’ve lost your LA privileges.”
Will other direct selling companies change their rules on credit for personal use? Probably not.
However, they will certainly pay close attention to the activities that could cause them to lose the right to claim credit for personal use.
There are at least three clear “to do” messages for direct sellers:
1. Monitor Communication.
Every direct selling company should take this opportunity to carefully vet company and distributor public discussions and presentations to assure that the focus and emphasis is on teaching a program whose purpose is to create a customer base and not a “system” of finding recruits who purchase, who find other recruits who purchase … i.e., rewards for sales to ultimate users rather than recruitment of distributors to buy and recruit.
Purchase for resale or personal use: Yes. Purchase to qualify: No.
2. Track Product Movement.
Track product to its final destination. The bottom line is that companies should be able to document that product makes its way on to “ultimate users” and is used.
3. Determine Reasonable Ordering Needs
Companies need to take a close look at the needs of novice and experienced distributors to determine what are “reasonable needs” requirements.
This task may entail extensive user studies, focus groups and the creation of objective criteria to determine that the ordering patterns of distributors, new or experienced, is matched to “reasonable needs” and not merely to qualifying in the plan.
Paragraph 4 is apparently a “quick solution” offered to allow Vemma to get back to operation, and would at least somewhat mollify the FTC.
Personally, I think the “count self-consumption as half” is not a bad compromise as it’s much easier than trying to figure out what is a “reasonable” amount of self-consumption, as clearly what was pushed by Vemma (and DSA) to allow ANY amount of self-consumption is frankly, a blatant endrun of every Amway Safeguard Rule that MLM had based itself on for past 35 years.
Fact: Self-consumption is fundamentally against Amway safeguard rules. Not only it’s not retail, self consumption means it violates 70% rule and makes any refund “moot”.
Fact: There are affiliates who consume reasonable amounts of the products they sell i.e. personal use.
There needs to be some sort of compromise between the two ends of this spectrum: no self-consumption vs. self-consumption, and this 50% rule is not a bad compromise. Frankly I’d have set it lower, but then I’m not a judge.
thankyou for your explanation sir.
that puts my confusion to rest.
case law does not suggest any percentage break up of retail sales and self consumption, but decides the legitimacy of MLM on a fact based inquiry, into how the MLM functions in practice, and ‘who’ is buying the product and ‘why’.
it would be pretty random if a court pulled a percentage of retail from its hat, and stuck it on MLM, without a reasoning based on unquestionable logic. MLM has different structures and compensation plans, and one retail rule will not fit all sizes.
however, i am still confused how the court can chose a ‘random’ punishment for vemma, which is not within the spirit of 9th circuit case law, like koscot and burnlounge, both of which rely on the definition of a consumer as an ‘ultimate user’ and not a person outside the marketing program.
personally, i feel monitoring vemma for strict compliance to sales to ‘ultimate users’ would have been more in line with established case law and the nature of the MLM business. as you suggest, vemma may appeal this paragraph 4, and the outcome will be interesting.
the FTC has clarified its position on internal consumption, autoship and buying club [discount club] in 2004, and has never retracted that statement, which means this is their standing opinion.
opinions in the MLM industry are wide ranging, from people banging on about retail, to the other end which wants to wish retail away.
but, as the FTC wrote to professor bill keep, ‘following case law’ is the best wagon to hitch a ride on, for this journey into understanding MLM.
i did name a detergent priced well above amway. there are even tide products that are priced over amway.
here is some homework for you. go back and read it.
@Anjali
After reading the response to you from Oz, I have decided to “move on”
I suggest you do the same.
wise decision IMO.
after all, i did give you detergent prices below, similar and above amway detergent. i rest my case too.
um, i’m very finicky about whom i chose to learn from. you shall not be receiving any tuition fee from me 🙂
Both must make a profit on the sales, short term or long term. That’s the primary idea in business. If it isn’t profitable, then they can’t afford doing it in the long term.
If it’s less profitable in the long term to recruit a customer than an affiliate, then both the company and the sales force will focus on the recruitment of additional affiliates. A rule won’t change that.
“Disguising the problem”
A 10 customer rule will only lead to that the problem will be disguised. The focus will not change, people will still continue to focus on the most profitable part. You will get pseudo compliance = people and companies coming up with solutions to pretend they have real sales to retail customers.
“Amway rules” have been in place since the 1970’ies. They haven’t really solved any problem, other than that they have helped MLM companies disguise some. They work in theory but not in reality.
If the “Amway rules” haven’t produced any meaningful results in more than 35 years, then it’s time to question the validity of those rules.
Agreed. I have learned a lot from Oz. And, he is typically right about most things MLM….and people too. Plus, he is much more patient than I.
You don’t owe me nothing. No diploma for you. 🙂 So I agree to waive your tuition.
well see, we both are oz fans, so ultimately we did find some common ground.
lets break up on that note !
I came to the same conclusion long time ago, e.g. in WakeUpNow discussions.
If we look at the realities of business, any business person can have multiple roles, e.g. people can be both distributors and consumers, business owner and consumer, etc.
It has been like that for thousands of years, as long as trade have existed.
But it also mean that the products can’t be bundled with an opportunity to illegally earn profit from deceptive trade practices. You can’t mix in any illegal functions and still claim a practice is legitimate in itself as a whole.
Break up? I was getting ready to ask you, “My place or yours”.
Internal consumption is not illegal, but it CANNOT be the PRIMARY focus of a distributor. A bar owner that drank most of his stock is a BROKE bar owner.
The existing practice is to separate the “prefered customer” into a customer class (buyer) APART from the distributor (seller), which will reduce the overlap (like Herbalife, where they claimed 72% of their distributors were NOT attempting to earn income). Customers CANNOT earn commission, so their purchase cannot be motivated by commission.
Then the question is… can you “legislate” the distributor into only spending so much on self-consumption, once we’ve properly reclassified the customer (rather than “whoever we say they are” like Vemma and Herbalife)?
Or can we leave those to live or die on their own, since we assume that they would know not to consume their own stock if they want profit? Or do we allow them X months chance to revert to preferred customer, and return excess stock per current DSA guidelines?
or perhaps the question is better asked… What problem are we trying to solve? Are we trying to protect the distributors from the company… or from themselves?
That sounded like some short term result rather than some final one? 🙂
The decision was clearly specific to Vemma, as a short term restriction.
It’s not a “random punishment”, but a reflection of how pyramid schemes are defined in statutes — the meaning of the word “primarily”.
It will be like ordering a truck driver to install a speed limit device in his truck, so he can continue to do legitimate work on a temporary basis while his speed limit case is being resolved in court.
The speed limit device will temporarily prevent him from violating the law. He may eventually lose his driver’s license, but he can continue to do his work until the case has been resolved.
no court has decreed such classification.
courts have accepted self consumption, so there is no need to separate self consuming distributors into a separate class.
as norway has mentioned in post#62, a person in MLM is an overlap of a customer and a distributor. trying to surgically separate these two identities is not viable. a discount self consumer could at any time get revved up and become a distributor, and a distributor may become inactive and continue consuming product only.
a simpler way to solve the problem, is to ensure that product purchases are not in quantities that are tied to qualifying for bonuses. this is exactly what the court has said in burnlounge and vemma. if the preferred customer class was a solution preferred by the court, they would have suggested it.
What absolute nonsense.
It’s not a / the courts’ responsibility to find a “solution” to a perceived problem facing a particular company.
when amway was in court, the court accepted the ‘amway rules’ as a ‘solution’ against inventory loading and encouraging retail sales. this ‘solution’ is used in almost all MLM cases , including vemma.
vemma has a preferred customer category:
when dr carr the vemma expert, was taking the court down the garden path, with his convoluted definitions of ‘customer’ and ‘affiliate’ the court should have said: excuse me mr carr, if all these affiliates were just customers on autoship, why didn’t you stick them all in the preferred customer category?
but the vemma order says nothing about this. it just says product and opportunity cannot be bundled, so no heavy autoship and no selling joining packs either. and it says self consumption cannot be tied to qualification for bonuses.
the court had a choice to pick a ‘solution’ to resolve self consumption issues, by mentioning and extolling the virtue of a preferred customer class, but it didn’t.
i mean, all the court needed to say in the order was: dr carr did not explain why non recruiting self consuming affiliates were not classified as preferred customers….
and Boom! the preferred customer class would have become an acceptable standard, and may have become an ‘accepted solution’ just like the amway rules.
in vemma the court Has Fashioned a Solution to resolve the Percieved Problem of vemma’s pyramid sales.
so saying a court is not responsible for finding solutions is utter nonsense.
I was talking about the MLM self-regulation attempts to encourage / track retail, unlike a few “leaders” who don’t give a **** as long as merchandise is moved.
Yet Judge Tuchi specifically mentioned that Vemma failed to provide ANY rationale / proof that such a reclassification is in any way justified.
You’d think Vemma would have provided such to fight its shutdown, hmmm? If such existed?
You mean the “50% sales to self” rule?
The current court has?
But since Vemma didn’t have any “preferred customer class”, the court couldn’t identify it either.
The court must look at the evidence from the actual case. Vemma had distributors qualifying for commissions by purchasing affiliate packs / monthly autoship orders = potential illegal activity, not possible to clearly separate into legal / illegal parts.
Almost all revenue came from potential illegal parts, from “qualifying purchases” rather than from clearly identifiable retail sale.
The court had to restrict that activity.
It will be up to Vemma itself to find solutions to the problem. The court will not order Vemma to find specific solutions, so it can’t suggest anything either.
Vemma’s own solutions will be monitored by the court. The court can probably accept many types of solutions as long as they can be clearly identified.
yes, because vemma’s reclassification was bunkum.
there was no price advantage for a vemma retail customer to become a vemma affiliate, unless they went on autoship which qualified them for commissions. with the self consumption and commission opportunity bundled together, the court could not decide the motivation of the vemma affiliates.
if a vemma retail customer could have become a vemma affiliate, to enjoy a steep discount without any autoship requirement, in any quantity of their choosing, the judge would have accepted their classification as discount customers.
read post#68
the court DID find a Solution, by allowing vemma to survive while restricting the illegal activities.
it is now up to vemma to find ‘Solutions’ to how it can Survive the court ordered ‘Solution’
Yeah, yeah, I know, Amway, yada yada, another strawman yada, yada, Speak Asia, another strawman yada, yada, Trudy Gilmond, yada, yada, some vaguely related case you have Googled, yada, yada
we’ve seen it all before.
Vemma has been prevented from utilizing anything the court deems illegal and any solution finding is up to it.
It didn’t do that. It fashioned restrictions, not solutions. 🙂
It will be up to Vemma itself to find specific solutions, based on its own knowledge of the business and the resouces it has available.
The court identified that Vemma most likely had some significant retail sale, i.e. it couldn’t clearly identify the opposite.
The court cannot focus solely on illegal activities. It must also protect legitimate business activities. That’s why I mentioned the AP&P production plant as an “area of interest” that I would have tried to protect as a defendant.
The AP&P production plant can clearly be separated from the alleged illegal activities. If you combine it with some retail sale through Vemma, it can survive and even make a profit e.g. by producing for other companies.
It will be in public interest to protect tens of legitimate production jobs. The court cannot turn a blind eye towards the public interests here, or the interests of affected individuals.
read the paragraph below. it is clearly the court looking for and finding a ‘solution’ to remedy the harm shown. the court weighed the evidence and found a balanced ‘solution’.
i call this solution finding, you can call it butterfly chasing or yada yada, if you prefer to be silly.
correct, so the court has to weigh the facts available and tailor a balanced ‘solution’.
@littleroundstrawman AKA yadayada
the court is seeking a ‘remedy’.
according to the macmillan dictionary :
a ‘remedy’ definitely does not mean yadayada.
@Anjali
I have found something of interest for you … showing the whole context, but the essential part is bolded.
The “Amway rules” were accepted as a matter of fact = they actually had a function. They are not to be interpreted as law.
I have made several comments about those “Amway rules”, e.g. that they can be completely meaningless or that they can help to disguise pyramid schemes.
And here we have the same argument from a court, only using other words than me — but the meaning is relatively similar. I only specified some more details about it.
It wasn’t that type of solution we were talking about. The Electric Chair can be said to be a solution to something, but you will not like to be the one sitting in it. It doesn’t really matter how MacMillan’s Dictionary defines it. 🙂
The discussion was about “preferred customer class” and similar solutions, not about involuntarily restrictions from a court.
Vemma received a long list of things it was prohibited from doing, but it didn’t receive any suggestions about how to fix the problem. It will need to find those solutions itself, monitored by the court.
Vemma was allowed to find its own solutions as a business, as long as they don’t violate the injunction. It may work or it may fail, but if it fails then it will strengthen FTC’s case.
Actually, a “remedy” in this case is to redress a previous wrong (remedial solution), i.e. how Vemma CANNOT continue to be a pyramid scheme.
What needs to be done is up to the company, but the court has identified areas where Vemma needs to change (or else DIE with infamy like FHTM and the rest of the trash heap of MLM)
I checked Arizona Production & Packaging LLC (AP&P). It was merged with BK Boreyko’s company AzPack Canning Company LLC in June 2014, so BK is only a partial owner.
Merged company: AzPack
Surviving company: AP&P
Website: azpack.com (menu tour / video show some details)
Capacity:
Bottles 400,000 per day
Cans 1,000,000 per day
Arizona Chamber of Commerce:
ecorp.azcc.gov/Details/Corp?corpid=L10085010&type=L.L.C.
Members of the Board:
BENSON K BOREYKO (2001)
KAREN BOREYKO (2001)
YIBING WANG (2005)
LAUREN BOREYKO (2014)
– – – –
PETER J REILLY (2014)
CANNING SOLUTIONS USA LP (2014)
BRAD WAYMENT (2014)
I had a new, quick look at the injunction.
BK Boreyko and Vemma have been “handcuffed” properly by that order, but it didn’t restrict him from having a Christmas tree in December (monitored by the court, of course).
Vemma as a network marketing company is probably history. Its best chance will most likely be to reorganize completely into a different type of business. It had legal trouble in Austria (2014), Switzerland (2015) and Italy (2014).
Vemma moved into new offices in early 2014, i.e. profits have probably been reinvested. “A sneak peak into the new offices” promotional video:
vemmanews.com/2014/03/05/bks-blog-new-office-all-in-verve-mojoe/
“AZpack”
AP&P production facility is a 240,000 square feet facility.
Good research, Norway. That seems like a lot of capacity. What do you think?
correct. it is quite clear that the amway rules are not law, but a legally accepted standard to address inventory loading and retail sales in MLM.
similarly the judge in vemma could have made the ‘preferred customers’ class an acceptable legal standard, by taking note of it, in it’s order. that’s all i’m saying.
a remedy is a solution and a solution does not have to only be a happy thing.
electric chair is a solution for severe crime. firing someone from a job is a solution for a tardy job. hiring someone to a vacant post is a solution. why would the macmillan dictionary be wrong?
in the case of vemma the court fashioned a remedy [solution], which had some restrictions and some allowances. the 50% retail requirement is a restriction, the unfreezing of company’s accounts are an allowance etc.
now vemma needs to find ‘solutions’ to do business within the court ordered solution.
why is there so much resistance to macmillan’s definition of ‘remedy’? do you have a better dictionary or something?
The question has been raised as to whether or not Vemma can change from being an Opportunity-driven Model to a Retail Sales-driven Model?
A highly successful Insurance Agency Builder once told me, “You can’t manage results, you can only manage the activity that leads to the desired results.
One of the “activities” that drives the most volume (results) are 3-way calls. If the Upline is at a higher level than the New Rep, there is “spread” which is the incentive for the desired activity.
In some marketing plans, the upline “recruiter” can earn $100 to $400 per newly sponsored distributor that buys the “starter package.” The best part for them is they don’t even have to prospect, leave their home or inventory products.
With the elimination of the starter packages at Vemma, it will be hard to recruit the people who bring their friends to the 3-way calls.
EXAMPLE: Ken just recruited Stewart into Vemma. Ken tells Stewart to work with Mike (his upline) since he loves to do 3-ways.
Let’s listen in on a call as Steward calls Bob, his best friend from work.
Hey Bob, this is Stewart. I have found this new energy drink that is absolutely unbelievaBULL. Plus, by just telling a few friends, and teaching them to do the same, we are going to get rich dude! I don’t know that much about it but I have my partner/upline, Mike on the call and he will explain it all to you. Mike is making $20,000 per month and is here to show us how.
Bob buys a few cans as a favor to his friend and places an order of about $20.
After about 30 minutes, the call ends and Ken congratulates Stewart on his new customer. Stewart asks what he made from his efforts and Ken does the math:
Well Stewart, you just made $2.00 for ONLY 30 minutes work. That is the equivalent of $4.00 per hour. And then Ken thinks to himself…. I just earned $2.75! I used to earn $250 for doing less work. NO-BAM!!!
Ken says to Stewart, “Who’s next on your list?” After a moment of silence, Stewart tells Ken his wife has a honey-do request and Ken replies, “I understand, my ex-wife USED to do that to me all the time. She left me after the Zeek Rewards fiasco”
Ken starts to see his override check drop dramatically to almost nothing and realizes there is not enough money in Retail Sales to pay the rent on his van, which he parks down by the river.
Out of desperation, he finally calls an old MLM friend and signs up in their HOT DEAL (with a signing bonus and one side of his binary already built for him) and repeats the process. BAM!!!
“There are eight million stories in the MLM industry. This has been one of them.”
MLM attorney jeffrey babener has published a new article on the FTC/vemma injunction:
worldofdirectselling.com/vemma-preparing-for-the-ftc/
Legal standard is about something different, e.g. “a rule or principle that is used as a basis for judgment”.
“Amway rules” may be a standard for DSA membership. That means it’s a “pseudo legal standard” or something similar.
A court may look at it and analyse whether it actually has any function on a case-by-case basis, but it will not blindly accept it. The court didn’t accept it for Vemma either.
There isn’t any restrictions against MacMillan’s Dictionary. I’m pretty sure it can be useful if people use it in a correct way, as a dictionary rather than as a replacement for rational thinking.
courts use the amway rules all the time so i don’t know what your’e talking about.
in vemma the court found that the amway 70% rule was not enforced properly and the 10 retail rule did not exist.
the correct way to read a dictionary is to read it without trying to outsmart it by dreaming up our own meaning of words.
While you are getting rational, why not take a moment to understand that the terms of the Preliminary Injunction are the legal remedy, as well as the solution chosen by the judge to address that specific legal problem…. but it is not a remedy or solution for Vemma’s business predicament.
Here’s a list of the different Vemma sub-companies, from the Receiver’s preliminary report (September 4).
JOINT VENTURES
All of them seem to be directly or indirectly affected by the injunction.
The ownership for the Asian companies wasn’t very clear in the report.
That’s why I copied exactly how a court saw it.
* It’s not a legal standard. Rules may be in place and be enforced, but it won’t eliminate pyramid scheme issues.
* It can easily be replaced or modified.
* It worked as a defense argument for Amway in 1979 because Amway could show that it actually had a function.
* If “Amway rules” can be accepted, then “Norway rules” can be accepted too. The important factor is about the function those rules have.
* Any other set of rules can be accepted too. And so can no rules.
I’m not able to recognize what that is about?
There’s many correct ways to read dictionaries. But “outsmarting a dictionary and making up new meanings” haven’t been among my suggestions for use.
I pointed out that “it wasn’t that type of solution we were talking about” in one post, but I accepted that it actually was a type of solution. So there’s no “outsmarting of the dictionary” from my side.
BK Boreyko CAN actually use the injunction as part of business solutions, e.g. as a “don’t blame me for changes, I’m under direct order by a court”. People will be less eager to argue about details if it has to go through a court.
The injunction CAN be useful in that way.
One of the Vemma subsidiaries has a tex reduction function.
New Vision International IC-DISC, Inc. (est. 2010)
Commissions from export sales can be paid to the IC-DISC company (owned by the shareholders). The IC-DISC company can then pay out up to $10 million in dividend (rather than salaries), and reduce taxes.
It’s legitimate tax reduction, so there’s nothing wrong
@mlm broken model
Can you just stop – we get it – you have an opinion. But your coming across as a know-it-all and to me some of your arguments are just stupid.
As for your soap argument – price is not the only factor which determines value – Amway soap may be more expensive because it is a better product – not just because it is distributed by a MLM model.
There are always lesser quality products at cheaper prices – that doesnt make the more expensive product a fraud or over priced rip off.
And no I am not with Amway but I do know that better quality products cost more to produce and have a higher consumer price – that is not rocket science.
Here’s Kevin Thompson’s / Kevin Grimes’ “Vemma video hangout” published after the court decision on Friday, September 18th.
youtube.com/watch?t=299&v=6VNX-9vpSQA
He’s somewhat “disappointed” that the court didn’t see what he sees, but he still seems to have accepted the decision.
There’s questions about how to interpret the “50% non participants” requirement, whether it is on a company wide basis or on an individual basis.
* It’s on individual basis, according to Kevin Grimes.
There’s some suggestions about reclassifying affiliates who haven’t recruited anyone, and haven’t bought affiliate packs, to “customers”. That’s the same type of reclassification Vemma was criticized for, they have only modified some details.
MY COMMENT
Affiliates cannot legally be reclassified to customers when they first have signed an affiliate agreement. They will need to sign off themselves, the company can’t do it for them.
Reclassifications may be seen as “Vemma returned back to old sins immediately”.
Commissions can be paid for sale to non participants = people who haven’t signed up as affiliates. If they get enough non participants then SOME sale to participants can be accepted.
It can be solved like this:
1. Qualifying purchases cannot exist, it will violate the injunction.
2. Some affiliates can voluntarily resign as affiliates and become retail customers.
3. A new class “customers on autoship or individual orders”.
same could be said about him and the ‘my advertising pays’ scam.
Have either of these two attorneys worked at the FTC?
They’re MLM attorneys. You have to realize they see everything through the “MLM is legal” lens and try to explain Vemma in “that light”.
of course they are MLM attorneys and will try to interpret the law in favor of their clients. just like the FTC tries to interpret the law to match their stand.
but attorneys like jeffrey babener and kevin thompson [i haven’t followed kevin grimes] are very knowledgeable about MLM law, and the guidance they provide by their unbiased personal opinions, through articles and such, are very good.
we have to separate their knowledge about MLM from their professional role, in order to appreciate them.
Maybe now they will investigate all MLM companies, which operate all in the same manner.
If the downline doesn’t buy the product and use it, the upline doesn’t get paid! Getting customers is just an afterthought!!!
Forever Living and Herbalife are big culprits! Don’t know how big cheques paid out to the upline, can be justified at the expense of the little “workers” in the downline!
The prohibited business activities (it has also been covered in another article here).
A: The payment/reward system.
B: Misrepresentations.
C: Failing to disclose.
D and E: Marketing material. Not relevant in this context.
INTERPRETATION?
Court orders sould normally not have any room for interpretations, because they ARE interpretations themselves. So “any marketing program” literally means it.
vemma’s website is down.
there is a message saying they are working diligently to get the operations up again.
media.vemma.com/images/main/notice.jpg
I’m guessing down for maintenance while they adjust the backend to comply with their current operating restrictions.
I have no idea what you just said, but paragraph A.4 seems clear enough.
If an affiliate wants to get paid $100 for recruiting new people into the Marketing Program he must first earn more than $100 by selling product to persons not in the Marketing Program.
It was nice of Kevin Thompson to urge network marketers everywhere to buy a few cases of Vemma (its so yummy) to help his client and its marketers through this rough patch.
Is the demand there? We will see.
i dont know about forevever living, but regarding herbalife and its structure, the FTC attorney made a very telling comment, while cross examining a vemma official called brad wayment.
the FTC counsel asked wayment if vemma had a system of wholesale purchasing [like amway], which created an incentive for affiliates to sell at retail, and also for resale, by reselling the product to downline distributors for a profit.
the vemma transcript on scribd.com is non copiable so i cannot reproduce that dialogue here, but you can check the cross examination of brad wayment .
emotional purchases by loyal distributors may help vemma for a month or two, but what afterwards?
vemma has to find a long term solution, to abide with the court order.
we may see a vemma appeal to para 4. they will need the FTC’s cooperation to a get a judge to rephrase para 4.
1. The injunction has banned all “qualifying purchases” …
* affiliate packs $600
* monthly qualifying purchases
* any similar solutions
a. It will affect all future orders. If the court has prohibited that type of sales activity, Vemma cannot legally continue with it.
b. It may affect invoices not already paid.
It means that all existing orders of that type must be cancelled, or they can be delayed until people have made some changes. Vemma cannot reclassify those orders itself to “non qualifying orders”.
– – – – – – – –
2. It has banned paying out rewards from those purchases …
a. It will affect all future commissions.
b. It may affect commissions earned, but not already paid out.
It means that all current commissions and bonuses must be cancelled, and be set aside as some type of “frozen funds”.
* It will be up to the court to decide whether those funds can be paid out or be used for product purchases. Vemma cannot decide that itself.
It also means that all future payouts of that type must be cancelled.
– – – – – – – –
VEMMA INTERNATIONAL?
The order includes all the foreign subsidiaries and Joint Ventures too. From the definitions, page 20:
Paragraph 1-A-4:
Vemma can pay commissions and bonuses derived from “non qualifying purchases” if more than half of those bonuses come from non participants.
You seem to have a different interpretation, e.g. you didn’t specify anything about “non qualifying purchases”.
@ James_C
Thanks for your comments.
I have yet to see anyone refute my basic premise which is that MLM Model ADDS costs to the delivery of products to the consumer.
Anyone who passed 8th grade level math and has a calculator can prove my point. Well, of course, that is unless they are part of the MLM world.
SIMPLY PUT – where does the 40% – 55% MLM companies pay the UPLINE come from? So, if the MLM company pays 25% to 50% to the Sales Rep who actually sells the product to the consumer, how can the product compete on price with legitimate retail methods?
The numbers don’t add up. Well, that is unless there ARE NOT RETAIL CUSTOMERS. That is why I say the MLM Model is Dead.
I was a consultant to a company that sold products to several MLM companies. What I learned from that experience opened my eyes. I am holding back some facts here but I know most of the open-minded posters get it.
And with this Great Recession type economy, people have shifted towards lower prices. You do realize this to be the case, right?
A FEW EXCEPTIONS
Of course there a few high end companies that are doing OK but that is mainly being driven by the Asian visitors to the USA.
Asians have to pay high tariffs to get USA Name Brand products. When they visit America, they load up on Louis Vuitton with one item for themselves and sell the others to their friends.
You say that I know-it-all. Well, thanks for the compliment but actually it all came with hands-on experience – been there, done that.
And yes, some of the lessons in life are more painful than others.
I notice several posters on this board also say the MLM Model ADDS cost to the delivery of products, so I am not alone there by any stretch of the imagination.
I hope James_C better now.
you base all your arguments on your ‘personal experience’ of this and that, but nobody gives a dang about your personal views.
the court in amway, found amway products to be fairly and competitively priced. the court in vemma did not comment on vemmas price, but commented on the fact that vemma seemed to have some market demand.
as long as an MLM can retail its products, eighth graders with their calculators can punch up a storm about MLM adding costs, but as long as a product can demonstrate market demand, nobody will question it’s cost.
and BTW, your arguments have been refuted several times. just because you keep repeating the same tired arguments, does not mean you will keep getting replied to.
i mean really, now the american economy is being shouldered by asians buying louis vuitton and suchlike? and all americans are buying the cheapest products available because of recession?
these kinds of arguments can be made by people who may have passed the eight grade, and stopped right there.
Well, hello there Anjali, and thanks for your comments.
You missed the entire point (as usual) but hey….thanks for reading.
Your comments are about the Law This, and the FTC that. I am referring to the Real World and how things work on the consumer level.
Do you also disagree that most consumers are experiencing extremely difficult times here in the good ole USA? If so, what happens when money is tight? Do people look to PAY MORE or LESS for their products, goods and services?
“The kinds of arguments” This is reality Anjali, just stating facts, not opinions.
And may I extend special congratulations to you for passing the 8th grade. I was beginning to wonder. But hey, don’t “stop there”
Do I see a high school diploma for you in the future?
I followed the idea that a court order doesn’t have much room for interpretations by the defendants. If the order says “any marketing program that acts in those specific ways described in this order”, then it literally means that.
The defendant or his attorney will need to find legal guidance in the order itself, rather than in case law from other cases or in law theories.
* Kevin Thompson cannot look solely at paragraph 1-A-4 and try to interpret “the meaning of the injunction” based on that alone. He will need to remove his “rosy MLM attorney glasses” before trying to interpret the order. He can’t look at it through a filter where most of the meaning will be replaced by some other ideas.
It doesn’t mean the injunction is written in stone, but it will need to be modified away from a meaning rather than being interpreted away from it.
VERSUS
Do you see the problem? “can pay’ and “banned” are incompatible.
My statement was correct as stated, yours taken together are contradictory.
What else would it mean? You are restating something that is clear and making it confusing and ambiguous.
Quite obviously, however the Court’s intentions may need some clarification. Don’t think for a moment there will not be questions of interpretation, which doesn’t mean that every case law ruling and precedent needs to be revisited.
so, you’re saying the law and the FTC are both an ass, and only You who has Mastery over the Real World, has an Opinion that Matters.
so, even if the law and the FTC found amway prices to be competitive, your Real World experience says they are not!
if times are so difficult in the USA currently then how come consumer spending in the USA is up and away? these are statistics from the US bureau of economic analysis:
tradingeconomics.com/united-states/consumer-spending
sometimes our interpretation of the ‘Real World’ gets limited to us and our neighbors, and our personal experiences, but then we can depend on the US bureau of economic analysis to paint the Real Picture.
there was a dip in US consumer spending between 2008-2010 due to recession, but the spending is back up again and slated to increase further.
been there, done that. and you?
remember, it is never too late!
One specific factor from the injunction …
* The products will need to be unbundled from the opportunity itself. That’s a clear condition mentioned several places in the order.
There’s no room for interpretations by the defendant or his attorneys. It’s a case specific injunction based on the facts of the case. It’s not a “general guideline for every MLM company”.
yes, it is a ‘case specific’ injunction.
and yes, though it may not be incumbent for every MLM company, it is certainly a “general guideline for every MLM company”.
MLM companies can easily see that products bundled with an income opportunity, are going to get them in trouble. and products sold via qualifying autoships will also get them in trouble.
I covered both perspectives …
* the court has banned … Vemma isn’t allowed to
* Vemma is allowed to … the court hasn’t banned
So I don’t really see the problem there. Both perspectives are correct enough, but they are from two different posts (posts #111 and #112).
It’s your own “incompatibility” idea that has failed here.
The fact that the court has banned paying commissions and bonuses that derives directly from “qualifying purchases” doesn’t mean that the court has banned all commissions and bonuses.
That post was an “answer #2” to your post #108.
#112: first answer — focused on the idea you stated, and quoting from the order itself.
#116: second answer — focused on the idea I followed about “very little room for interpretations”
They both shared the same main conclusion, but they covered different aspects. They are two different answers, not “repeated answers”.
hmm, the likes on boreyko’s FB posts have come down from thousands to mere hundreds.
and MLM attorney kevin thompson has dug up a three year old video, which shows that his stance on autoship is quite exactly what the court has found in vemma.
i can’t copy this video, you can check it out on KT’s FB page. he was Spectacularly Right three years ago!:
The foregoing premise is irrefutable. Sales and marketing are expenses and ADD cost.
however, your first ‘basic’ premise, if i understood it was that MLM products must inevitably be overpriced relative to non-mlm retail competition. That premise has been refuted, though the argument continues.
From my perch, It doesn’t appear that mlm overpricing is inevitable at all but only that the industry has determined that it is more profitable for a company to reward its management and sales force for recruitment and self consumption at high product prices than to compete mass market style with Walmart etc. This is a strategic decision not an inevitability.
While mlm marketing and compensation adds costs this must be compared to the alternative of maintaining retail stores and employing W-2 labor. Its pretty plain that mlm sheds some costs while increasing others.
“May get them in trouble” rather than “are going to get them in trouble”.
The court didn’t create any new standard of law there. A court may come to a different conclusion in a different case, e.g. a court may not see any problems in products bundled with an opportunity if the facts are different.
The order is “Vemma specific” or “case specific” rather than “MLM specific”, i.e. it doesn’t solely look at MLM case law but rather at case law relevant for the case itself.
yes, any MLM which remains stubborn about bundling products with opportunity had better show high retail.
what kind of ‘different case’ can you envisage?
Like i said…’You are restating something that is clear and making it confusing and ambiguous.”
I believe it’s time to return back to a more relevant topic. 🙂
You clearly have said that, and I didn’t really agree with you when I checked the realities.
FYI, posts #105, #111 and #121 have some similar conclusions about “prohibited business practices”. It’s related to that the court order is divided into sections, and similar issues may be covered in more than one section of the order.
Whether you agree or not, when you checked the so-called realities, all you did is consult your own opinion. Mine is right and yours is wrong. That’s reality as far as i am concerned.
“Supplementary answer”.
The case law wasn’t solely about MLM case law. I had a quick look, and checked one of the cases. It was about multiple “Get Rich Quick” schemes, FTC v. John Beck Amazing Profits, LLC.
2 minute infomercial, “John Beck’s Free & Clear”:
youtube.com/watch?t=126&v=GqiWUgSCdLo
The current case against Vemma will be better interpreted as a “Preliminary Injunction case” than as an “MLM pyramid scheme case”. The pyramid scheme issue will be more relevant in a different phase of the case. The current issue was simply about the injunction itself.
The injunction will need to cover what the alleged wrongdoings are about. The court cannot apply a “BurnLounge standard” to that part. It will need to look at more relevant case law.
My primary suggestion was that it would be wise to return back to a more relevant topic. The rest of that post was just “additional info”.
I have tried to look into your so called “problem”. It seems to be based on some “compatibility ideas” you have. I can’t offer any solutions to that type of problem.
Post #123 replied to your post #117, while post #124 replied to your post #118. Both posts tried to give valid answers. I didn’t try to make any of those posts “compatible” with specific ideas.
You are babbling again.
@ hoss
Thanks for taking the time to actually make your point.
Just curious, from your experience, can you list the costs that MLM sheds? Then, can you list the costs that MLM increases?
That is how I like to discuss any topic. Otherwise, what is the point to all of this.
Let’s address the specifics.
@ Anjali
This response pretty much tells me what I need to know. You remind me of the student who attended every class and always made straight A’s, but had absolutely NO common sense. They make great employees but are terrible when it comes to making their own decisions.
Do you believe this headline and the 5.1 percent unemployment rate to be true also?
Sorry for the confusion – – (Ozedit: Offtopic derail attempts removed)
There is a lot of talk in the MLM world about “leadership”.
When I making a full-time living in MLM, I have to admit to being impressed by a lot of the “leaders”.
I remember sitting in the audience at the convention in Point Clear, AL when the Insurance Dept of Washington State shut down AL Williams and how the leaders responded to it.
The fought it and WON and it wasn’t easy. The details of that case taught me a lesson on how some regulators pick their battles and WHY.
What does this have to do with Vemma.
Ken Stewart is a “leader” with the company. On Sept 18th, the day of the FTC announcement, Ken took to his Facebook page with this in-your-face picture and “Take That FTC” post.
facebook.com/photo.php?fbid=10206457347765460&set=a.1636031293634.86767.1022269522&type=3&theater
I find it interesting that Ken hasn’t posted anything of substance in almost a full week!
Is it because he knows deep down inside that the Vemma products are overpriced and will never compete head-to-head with the top selling energy drinks on the market today?
OUR ECONOMY AND HOW THAT RELATED TO THE MLM WORLD
This IS the reality of the decision from the FTC. And, in the Real World, there are still 47 million Americans living in poverty — the highest number in two decades, according to the Census.
Plus, an additional $10 Trillion Dollars in debt.
Plus, Mortgage Interest Rates about are less than HALF the last 30 year average! freddiemac.com/pmms/pmms30.htm
Plus, According to the U.S. Debt Clock, total long term unfunded liabilities are at $126 trillion, a $1.1 million liability for each U.S. taxpayer. The main driver of that astronomical number is two of our major entitlement programs: Social Security and Medicare.
NOTE: Some conservative analysts say the unfunded liabilities exceed $200 trillion.
Oh yeah – the US economy is doing just fine. 🙂
If the MLM world cannot figure out a way to actually retail their products and COMPETE ON PRICE/VALUE, their days are numbered IMO.
I hope the money-game days of MLM are over! But for some, the cocaine habit is so strong that they will deny there is even a problem as long as that white power is available. AS I have heard then say so many times, “Sure beats getting a real job!”
Right Ken?
For your discussion .. Posted sept. 22
mlmlegal.com/vemma%20prelim%20injunction.html
Vemma Preliminary Injunction Order … First Take
Time for the Industry and Vemma to Press the Reset Button
By Jeffrey A. Babener © 2015
It’s the End of the World As We Know It
REM
Well, actually … maybe not.
The direct selling industry is pondering the impact of the September 18, 2015 Preliminary Injunction Order in FTC v. Vemma.
It will have a major influence on direct selling, but perhaps more on business practices than legal standards.
What Happened?
On August 17, 2015, the FTC filed a complaint in U.S. District Court in Arizona seeking a permanent injunction against Tempe-based Vemma International Holdings, Inc., a long-time direct selling marketer of health-related products.
The FTC was successful in obtaining a temporary restraining order, which shut the company, froze its assets and placed it under the control of a court- appointed receiver.
A follow-up hearing on a preliminary injunction was held, and one month later, on September 18, 2015, the Court entered a preliminary injunction. In its Order, the Court found that there was substantial likelihood that, at trial, Vemma would be found to have operated a pyramid scheme:
due to its promotional and operational practices that pushed recruits to buy starter packages and subscribe to autoship in order to qualify for commissions, and, secondly that it engaged in deceptive practices relating to overt or inferred promises of substantial earnings that did not materialize for most participants.
Nevertheless, the Court recognized that there was consumer demand for the product and a rationale for allowing the business to continue, to serve its customers and attempt to operate a viable and compliant business operation.
And thus, the Court removed the receiver, unfroze the assets, and allowed the company to reopen during the pendency of trial, but under significant restraints and under the watch of a federal monitor.
Specifically, the Court adopted, what is referred to in this FTC area of law as “fencing in” language. The Court’s order prohibited tying qualification for commissions to affiliate purchases of product packages or autoship, and also prohibited paying commissions unless the majority of product sold was sold to nonparticipant retail customers.
The industry was left to ponder the meaning of the “fencing in” order and its ramifications for the entire direct selling industry.
The Fencing In Language is Specific to Vemma
It would appear that the fencing in language is specific to Vemma as a penalty for past abuse. The Order is an Order. It is not case law and is not case precedent.
Actually, if the Order were suggested to be precedent, it would not be consistent with case law or the landmark 9th Circuit Appeals Court pyramid case rulings in Koscot or BurnLounge.
The BurnLounge ruling, following on Koscot, requires emphasis on sales to ultimate users, which includes nonparticipant retail customers and personal use in reasonable amounts. Primary motivation for distributor purchases should be destination to ultimate users and not to qualify in the plan for compensation.
Effectively, the Court said that Vemma spent so much time telling people they “must buy” that the Court inferred that recruits’ primary intent was to qualify (rather than buy for resale or personal use) because that is what they were told to do by the company.
In the absence of a concerted marketing system that pushed “qualification,” the Court recognized personal use as a sale to an ultimate user.
However, the Court ruled that the systematic “pushing” of purchases for qualification renders those purchases as incidental to the business opportunity as opposed to intent for resale/personal use for an ultimate user … disqualifying the sales as being sales to ultimate users.
The net result, opined the Court, was that Vemma forfeited its right to rely on personal use for qualification and commission purposes.
This is a big message to all companies, i.e., get your act together on how you promote your product and opportunity.
It is a mixed decision.
The old approach was problematic, but product was recognized as real. And so, the court continued the injunction to allow the business to continue, but under severe restraints.
The business will be allowed to continue in possession of the owners, not a receiver, but under view of a “monitor” with restrictions to avoid old offensive behavior.
The one major problem that renders Vemma less competitive among other consumables direct sellers:
Paragraph 4 of the Order only allows compensation if sales are greater than 50% to nonparticipants. This paragraph is not only ambiguous and hard to understand (is this per rep or for the entire program?) and is inconsistent with 9th Circuit case authority in Koscot and BurnLounge, which merely prohibits compensation unless paid on sales to “ultimate users”…. and, in which ultimate users are recognized as nonparticipants and distributors who purchase for personal use in reasonable amounts.
One possible interpretation of Paragraph 4:
If a rep has volume, compensation for the reps’ personal or group volume, compensation cannot exceed 49 percent of the personal or group volume for sales to the rep or his downline … i.e., the company can pay commissions on personal use or inventory sales volume, up to 49% of the total volume.
Effectively, personal use is counted as a half sale … which is at variance with every other direct selling company.
Again, this result is not consistent with Koscot or BurnLounge.
The District of Arizona is in the 9th Circuit and bound by case authority. Since the matter before the Court is fashioning a preliminary injunction order which balances the harms to the parties, rather than entering a formal ruling in the case, the Court designed an interim order with “fencing in” language specific to this defendant and the circumstances pending a formal trial on the merits. It split the baby… kind of …
It would appear that the Court is not saying paragraph 4 is precedent or the standard, but that it is an appropriate price to pay for allowing the business to go forward, in light of Vemma’s practices which tainted the market and left the wrong impression with reps as to why they should buy … i.e., some relief here, but no free pass … the auto is allowed on to the turnpike, but its speed restricted to 40 miles per hour.
In a way, the restriction is not unlike lifestyle restrictions that Courts place on individuals who are on probation or parole … no drinking, be home by 9 p.m., don’t travel, etc. … restrictions that impair normal living, but which are the price to pay … i.e., freedom is curtailed. Here normal operating business practices are curtailed.
How is this Case Different than BurnLounge?
The fact that the Court allowed continued operation of the business suggested that it differentiated Vemma facts from BurnLounge facts. And, it is true … the facts here are not BurnLounge facts.
This case is distinguishable from BurnLounge in which commissions were paid on primary revenue from sale of web-hosting sites, which the Court found were sales tools and not consumer products … although some product was added to the bundle.
The Court found that distributors were really paying for a bundled opportunity and that the web portal purchase was a gateway to participate in the comp plan.
Similarly, although real consumer products were sold in Vemma, the company’s promotional materials which focused on purchasing, qualifying and recruiting, rendered the sales into the category of primarily purchasing a bundled opportunity for qualification in the plan rather than purchasing for use by the ultimate user, i.e., for resale or personal use. And, thus, Vemma was penalized for its historical promotional emphasis on purchase for qualification.
In a different, but parallel fashion, the courts concluded in both BurnLounge and Vemma that purchases were incidental to the opportunity.
But, because Vemma was selling consumer products and not sales tools, some redemption was possible, albeit requiring Vemma to market in a fashion that is not competitive with the rest of the industry and in a restricted approach not consistent with the state of the law on personal use.
It is possible that Vemma will ask for a rehearing on this issue and may seek an interlocutory appeal on this issue. It will not likely get relief, at least in the immediate future.
After a period of time of demonstrated “good behavior,” the court might reconsider this “hamstring.”
The message: Actions have consequences. As Collin Powell said in his Pottery Barn metaphor, “If you break it, you own it.”
No other direct selling company operates this way and it is also inconsistent with the 2004 FTC Staff Advisory.
It is clear the court is fashioning the order more strictly in response to past abuse. As Marsellus Wallace noted to Butch in Pulp Fiction: “You’ve lost your LA privileges.”
Will other direct selling companies change their rules on credit for personal use? Probably not. However, they will certainly pay close attention to the activities that could cause them to lose the right to claim credit for personal use.
The Direct Selling Industry Should Press the Reset Button
There are at least three clear “to do” messages for direct selling companies:
Monitor Communication.
Every direct selling company should take this opportunity to carefully vet company and distributor public discussions and presentations to assure that the focus and emphasis is on teaching a program whose purpose is to create a customer base and not a “system” of finding recruits who purchase, who find other recruits who purchase … i.e., rewards for sales to ultimate users rather than recruitment of distributors to buy and recruit.
Purchase for resale or personal use: Yes. Purchase to qualify: No.
Track Product Movement.
Track product to its final destination. The bottom line is that companies should be able to document that product makes its way on to “ultimate users” and is used.
Determine Reasonable Ordering Needs.
Companies need to take a close look at the needs of novice and experienced distributors to determine what are “reasonable needs” requirements.
This task may entail extensive user studies, focus groups and the creation of objective criteria to determine that the ordering patterns of distributors, new or experienced, is matched to “reasonable needs” and not merely to qualifying in the plan.
And Vemma Should Press the Reset Button
If Las Vegas oddsmakers were accepting bets, the winning wager might be, based on a long line of FTC cases, that this case will not go to trial, but will settle with a Stipulated Permanent Injunction Order in which the FTC, Vemma and the Court agree to address restitution and penalties to those previous consumers alleged to be victims, and secondly, to adopt a going forward framework of business practices relating to pyramiding and deceptive earnings claims issues that are a compromise on compliance.
It is highly unlikely that Vemma will ever be able to operate with the complete competitive freedom of the rest of the industry … i.e., some type of fencing in restrictions will appear in either a Stipulated Permanent Injunction Order or an Adjudicated Permanent Injunction Order.
In the meantime, Vemma should make the most of this chance at a new life and for redemption in the eyes of the Court. For a month there, it was “dead” … and this glass is half full, not half empty … the Preliminary Injunction Ruling is its “defibrillator.”
At a minimum, Vemma should press the reset button on its relationship with customers and distributors.
Perhaps, it should use this opportunity to start from scratch and enter into new agreements, one strictly for customers or preferred customers (those that wish to commit to autoship). And, one for affiliates.
A preferred customer would have one right only: to purchase product, and, perhaps at a discount, if on autoship. And, affiliates would have only one right: to help gather customers and to build a sales organization.
An affiliate could also sign on separately as a preferred customer for personal use or, with proper “vetting” of demonstration of “need” and verification of resales, purchase product for resale.
Under the prior program, where there was no charge to sign on as an affiliate, the identity of the consumer and affiliate became blurred. This often happens to companies that adopt this approach, and for this reason, it is not a “best business” practice.
Perhaps, it is better to differentiate and identify those that wish to be affiliates by charging an affiliate “at cost” starter kit fee (sales kit or online marketing support), typical in the industry of $49, along with a modest monthly administrative fee for replicated website, back office and communication tools.
Obviously, there is no charge to merely be a customer or preferred customer. Those who wish to pursue the business opportunity will affirmatively need to pay starter kit and administrative fees.
Such fees would make no sense to individuals who merely wish to buy product for personal use. This approach is the long practiced approach by leading direct selling companies.
Obviously, there are many ways to address the “differentiation issue.” But, one thing is clear … it is mandatory for Vemma to keep track of sales to nonparticipants and sales to those who are participants.
Under the new rules of engagement, failure to track and demonstrate that the majority of sales are to nonparticipants, means no payment of commissions to the affiliate who produces the sales volume.
And of course, obviously, pushing the Reset Button here means thoroughly vetting the promotional practices of the company and its distributors to ensure that the theme is “customer acquisition” and not “distributor purchasing for qualification.”
Swinging the Pendulum to the Center
It is often said that a pendulum swings far to the left and far to the right, but sooner or later returns to the middle. Perhaps, in reinventing itself, with an emphasis on promoting sale of product to actual customers, Vemma’s pendulum will swing successfully to the center.
BK Boreyko was “handcuffed” by that injunction. Ken Stewart seems to have failed to see that.
Something or someone might have brought him back to reality. Or maybe he’s still celebrating.
Injunctions usually don’t have that room for interpretation?
The alleged pyramid scheme has been shut down by that court order, but the business itself has been allowed to continue with multiple restrictions.
The injunction didn’t try to be consistent with Koscot, BurnLounge or other MLM pyramid scheme cases. It tried to be consistent with other preliminary injunction cases, including non MLM cases. It addressed the alleged wrongdoings and prohibited those types of deceptive business practices.
@ M Norway
I will leave the legal technicalities to you and the rest of the board. However, from a common sense point of view, consider this:
After over a year of investigations, the FTC knows Vemma broke the law. From reading all the posts on this board, it seems to me that the key issue was the TRO while waiting for the actual trial to begin.
In the decision, there is wording that says the FTC believes they will win their pyramid scheme case against Vemma.
The FTC also understands there is the potential of an appeal after the guilty verdict is rendered with “lack of due process” being one of the issues claimed by Vemma.
By letting Vemma continue with the “fencing in” and “monitor” provisions, they eliminate the future appeal issue. So, they are not SHUT DOWN prior to having the right to defend themselves but they did impose certain restrictions.
Plus, this is NOT their first rodeo. The regulators fully understand the REAL driver of products sold through the current MLM Model is OPPORTUNITY, not retail sales.
By forcing them to change the model to the unsustainable Product Sales Model, they effectively put them out of business without the need for a costly trial.
The topic is relevant, your approach to it is not.
First you say that payments on “qualifying purchases” are banned, then you say payments on qualifying purchases can be paid. Then you change your tune for the third time and say that payment on qualifying purchases can be made, while some are banned which when its all boiled down is what i said to begin with.
So thanks for providing this useless detour to nowhere.
i misspoke earlier, and i am ready for an ambush, but the main difference is that Amway does not incur wholesaler and retailer markups while Proctor and Gamble does.
I can not comment on which company’s detergent is sold to the public at the lowest average price but wholesale markups of 20% are not atypical and retail markup of 40% are not abnormal for many products. That’s an aggregate markup of 68%.
See: tom-gray.com/2012/04/26/pricing-to-distributors-what-is-reasonable-markup/
So if Amway’s distribution channel adds about 40 to 60% to the consumer cost, then it appears that Proctor and Gamble’s wholesale retail channels would too.
yes, i believe the US bureau of labor statistics, is there any reason not to?
US unemployment peaked during the recession in 2008- 2010, and is at the lowest since then.
tradingeconomics.com/united-states/unemployment-rate
declining unemployment, and increasing spending [post#120], do not paint a picture of a people unable to buy amway detergent, which is a median priced product. or a herbalife F1 shake, which costs less than a burger. or any other MLM product whose ‘value’ they feel convinced about.
further, i refuse to believe that USA’s 10 trillion debt will cause the immediate death of MLM. i see no ‘immediate’ connection between the debt and MLM sales, which is a small portion of the US retail market.
i also see no immediate connection between global warming and MLM sales, in case you think to bring that up, next.
you get an “A” grade for this^^ kind of conclusion. we can wholly agree on this.
IMO, there is no need for MLM to artificially rack up prices. if amway, herbalife, avon etc can have comfortable distributor margins, while being competitive in retail prices, so can other MLM.
MLM which are about product sales, will figure this and survive. MLM which are product based pyramid schemes, will have inflated prices, and keep crashing and burning, and not create any value for participants in the long run.
the bottom line is, MLM is perfectly viable as a business, but the fact that many MLM are run like pyramid schemes, gives the industry a bad name, but does not effect the intrinsic viability of the business.
i refuse to throw the baby out with the bathwater, just because the US has 10 trillion dollars in debt or because ‘unfunded liabilities’ are…..something something!
That’s something i can agree with. Somebody figured out long ago that the same forms used for a legitimate mlm could be repurposed to pyramiding.
Its the pyramiding that decouples product price from the market dynamics , not mlm itself which at base is just an alternative way to get product from producer to consumer.
i would also point out that the commission schedules and bonuses of legitimate mlms are at the level we see because that is what the retail market will bear.
parfait! bein dit monsieur! bellissimo !
[pardon my french] 🙂
@ Anjali
Thanks.
Now for your test scores.
Sorry, but you just earned yourself a big fat “F”
Anyone else care to “school” Anjali as to the Reality of the ACTUAL US unemployment rate?
@ Anjali and Hoss
As Hoss said in his reply above, it is hard to run a price comparison on certain products because we have all of the information needed to do so.
For example, if the soap being sold thru an MLM company is actually CONCENTRATED as advertised, then it becomes virtually impossible to compare to what is being sold through traditional retail stores.
We can also agree that there are certain products that carry a large margin and can be sold via MLM without appearing to be overpriced.
A FEW EXAMPLES:
Coffee and tea – up to 300%
Cosmetics – 78%
Bottled Water – 4,000%
There is plenty of room for MLM companies to payout 40% to the upline, run the car programs, pay 25% to 50% in Retail Commissions and still be inline with traditional retail.
I will concede this point.
However, my username MLM Broken Model refers to the companies that are NOT SELLING hardly any products whatsoever. Instead, they reply solely on HOPE AND OPPORTUNITY to move products from company to consumer.
In order to payout large checks quickly to their “players” (who use those checks to entice other “players”) these MLM companies increase the price of their products so there is more money to pay the recruiters.
Since there is hardly any retail, it really doesn’t matter if the Retail Price is inline with traditional retail methods.
We saw this with Vemma, Monavie and many others.
However, if an MLM company is paying 50% to their “players/recruiters” and 25% to 50% commissions on Retail Sales, that is a lot of markup, especially with most products.
Whose “Reality”?
nobody is interested in individual persons coming to individual conclusions/opinions about the unemployment rates. they are free to share their opinions, but anyone looking for statistics about US employment, will go with the US bureau of labor statistics, since they are the ‘official’ voice of the US govt.
why don’t you take the US bureau of labor statistics to court, if you think they are are lying to the public?
the court will give them one fat ‘F’, and appoint you to ‘school’ them about the Reality of US unemployment, since you have the Perpetual Proprietorship of ‘Reality’.
sorry, but you get negative marking for being full of it.
I have no idea what unemployment has to do with the court’s preliminary injunction decision. Offtopic guys.
correct.
correct. i dont think there is any disagreement about this either.
as i see it, your stance was that – MLM Is Not Viable.
since you agree now, that MLM is viable, i don’t see any basis for disagreement, except for unemployment rates etc which would be a bit off topic? i mean, always beware, OgreEdit Watches!!
@Anjali
Interesting style and technique you have there. Someone posts 4-5 examples to prove a point and you pick one of them and post your own version of the straw man reply.
How is that working out for you with the other members of this board? Are they buying it?
@Oz
You own the site and have the right to call it the way you see it. I respect what you do here. My post about the poor economy was in reference to the Average cash strapped American seeking LOWER PRICES and that means….MLM Model Dead, IMO.
in the particular case of vemma and its injunction, personal use is ZERO sale, Unless there is 51% retail sale.
what i’m trying to say is, vemma wont be able to get away with treating distributor personal purchase volumes as a half sale. vemma has to show 51% retail, for personal use to count at all.
if vemma settles with the FTC with a stipulated permanent injunction order, then i suppose this 50% retail ‘fencing in’ condition will be dropped?
vemma can easily work with the FTC to fashion a program, which differentiates customers from affiliates, with a refundable membership kit at 49$, and product discounts.
by giving affiliates product discounts, vemma would incentivize retail and create a class of discount buyers. vemma has already proved that it’s product is retailable, and a healthy retail margin will only improve retail.
please do not speak for all americans, unless you have been elected to do so.
american consumer spending is up.
you brought up unemployment rates, and when i pointed out that they were at the lowest since the recent recession, you claim the statistics are bunkum.
if you want to argue that american consumers are cash strapped based on your interpretation of reality, and your secret statistics, you shall have to do it all by yourself.
the economy will keep going up and down, and there is no valid basis to suggest that a poor economy will search out and kill MLM in particular.
in another thread we did find, that MLM actually does better in a poor economy, because more people may try their hand at it, for being a low cost low risk business opportunity.
Then check your own post #117?
You have already got a proper answer in post #123.
* I don’t really see any problem there.
* The problem is imaginary, it doesn’t exist in reality.
There’s no conflict that I can detect between those two statements. They both seem to be correct. The problem seems to be about that those two statements are from two different posts, from two different perspectives.
…is incorrect. A “non-qualifying” purchase is one made by someone not in the marketing program. (i.e., retail) and bonuses and commissions for this sale are unrestricted. There is no “if” involved.
The “if” applies to ‘qualifying purchases’ (i.e., sales to qualify based on self consumption, sales made to marketing program participants etc. which includes compensation for recruiting new participants (all the pyramid elements)
As i said before
Referemce Babner.
Not that simple. Its the methodology that critics find misleading because the headline/front page) unemployment figures do not take into account persons who are “no longer actively seeking employment, ” which is to say that the Bureau of Labor Statistics under political pressure omits working age people who can not find a job and have given up looking.
Critics argue that to do otherwise would be suicide for incumbent politicians.
This uncounted mass of unemployed, and very often unemployable people do not show up in the headline unemployment statistics… which itself reflects only the percentage of people who are currently “looking for a job” but can not find one.
Critics argue, that actual percentage of unemployed/unemployable due to social and economic factors is in the 10-11-12% range. i think this is probably correct and feflects a large and growing welfare state but I am not inclined to join the Occupy Wall Street movement because of it.
The idea expressed here seems to be that there is a persistent and perhaps growing mass of unemployed/unemployable persons who are so price sensitive that Amway detergent is priced beyond their means.
As discussed before there are even cheaper alternatives to Tide and Amway which might appeal to this market segment.
so, critics disagree with the methodology used by the US bureau of labor statistics, in that they feel that results are smudged by leaving out a certain class of people.
is this methodology new? if the bureau of labor statistics has always excluded this class of people from its unemployment statistics, it will not make much difference to the ‘trend’ of unemployment over the years.
it is not my argument that 5.1% unemployment is low or high. if critics say it may be 7.5%-9%, it may be so. my argument is that unemployment is at its lowest from 2008.
my argument is that lowered unemployment rates and increased spending do not translate to inability to buy fair priced products, whether it is amway, tide or surf.
i see no special situation economy wise, which indicates that MLM ‘will’ die.
i mean, MLM definitely wont die just because MLMbrokenmodel ‘thinks’ it will.
…and also that this persistently unemployable population is particularly susceptible to buying the “dream of income and opportunity” offered by broken-model-mlms which have resorted to bundling false hope with overpriced product.
Your argument didn’t support your conclusion there.
* My statement was about “non qualifying purchases” made by the affiliates themselves. I concluded that Vemma could pay commissions or bonuses on that type of sale if it also had higher amounts of retail sale to non-participants.
Your argument was about something different (“wrong argument”).
* You redefined “non qualifying purchases” to be about retail sale to external consumers. It will be rather meaningless to talk about “qualifying purchases” or “non qualifying purchases” when you talk about external customers.
So your conclusion was completely meaningless.
Please note that I haven’t disputed that purchases made by external customers are “non-qualifying purchases”. I have only pointed out that it will be meaningless to use that definition on that type of sale or purchase.
i have concluded that you are confused.
Babener didn’t say anything about that?
* He had a “One possible interpretations of paragraph 4”, but he didn’t conclude on anything. So your reference to Babener will need to be about that “Babener mentioned something similar in one part of his post”.
Your own argument may be correct enough, but it was too vague. It didn’t cover some essential factors you normally should have covered, e.g. that the existing “qualifying purchases” do not count as commissionable retail sales.
Babener covered the same point I tried to cover about “prohibited qualifying purchases”, but he used different words.
That’s even worse!
Pre-injunction all affiliates were participants in the marketing program. As a result every purchase they made was rewarded and constituted a “qualifying purchase within the compensation plan .
You want to perpetuate the myth that self consumption equals retail. Too bad, not under this Preliminary Injunction.
That’s why I have suggested more than 25 posts ago, in posts #130 and #133, that we both return back to a more relevant topic.
There’s no disputes about that your argument in post #108 may be correct. It’s vague enough to be correct, and it hasn’t been disputed.
The existing disputes are mostly about ideas you have created yourself. You could easily have discussed it with yourself, with no involvment from me. It would probably have made more sense.
There’s no need to involve me in lengthy discussions about something that primarily is about how you have interpreted some statements.
The primary reason for that is because you interpret statements out of context with the rest of the text. The complete statement was like this:
Most of our “disputes” are about that type of misinterpretation, about “out of context interpretations”.
You probably had a pretty bad “debate instructor” in school, one you still try to follow. 🙂
It wasn’t only out of context with the rest of the statement and the rest of the post, it also missed most of the previous arguments in the discussion.
Post #111 (based on quotes from the order in post #105):
Post #121 (based on quotes from the order in the same post):
I have actually analysed most of the injunction in posts #105, #111 and #121, so I have relatively clear ideas about the different parts.
So the vague ideas here will need to come from someone else.
Not really…mistakes the case. non-qualifying purchases come from outside the marketing program (retail) and they are fully commissionable without qualification. However your amended conclusion (below) is correct.
So you finally get it.
I stand by my original statement….the one you criticized because it was apparently not confused enough.
The court split the baby. It permits rewarding Self consumption and other rewardable activity but only to the extent an affiliate earns more by selling to persons that are not participants in the marketing plan (i.e., sales to retail customers.)
Debate over.
Here’s how courts see internal consumption …
It isn’t that simple in reality. It must be backed up by solid facts on a case-by-case basis.
Certain products or services CAN be bundled with the opportunity itself, it will only be a question of price and functions.
Example:
World Ventures’ memberships could have been bundled with the opportunity itself if the primary function had been about travels. But pyramid scheme cases in several countries have come to different conclusions.
TravelMax probably had bundled opportunity and services. It was found not to be a pyramid scheme in 1997, IIRC.
no, travelmax did not bundle the business with the opportunity.
affiliates joined up with a 25$ kit, and distributor purchases were optional.
so affiliates could sell travel at retail without any investment.
“Bundle the business with the opportunity”? 🙂
TravelMax did have some “training courses” or other “products” bundled with “business centers”, e.g. $800 ITA Independent Travel Agent course, “VIP Getaway” package, charities package.
I’m not familiar with that case. The main point was that it would be a question of price and functions — e.g. “does it have a meaningful function?” and “is it something people would have bought anyway, even without the attached opportunity?”.
Court decisions say “the product was incidental to the opportunity”, so you must look for the opposite factor — “opportunity incidental to the product”.
BK boreyko went back to his vemma HQ on 20th sept, and posted on FB that they would be open for business from the 21st onwards [at least shipping out product].
however today is the 25th and all is quiet on the vemma FB front, and the vemma website is also still in maintenance mode. so, business has not resumed in any shape or form.
could it be that vemma is making a settlement with the FTC?
MLM attorney jeffrey babener has said that he expects vemma and the FTC to settle via a permanent injunction order, in his posts here.
even truth in advertising [TINA], which had lead the attack on vemma, believes a settlement is on the anvil.
vemma cannot afford a lengthy trial hobbling on a restrictive injunction which requires 50% retail. and the FTC seeks remedy more than mindless punishment, IMO.
i think some hefty fines, and promises to stay on the straight and narrow are on the cards for vemma.
truthinadvertising.org/heres-how-the-vemma-case-ends/
But but but… Vemma has bajillions of retail customers.
Why don’t they just reopen and continue to make millions of dollars in losses?
A settlement MAY be a solution in the long term, but not in the short one.
Vemma can’t live with the current conditions. FTC can’t live with adjustments to the current conditions. So there’s no room for settlements now.
The “pyramidal activities” will first need to be stopped completely before Vemma can return to a more normal business practice. Vemma will need to be monitored “from the inside” for a very long time.
In FTC v. BurnLounge, a fourth individual defendant, Scott Elliott, settled or accepted a judgment relatively early in the case, while the three others continued to fight the case in court for years.
Tom Alkazin / Bethany Alkazin may settle. They are not “main defendants” compared to BK Boreyko.
yes, of course vemma will not be the same again.
the [almost] mandatory autoship will have to go.
the marketing style, income disclosures etc will have to change.
maybe vemma will need to report its sales stats to the FTC, or something.
TINA says its a ‘foregone conclusion’ that the case will settle, and they will soon have an article up on – ‘An analysis of what a Vemma settlement could look like’.
it would be nice to know mr jeffrey babener’s view too, on what a permanent injunction settlement would look like.
The current restrictions are actually “fair enough”. BK Boreyko and Vemma have been “handcuffed” by the injunction until the case can be resolved in court.
TINA’s prediction was based on 5 factors …
1. Odds. 20 out of 24 pyramid scheme cases have been settled.
2. Precedent. Boreyko has settled before, in 1999.
3. The Verdict. Boreyko will most likely lose.
4. Health Claims. FTC may bring up additional charges.
5. The Economics. Boreyko can’t afford to fight.
truthinadvertising.org/heres-how-the-vemma-case-ends/
truthinadvertising.org/ftc-pyramid-cases-by-the-numbers/
She has looked into Boreyko’s side of it, all the arguments for why he will be interested in a settlement.
* She hasn’t looked into what Boreyko cannot accept in a settlement. Some settlements involved lifetime injunctions, e.g. Equinox’ organizer was permanently banned from all types of involvment in network marketing and MLM.
* She hasn’t really looked into FTC’s side either.
I have a better example …
I don’t see any problem in DubLi’s VIP discount card — $99 yearly membership for a discount card, bundled with the opportunity to earn $20 if people introduce other members.
That was the legitimate front side of the business, the customer side of DubLi’s business model.
The other side of DubLi’s business model was a $500 … $12,000 recruitment program for “Business Associates”, where new associates could buy higher income positions / multiple levels of commissions.
Both sides rewarded recruitment of additional members, but the customer side had a different function than the BA side.
Here’s one example from the Equinox complaint …
The settlement involved permanent ban. Page 10 in “View full document”.
factsaboutherbalife.com/f-t-c-v-equinox-international-corp-no-cv-s-990969hbr-1999-wl-1425373-d-nev-sept-14-1999/
Equinox was much more “harmful to consumers” than Vemma. Bill Gouldd pushed his legal luck too far, beyond the limits for acceptable settlements.
* A good strategy for BK Boreyko may be to reduce “calculated or estimated consumer harm” before he tries to settle anything.
* A poor strategy will be to try to bend the rules, and then get caught for doing it (e.g. pseudo compliance).
Pretty dramatic shift for Jeff B who only two years ago opined that self-consumption is perfectly legal and MLM industry is safe from FTC, eh?
mlmlegal.com/herbalife%20Personal%20Use.html
It was too lengthy to get the idea “within reasonable time”.
Self consumption is perfectly legitimate, according to “Amway 1979”. That’s a question of law. A distributor can also be a consumer and buy products from anyone he like — including buying products from himself or his upline.
There’s no restrictions in laws against it, and it has probably been analysed many times by law makers and courts.
But that doesn’t mean all sales or consumption are perfectly legitimate. Some purchases, e.g. mandatory purchases where people can qualify for commissions, may be symptoms of pyramid schemes. That will be a question of fact — about how the business operates in reality.
“Driving a car”
You can compare it to driving a car. It’s legal in itself if you have the correct licenses, but certain types of driving practices may still be illegal. Some practices may not be specifically mentioned in any law, but they may still be illegal based on the facts of the individual case.
Amway’79 did not touch upon self-consumption, but it did outlaw inventory loading.
The Amway safeguard rules are designed specifically to eliminate inventory loading. Furthermore, the 10-retail-customer rule is specifically designed to MINIMIZE self-consumption effect on sales.
Jeff B’s position is that self-consumption is on a “trend” to be legalized across the US (instead of codified in a handful of states laws due to DSA lobbying) without considering how it can be used to endrun the Amway’79 / Amway Safeguard rules if the safeguard rules are not enforced.
The difference between consumer purchase and qualifying purchase.
$150 worth of Vemma products = consumer purchase.
$150 worth of Vemma products + opportunity to earn commission = not a consumer purchase.
One of the components in that “bundled package” will be completely meaningless for a consumer, so it isn’t really believable that a consumer will buy that “package”. It’s more likely that the motive for the purchase is related to the income opportunity.
If a court cannot clearly separate product from opportunity, then it will not try to do it either. It will only try to identify the primary function of the “bundled package”. But it may accept reasonable defense arguments supported by evidence trying to prove a different primary function.
If a company wants to argue “legitimate self consumption purchases” then it must first make those purchases become clearly identifiable.
An alternative strategy is to prove “not harmful”, i.e. to prove that it isn’t really important whether people buy those products as consumers or as income opportunity seekers, because they get a fair value anyway (they are not misled to buy something they normally wouldn’t have bought).
From the current order, quoted in post #167:
That one referred to Amway 1979.
“per se” = in itself. How the law sees it is relatively clear, but the realities of an individual case may be in conflict with what the law see as legitimate.
Amway tried to prove that it wasn’t really harmful to consumers, that it had a system in place to protect consumers from harm, and that the system actually had a meaningful function. That’s an “alternative strategy”.
Here’s one example, Netforce Seminars:
Jeff Babener will first “weigh in” if you do most of the work yourself, if you contribute to the answer yourself.
Darrin Epps and Edward Lamont were former high level distributors in Equinox. That may have contributed to more strict conditions in the settlement.
They were “repeat offenders”, and they should have known better. It was no “business accident”, they knew perfectly well what they were doing. They probably already were on FTC’s list of “people we would like to sue, but we haven’t had the capacity yet”. 🙂
I will look for factors like that. A shutdown isn’t simply about pyramid scheme rules, it’s more about “other factors”.
That AlJazeera article is part of a 5-article MLM/pyramid scheme series from October 2014, covering Vemma, Herbalife, Amway, legal remedies, thinking outside the pyramid.
of course there is a problem with dubli’s discount card.
first of all i’m not sure a ‘discount card’ is a ‘product’ and second of all a discount card is an ‘incomplete financial transaction’. paying commissions on incomplete financial transactions is a red flag in MLM.
how can you be sure that these discount cards are actually put to use? affiliates can just keep selling discount cards and earning 20$ commission’s in chain recruitment style.
this 20$ commission on discount cards is nothing but recruitment commissions, and the VIP discount card is an example of a ‘product’ being bundled with the ‘opportunity’.
vemma is launching a sale next week:
i guess, boreyko wants to unload vemma products before their expiry date. no clue yet from boreyko, about vemma’s future plans.
but vemma attorney kevin thompson posted a message on FB, which If it refers to vemma, is a sign that all is not well:
vemma affiliates are complaining that they are losing their teams to other opportunities.
boreyko&team need to shake up, and for beginners, they need to keep their affiliates informed about what’s going on.
in fact, amway ’79 made a strong case for self consumption, as the judge noted:
in amway, the judge noted that only approx 25% of amway reps were recruiting and inventory loading. these reps had to abide by the ‘amway rules’.
thus 75% of amway reps were non recruiting and self consuming/retailing, and there were no binding ‘amway rules’ on them.
with 75% of amway reps recognized as bonafide self consuming ultimate users, it is obvious that neither the FTC nor the court has a problem with the ‘amount of self consumption’ taking place in the MLM.
vemma, has tried to use this amway classification of non recruiting self consuming reps as ultimate users, but Failed because their reps were mostly purchasing in quantities [autoship] required for commission qualification.
The VIP discount card is meant to be the legitimate front side of the business, while the BA recruitment scheme is “the other side”.
The membership had 3 different options (from memory):
1. Free — 2% cashback
2. Premium — $4.95 per month — 4% cashback
3. VIP — $99 per year — 6% cashback — $20 commission one time
A court will most likely accept it as a service. It’s about what a reasonable person can accept as worth paying for — about the realities of the product or service.
It’s not chain recruitment if they only can earn commissions one time / one level deep. It’s more like personal sales commission.
A court must look at realities, and so should we. That’s why I identified the other part of DubLi’s business to be the main problem.
Kevin Thompson has probably tried to find some “legal walkarounds” to the restrictions from the court. 🙂
One method he can try to use is to get his client to accept the realities of the injunction = that the recruitment part of Vemma actually has been shut down.
I. PROHIBITED BUSINESS ACTIVITIES
“Qualifying purchases” have been prohibited. Commissions derived from such purchases have been banned. Vemma simply isn’t a recruitment driven opportunity anymore. The old business idea has failed completely.
The old business idea was based on a certain amount of “legal luck”. But Vemma and Boreyko doesn’t have that anymore.
II. PRESERVATION OF RECORDS AND REPORT OF NEW BUSINESS ACTIVITY
III. PROHIBITION ON DISCLOSING CUSTOMER INFORMATION
Boreyko cannot bypass the injunction directly or indirectly, e.g. he can’t set up a new business entity to bypass it, he can’t have any “hidden partnerships” where some partners try to bypass it, he can’t sell or transfer membership data to a new entity.
IV. ASSET PRESERVATION
Boreyko cannot sell the affected parts of his business to a third party either
Only if they have not been induced / forced / enticed BY THE COMPANY to do so.
Vemma did exactly that.
Maybe they were “non-participants” = not eligible for recruitment based commissions or bonuses?
A participant is someone who pays directly or indirectly for eligibility to earn commissions or bonuses that derives primarily from other participants. Herbalife’s Sales Leaders (SL) are participants, while Non Sales Leaders (NSL) are non-participants.
Ken Stewart (Facebook):
facebook.com/photo.php?fbid=10206517839037704&set=a.1636031293634.86767.1022269522&type=3&permPage=1
Herbalife has three tiers, IIRC. No downline, single level downline, and multi-level downline.
Defining “participant” by downline count is problematic, IMHO. This seems to imply that recruitment is required to participate. If this is done, there will need to be a heavy audit of 10 retail customer rule.
I am surprised BK didn’t order all affiliates to take down any existing Vemma related websites that contained offending material… or did he already did that previously?
Previously Vemma has three ways to qualify 1) self-buy 120 PV (your PV counts 100% toward your qual), 2) your two downlines each buy 120 PV (they qualify themselves, and they qualify you as GV counts as 50% toward your qual), and 3) each of you buy 60 PV, adds up to 120 toward your qual.
No idea how they are going to count the downlines on autoship in this new rev. It should be prohibited, but… we shall see.
Technically customers should have no downlines, and if they are serious on separating customers from affiliates, their genealogy will be a mess.
I really hope this isn’t some ploy to jack up retail sales next month and then submit those figures in court, along with a motion to ease the current restrictions in place.
Even by MLM underbelly standards, that’d be pretty sleazy.
You’ve got people running around proclaiming “save MLM, buy Verve!” and then Vemma go an announce a firesale.
The FTC action isn’t about artificially manufactured retail sales during a limited time period, it’s about the volume of retail sales taking place under Vemma’s regular operating environment.
I mean surely all the retail customers Vemma claim to have will be enough to sustain the business till the FTC matter goes to trial? Why even bother having the sale at all?
Lowering the qual to 50PV won’t mean much when a single pack is 60 PV…
I personally don’t care much about the prices, as BK choose to set them. It’s his company. And once he lowered the prices, he’ll have a hard time raising them again without ruining all the goodwill.
(Look up “Red Cross, donut and WW2” for such an example of a grudge that lasted several decades)
The trial is going to be based on past conduct. What they did after the shutdown would probably be only relevant in the penalty phase, if this ever got that far. I agree with TINA that this will likely be settled with some sort of consent decree.
I’d like to see if Vemma can pivot, which may prove or disprove that MLM itself is rotten to the core or there’s a chance to save it. 😉
i see that vemma has taken my advice and reduced its prices thus creating a ‘retail margin’.
they have halfed their qualifying volume. i guess as vemma cannot create sales volume via 120 PV anymore, they have reduced the QV, and will go for ‘double speed’ recruitment to keep up their sales volume.
except for the price reductions and QV reduction, much remains the same. i mean, most affiliates will remain on QV auto delivery i suppose?
now affiliates will have to Say they are retailing instead of self consuming, and it remains to be seen how this will be tracked.
well, vemma has risen to the challenge, let’s see if they can survive.
i really don’t think the court will be impressed by a couple of months of retail sales. this sale may just help to offload stocks.
It was based on Ackman’s presentation, not on Herbalife’s IDS. The IDS will usually contain “manipulated data”, e.g. it will group “SL without downline” together with “NSL without downline” — and thus make failure rate look better.
The 2014 IDS have the following groups (rounded numbers):
– – – -Non Sales Leaders – – – –
* NSL without downline 398,000
* NSL with downline 39,000 (1,821 made avg. $48)
– – – – Sales Leaders – – – –
* SL without downline 45,000
* SL with downline 72,000
NSL with downline:
NSL with downline will qualify for the first prong of the Koscot test, but not for the second.
36,259 of NSL with downline were 25% discount distributors = not qualified for any commission at all.
2,977 had 35% or 42% discount = they could earn sales commission on sales to people with 25% discount.
1,821 did earn an average of $48 from that type of sale. But that type of sale isn’t “unrelated to sales to or consumption by ultimate users”.
Compared to Sales Leaders (SL) with downline:
VEMMA
In Vemma, all members are participants. They qualify for commissions when they buy affiliate packs or pay for monthly “qualifying purchases”. They qualify for BOTH prongs of the Koscot test as long as they are active.
He’s violating paragraph 2, 3 and 6(b) …
The order didn’t have that room for interpretation. It didn’t only prohibit the 120 GV qualifying purchases, it prohibited all qualifying purchases.
But it prohibited specifically those types of qualifying purchases the court could identify clearly, in paragraph 6.
Injunctions are meant to be interpreted literally. Boreyko cannot use his own interpretation to overrule something that is clearly written in the order.
Boreyko simply doesn’t have that authority. He will need to adjust himself to his new role as a “handcuffed CEO, restrained from certain types of business decisions”.
..aaaand ken stewart has removed the post about the vemma relaunch plan from his FB page.
what’s with the secrecy guys? or is the relaunch plan withdrawn for further changes?
The injunction is relatively clear in itself. It will first become complicated if people try to apply MLM theories to it and try to “make it work” for that specific business model, e.g. if they’re looking for solutions to make a recruitment based system work in compliance with that order.
“Alternative shutdown”
The current order is an alternative to a complete shutdown. It will allow Boreyko to save the few legitimate parts of his business, but it will not allow him to continue a network marketing company. That part has been shut down, but how to shut it down will partly be up to Boreyko to decide.
“The organization will need to shrink”
A partial shutdown normally means that the organization will need to shrink, and that most people will need to find new jobs or opportunities.
The business itself will need to be based on other ideas than the old ones or current ones. It will need to come up with a new model for sales and marketing, one that is not based on network marketing.
“New roles and functions”
Vemma has a network of people. They are clearly not customers, and they’re clearly not sales people. So they don’t really have any function in a new model. A few of them may find their own “new roles and functions” in a new model.
It’s not a “human right” to operate a network marketing program or to participate in one. Boreyko will most likely lose the right to involve himself in MLM or network marketing for multiple years. He pushed his “legal luck” too far.
“The writings on the wall”
Anthony Powell probably saw the writings on the wall, e.g. that he wouldn’t feel comfortable complying with a court order. I believe other people should see it too, but I don’t think they should make similar decisions.
@Anjali – the reason it has been removed is because the company doesn’t want us to use social media at the moment and post any opinions, analysis, comments, etc., so as to not upset the FTC and/or give them any reason to file any complaints with the Court…
It has nothing to do with secrecy, and everything to do with being smart during this interim period.
After all, much of the post was the actual email sent out by the company to a few hundred thousand people-so much for your secrecy theory! (If you want to keep something a secret, you usually don’t tell several hundred thousand people! LOL)
Social media, until further notice, is only to be used to promote a product or a meeting date/time/location…that’s just smart business for the time being…
In addition, the reason for the small delay in getting re-opened is that they are having to make programming changes regarding the pay plan, modifying the websites and back office, getting systems back up, redesigning materials, etc.
It has nothing to do with discussions regarding a settlement as being the reason, secrecy, or relaunch plans being withdrawn for further changes…so much for your “theories.”
Finally, I’m flattered that you would spend so much time looking over my Facebook page…
So, either you don’t know how to read or you have vision problems. Those posts have now been deleted for reasons already mentioned.
And this comment of yours is just baseless conjecture:
That comment is rather laughable in lieu of the new pricing just announced-at $2 a can, Verve more than competes head to head with the top selling energy drinks!
And while someone can’t use the QV of their personal purchases to qualify, they can qualify for commission and bonuses on the QV of orders of personally enrolled affiliates and personally enrolled customers.
And affiliates are likely to continue ordering for personal use because they like the products and because if they order for 6 consecutive months, the 7th month they can take advantage of the free product promotion…
One final note: I have always respected a number of you on this site, from Oz to Chang to Norway and others (I have often posted in support of your comments and/or analysis on various topics or discussions), and I would hope that you would extend the same courtesy to me.
c’mon ken stewart, the FTC does not have a problem with opinions, analysis and free speech at all! y’all are just being paranoid!
as long as you track your 50% retail carefully, and don’t go around telling people to ‘join vemma and apply for 60QV autodelivery’ it will all be fine.
it will also be interesting to see the sales figures for self consumption of affiliates, a few months down the line. now that self consumption is detached from self qualifying commissions, the results will be very enlightening.
also, best of luck. i believe vemma was a product based pyramid and the court is pretty convinced about it too. but since the court has given vemma a chance to fight, i extend my best wishes too, may you succeed.
and what, you’re flattered i’m spending time on your FB page! that’s so sweet! i just cant figure why people have a problem with me stalking them on the internet ! 🙂
Where in the injunction did you find that affiliates can qualify for commissions and bonuses in specific ways?
None of the affiliates (or customers) can purchase any products bundled with the eligibility to earn commissions and bonuses.
Paragraphs 4, 5 and 6:
Paragraph 4 will require many real retail customers. Affiliates cannot qualify for commissions simply by purchases made by other affiliates in their own downline.
* Vemma cannot reclassify any existing affiliates, but affiliates can of course reclassify themselves to no longer be a part of the marketing program. Instead of a back office, they can get a “My side” showing info relevant for a customer.
How much Verve do I have to sell (@$2 a can) to make X?
Trying to also figure out how many customers I’d need personally, drinking a can a day, to make X. I think one energy drink a day is a reasonable amount to figure.
If $2 a can is fair market, what is the wholesale price for affiliates?
So it used to be 120 points for a 2pk and it’s now 50 pt for a 2pk.
I believe they’re about to violate the injunction here …
Paragraph 4 says …
Pays any compensation … unless the majority of such compensation … is derived from non-participants.
It CAN have multiple meanings. Babener pointed it out in post #138:
And I pointed out that injunctions normally don’t have any room for interpretations like that — “paragraph by paragraph separated from the whole”. If there’s doubt about something, then it will need to be clarified first before people can make any decisions.
FTC or the monitor will need to agree with the interpretation, to clarify that there’s no disputes about it. Or maybe the court will need to clarify what paragraph 4 of the injunction actually means.
If there are any disputes about that interpretation, then it will be a major issue leading to even more restrictions. Boreyko’s long term defense strategy will be seriously weakened. He simply can’t afford any misinterpretations here.
Agree with this interpretation.
Or it’s a “tasty” trial balloon used to keep the minions in line instead of jumping ship like rats on one that’s sinking fast.
Justice is usually not in halfs, e.g. “half legal” or “half illegal”.
The primary function of the court order is to prohibit unfair trade practices / illegal pyramid scheme activities.
Paragraph 4 will need to be interpreted within that context. It can’t be interpreted separated from the context.
If there’s doubt about something, the correct practice will be to get it clarified.
The order itself gives no permission for independent interpretations, e.g. it doesn’t suggest any methods like the one they have chosen.
* Boreyko can be blamed for having introduced a method himself, rather than trying to clarify what the injunction actually allows.
He can’t blame his lawyers, because they don’t have the authority to introduce methods either. They are simply not in that position.
The chosen method:
If the ratio of commission is 51/49, then affiliates will be paid 100%
If the ratio is 40/60, then the affiliate will be paid 79%, 21% will go to Vemma
If the ratio is 20/80, then the affiliate will be paid 39%, 61% will go to Vemma
If the ratio is 10/90, then the affiliate will be paid 19%, 81% will go to Vemma
Vemma will profit from that method, and it won’t really need to fix any pyramid scheme issues.
It can continue almost exactly as it did before the injunction. The only ones who will lose will be the affiliates.
I believe that is a clear misinterpretation of the injunction. Someone has failed miserably here when they interpreted the injunction.
Consistent with what Babener said.
I really don’t care about what Babener said. I have my own brain, so I don’t need to rely on his. But that won’t restrict you from using it.
I didn’t care about what Gerald Nehra said either for TelexFree. And I didn’t care about what Kevin Grimes said for ZeekRewards.
Babener will need to put on his “injunction glasses” and remove his “MLM lawyer glasses”. He cannot interpret the injunction as an MLM attorney, it will be “wrong type of legal reasoning”. The main purpose of the injunction is NOT to “align Vemma with other MLM companies”. It has a quite different function.
Those two examples were about some specific factors …
Gerald Nehra ignored the Ponzi scheme issue when he looked at TelexFree, and instead he applied his own “MLM attorney reasoning” — some ideas he had invented himself based on what clients like to hear. He tried to make TelexFree match his own ideas.
Kevin Grimes ignored the Ponzi scheme issue when he looked at ZeekRewards, and instead he applied his own “MLM attorney pseudo compliance ideas” — some ideas he had invented himself based on what clients like to hear. He tried to make ZeekRewards match his own ideas.
Babener didn’t conclude anything when he tried to analyse paragraph 4, he only gave a relatively vague suggestion. But I’m pretty sure he won’t approve “the chosen method” if he take a look at my examples.
the court has not specified that >50% sales of the TOTAL Sales has to be retail. the court has only specified that compensation can be paid only when the majority of sales is retail sales. there is a delicate difference in these two interpretations.
it will be next to impossible, for vemma to run marketing scheme where exactly 51% will be retail and exactly 49% will be downline sales.
in some affiliate groups retail may be more than 51%, in another affiliate group downline sales may be more than 49%.
if affiliates make More retail sales than required, they will earn all commissions. if affiliates make More downline sales they will earn less, and vemma will get some extra earnings.
since affiliates will earn commissions on their group sales, the up lines will try to maintain the balance between retail and downline sales, because if they don’t the entire group will suffer.
this scenario as presented by norway is ‘possible’ :
BUT, this scenario ^^ will not happen practically speaking, because uplines will be guiding their downlines on their sales.
vemma needs to stay ‘close to’ the 50%/49% requirement of the injunction, but not exactly so. hence this method of calculating commissions, on the basis of the total retail in any group, is correct, IMO.
when jeffrey babener suggested it, even i had my doubts, but actually it DOES make sense.
Well… you are the one who quoted him. And what he said made sense since it is consistent with para 4, (as is
Vemma’s method of complying with the same provisions)
Maybe the court had something else in mind. Maybe the FTC and the Monitor have a completely different view. We’ll have to wait and see but it appears to me that Vemma’s planned actions are consistent with the letter and spirit of the Preliminary Injunction
If retail sales are slack (which I expect) isn’t the only way to keep a ratio near 51/49 accomplished by slackening self consumption at the same time?
Everyone in the courtroom must have realized that Vemma could very easily go into a death spiral unless affiliates sell rather than self consume for profit.
i have not gone back to look but I thought the ratios were based on total compensation not total sales.
the court has not used the idea of ‘Total’ at all. neither does the court say ‘Total Sales’ nor ‘Total Compensation’.
the court says ‘Any Compensation’ should be based on sales, which have a majority of retail sales in them.
if ‘any compensation’ is paid on sales figures which contain >50% retail, it follows that the ‘total compensation’ paid out by vemma will be on majority retail.
it does not matter if the majority of vemma’s ‘Total Sales’ are retail or not, as long as ‘Any Compensation’ paid out is based on majority retail.
Correct, paragraph 4 doesn’t specify anything about it. So we can’t know for sure what that paragraph actually means.
Babener pointed it out too …
I have pointed out that if it really IS ambiguous and hard to understand, then the correct action will be to get it clarified. Trying to interpret it and then make decisions based on that interpretation will not be a proper action.
So it isn’t about “how to interpret paragraph 4?”. The important question is about “which action will be the most correct one?”.
If Boreyko truly has the authority to interpret it himself and make decisions based on it then there won’t be any problem with his “chosen method”. FTC and the court will simply accept it based on “Boreyko’s right to decide”.
the court has appointed a ‘monitor’ to oversee vemma’s functioning and to make sure it is compliant with the injunction.
if the monitor feels that vemma’s approach in calculating compensation is wrong, he can move the court.
IMO, vemma will keep the monitor informed and have his agreement, before launching its new compensation plan.
personally, i think the court kept point 4 ambiguous, because it could not, for practical purposes, demand OverAll >50% retail, when there are hundreds of thousands of affiliates across the world, selling in their own ways. the best the court could do, with vemma, was to tie commissions to retail sales in a practical manner.
I believe that 51/49 rule is a misinterpretation, that they have interpreted “majority” too literally. The case is about realities, not about minor details.
If people buy 2 cases of Verve for self consumtion and resale, then it will probably be enough if one of them is sold to a retail customer. 50/50 will be enough.
no, vemma has kept self consumption out of the picture for calculating commissions on the QV because:
so, an ‘affiliates purchase’ [self consumption] of product cannot be linked to eligibility for bonuses, either via autoship or via accumulation of QV.
this ^ is why the new vemma QV, can be satisfied only by downline sales and retail sales.
@ Ken Stewart
Do you think it was smart to post that picture of the FTC getting hit by the Vemma punch?
You can question my eyesight all you want since I question YOUR judgement.
How are you going to change Vemma from being an Opportunity-Driven Model to that of a Retail Sales Model? What specific plans have you put forth?
@ Ken Stewart
I actually hope Vemma can figure out how to market their products on the strength of their price, quality and value as other similar products do everyday.
I would love to see you start building a “sales organization” instead of relying on the current MLM Model which I believe is broken.
All of the so-called “MLM Gurus” teach their students to “sell the opportunity” In fact, the main PRODUCT of the typical MLM company today IS “Hope and Opportunity”
I hear this pitch all the time: You recruit three and teach/help them do the same. Then, you duplicate that Model downline and viola – – geometric progression will do the rest.
I also hear this objection: Our products are overpriced. How can I sell them to my friends? Answer: You don’t. Once you have recruited 3 friends who are on autoship, your products are FREE.
Hope and Opportunity baby, yeah!
The MAIN point was about 50/50. The example was a random one.
50% is a “good enough majority”. 51/49 is an attemt to follow rules like a Bible, but failing to identify the realities correctly.
the court said “Majority’. i don’t know if the bible defines ‘majority’ but math defines majority as anything over 50%. it could be 50.0000…1% it could be 99.9999…9% – or any number inbetween will do.
in the case of vemma, the court has denied any commissions on affiliate self consumption.
so, over 50% commissions have to come from retail and the remaining from resale to downline distributors. there is no other possibility that i can see.
I only used the word “total” since you did, and I am aware the court did not, but 51/49 ratios or 20/80 splits refer to “compensation related to the purchase or sale of goods or services.” Compensation is the metric not sales.
True. We can all agree that 11″ equals a foot and analyze trends on that basis but something gets lost in the bargain.
? Since when is 50% considered a majority? Never.
In any event the court said ‘greater than 50% and that is what Vemma and the Monitor will be shooting for.
no, sales is the metric.
read this phrase from the order: ‘..unless the majority of such compensation is— derived —from sales to or purchases by persons who are not members of the Marketing Program’.
if majority of the compensation has to be ‘derived’ from retail sales, it follows that retail sales has to be in majority, unless vemma pays different compensation for retail sales and downline sales.
even vemma has used ‘sales volume’ as the metric in it’s new calculations for how compensation will be paid.
if i were writing a thesis on ‘lets calculate the exact rate of unemployment in the US’, i would measure every inch to within an inch of its life.
when i am merely trying to reason whether US citizens can afford tide or amway or surf, vis a vis the cheapest detergents available, General Trends of unemployment and consumer spending can provide a fair enough idea.
unemployment is seriously down after the 2008 recession, consumer spending is seriously up after the 2008 recession, i think a few pence more on daily washing wont be breaking the US consumers back.
another indication is of course that tide, surf and amway are still in business, so …..
I still see compensation as the metric.
Right….unless Vemma pays different comp for retail and downline….and why shouldn’t it?
The Court did not say Vemma had to compensate retail sales the same as internal sales, which in my opinion would unduly restrict managerial input….but it does allow Vemma to compensate for self consumption providing compensation derived from retail sales is greater.
Vemma should want to increase retail sales now that the pyramid has crumbled, otherwise it will be out of business in short order.
One way to do that is to incentivize affiliates to make more retail sales just like any legitimate sales organization does. What other way is there?
Affiliates can not consume and recruit their way to prosperity under the terms of the Preliminary Injunction.
…and in fact they can’t even get a commission (rebate) on the juice they buy unless they earn retail based compensation greater than the rebate.
Unless this quasi-sales force is mightily incentivized to sell retail they will melt away both as a sales force and as end consumers.
50% can be a majority when interpreted by a court.
Example:
If you buy one case of Verve (24 boxes), and sign up a retail customer who buys one case (24 boxes) — then you have met the requirements for “majority of such compensation”. You won’t need to sell one additional box of Verve to a customer.
now the QV is only 50 points, which means 25 QV has to come from retail.
vemma affiliates are habituated to ‘drink some, share some’.
who’s to say they wont give 25QV away free, to friends co workers etc and note them as retail customers?
basically vemma affiliates just need a bunch of addresses to show they are retailing.
almost all vemma affiliates will purchase 50 QV to ‘qualify’ for commissions, so i’m not seeing what has Really Changed in vemmas model. it seems more cosmetic than real.
That’s still an affiliate order…
kevin thompson and kevin grimes are out with part 1 of their interpretation of the vemma order.
it hinges on the identification of ‘ultimate users’ and use of ‘autoship’ for automatic qualification on self consumption.
i think monthly QV requirements for staying active, should be done away with. this is just pressure to purchase inventory.
but if an MLM wants to keep monthly QV, to ensure product sales, then it is only fair that they prove majority retail.
i don’t agree with thompson/grimes, that a non recruiting affiliate can be identified as a customer, when he is purchasing product on qualifying autoship.
there was no need for vemma to lump the qualification, autoship and product discount together, and then claim that non recruiting affiliates on this ‘system’ were actually ultimate users.
thompsonburton.com/mlmattorney/2015/10/01/vemma-analysis-lessons-learned-part-1/
By definition, a majority is the GREATER part not an equal part.
Wouldn’t it make more sense for the court to just amend the preliminary injunction to read 50% or more?
if the total purchase from vemma is say 100$, with 50$ retail and 50$ downline sale, then only 49$ of the downline sale will be considered for calculating compensation. ie commission will be paid on 99$.
the court has asked for ‘majority’ retail sales, and this will have to be followed to the ‘T’.
it does not make much difference, ‘practically’ speaking, but the ‘majority retail’ demand of the court will have to be satisfied in any calculations.
Here’s “Form and scope of preliminary injunctive relief”
1. Why injunctive reliefs have been granted (page 13).
2. The court’s equitable powers (page 13)
3. Some general limitations (page 14)
4. Findings (page 14)
5. Scope of the injunction (page 14)
A. Prohibition of Certain Promotional and Marketing Program Practices
6. false and misleading representations (page 14 and 15)
7. pyramid scheme (page 15)
Only specific, identifiable components and practices of the marketing program have been prohibited.
Boreyko will need to find his own solutions for how to run his own business. The injunction will neither guide him nor instruct him on that part. It only tells him what he cannot do, and that he’s being supervised by a monitor.
Here’s how the law sees it. 50% is acceptable.
Arizona pyramid scheme laws (relevant state law for this case):
UK / EU pyramid scheme laws:
from the examples you have provided;
-when participants earn— more money—-from bringing others into the program than from the sale of goods, services or intangible property.[ ‘more’ means more than 50%, not equal to 50%]
– receive compensation that is —derived primarily— from the introduction of other consumers into the scheme rather than from the sale or consumption of products.[ ‘derived primarily’ means more than 50%, not equal to 50%]
similarly ‘majority’ means MORE than 50% and not EQUAL to 50%.
anyway, this is too small an issue to be worthy of blog space.
Geebus,
ya THINK ????
well LRM, the next time someone asks for the meaning of more, majority or primarily, you can raise your hand and thank us mentally.
if we succeed in educating you about Anything, it will be a Great Utilization of blog space and time, don’t Ya Think? 🙂
It wasn’t about “what’s the general meaning of ‘more than’?”. It was about “what does relevant legal sources tell about the definition of a pyramid scheme?”.
Pyramid scheme has vaguely been defined to be about that more than 50% of the money paid out as rewards comes from bringing other participants into the program.
If that one should be interpreted to be about 51% or 50.1%, then the other one cannot be interpreted in the same way. 50% retail sale will be enough to establish that it isn’t a pyramid scheme.
Your citation applies to ” a program, ” to an entire scheme, not to individual transactions within it and the equitable relief (the remedy) provided under the Preliminary Injunction must be viewed holistically.
My citation applies to pyramid schemes in general. It was cited from Arizona AG’s consumer information, but I only cited the most relevant part.
“Holistic” should normally be about the relevant whole. I believe you should focus on that rather than on the philosophical whole, i.e. you should try a practical approach rather than a hypothetical one.
“Relevant whole” here may be
* the whole paragraph 4 (page 21)
* the whole section I (page 21)
* the whole injunction part of the order (page 18-27)
* the whole order (page 1-27)
* the whole order plus external factors
I used the last method when I introduced an external factor “What does the statutes say about pyramid schemes?”, when I looked at Arizona AG’s description.
Thanks for your in depth analysis.
Please contact the Attorney General’s Office in Phoenix at (602) 542-5763 and tell him that you disagree with the terms of the preliminary injunction. You may leave a message.
Good luck.
“Big question mark”.
The injunction was ordered by a court, not by the Arizona AG. So I can’t expect to get any meaningful response from Arizona AG, other than “Thank you for informing us about your concerns”.
Exactly.
That didn’t clarify much?
1. A court will need to follow the law.
The District Court in Phoenix, Arizona will need to follow both local State Laws and Federal Laws in decisions.
So I simply identified one relevant legal source. Arizona AG’s consumer information contained enough factual information about the definitions of pyramid schemes in Arizona, so I didn’t need to look up the complete definition from other sources.
2. Equity will follow the law
If it already has a valid definition in local state laws or federal laws, then equitable remedies will need to follow the same standard. The court cannot “invent” new definitions.
en.wikipedia.org/wiki/Maxims_of_equity#Equity_follows_the_law
“Relevant whole”
Which rules or legal principles a court will need to follow can clearly be a relevant part of a whole, i.e. it might be worth looking at when interpreting parts of an order.
“Dysfunctional whole”
A rather dysfunctional whole will be when people try to follow holistic ideas, but don’t have a system in place to identify the relevance of any additional factors.
Here’s an additional explanation …
The quote from Arizona AG was related to the discussion about “51% or 50%, which one will qualify as a minimum for majority?”. So it had a limited purpose, not worthy any lengthy explanation.
The normal way to interpret it — after it has been established that the paragraph is ambiguous and difficult to understand — should be to look for guidance in the order itself. I did that, but I didn’t find anything specific there either.
Another way is to look for external legal sources. I did that, and I found something relevant.
A third way is simply to accept a commonly accepted understanding. I did that too, but I pointed out some practical issues in that interpretation.
The “51% idea” doesn’t seem to be flawless. It seems to be based on theories more than on realities. That’s contrary to what the case really is about, so it’s most likely an over-interpretation of something.
It’s commonly accepted that “greater than 50%” or “majority” both will require more than half — not equal to half — if we’re talking about general rules or hypothetical questions. But it doesn’t need to mean that in reality.
The discussion about how to interpret the “majority criterion” in paragraph 4 started with that in post #220.
When the question is about retail sale then 50% will be enough. The law doesn’t require more than 50% for retail sale, it will only require “not less than 50%” for clearly identifiable bona fide sales to end users.
If the question is about the opposite then 51% will be the correct interpretation.
“Relevant whole vs. dysfunctional whole”
The existing 51/49 interpretation looked rather dysfunctional, like someone had failed to look at the realities but rather had applied some theoretical rules.
If your cursory online investigation leads you to conclude that judge Tuschi erred by requiring the majority of compensation be derived from retail sales during the term of the Preliminary Injunction then you are entitled to your opinion, even though there is a a greater than 50% chance that you are wrong.
My claim has been about that people have over-interpreted the details in paragraph 4 when they came to the 51% conclusion.
* They have failed to properly test theories against realities.
* They have failed to properly check any additional legal sources.
I didn’t post that opinion, so your conclusion seems to be 100% wrong. 🙂
Paragraph 4 was vague, but so was the legal source. It normally means that the court can accept many different solutions to the same problem. It’s not meant to be interpreted like a Bible. People will need to apply some “judgment skills” themselves.
That is all fine, but the judge knows Arizona law better than you, has more experience than you, understands the implication of a Prelimary injunction better than you, and has had an opportunity to review the evidence and hear oral arguments which you have not, so on balance I would have to conclude that when the judge says that a majority of the compensation must be derived from retail during the term of the injunction he is is acting within the law and does not mean 50% or greater or he would have said so.
Secondarily if you want to read the Arizona AG website like a Bible that is up to you.
Heed your own advice.
That’s not legal arguments. It’s a type of cognitive bias, i.e. the type of thought-set where people look at rather irrelevant factors to strengthen their own beliefs. 🙂
You and Anjali looked at the theoretical side of it — “the meaning of the word majority”. You came to the conclusion that 51/49 would be the correct standard.
I looked at the practical side of it — “how to interpret it in reality when applied to product purchases”. I came to the conclusion that 50/50 would be enough when applied to facts. And I showed that it was supported by Arizona law.
No, Its called judgment after considering the facts, and by any objective standard this Federal Judge knows Arizona law better than you do.
He also knows why he required a majority of compensation to be derived from retail….and YOU don’t, so if you want to do something useful for yourself go find out why the judge set the standard at a majority instead of 50/50.
By the way a Federal Judge’s ruling has primacy over an opinion held by an attorney general so everything you have said on this subject has been complete piffle.
False. Its not for me to say what the correct standard is. The judge set the standard, I only remarked on it. Do you see the difference?
Yes. To come to a conclusion yourself, then you will need to use your own brain and analyse different factors. But you seem to rely heavily on the brain of the Judge. 🙂
If the 51/49 conclusion later will be clarified to be about something different, then you can blame the judge rather than yourself. “I had expected a court order to be perfect in all details”.
So your method does actually have a function.
Yes I have because it is a much better informed brain than yours…or my own.
It may be the correct solution for you. You can simply focus on the judge, and can avoid looking into “risky parts”.
There hasn’t been any disputes about the Judge’s skills, experience or knowledge. It wasn’t even mentioned before you brought it up in post #255 or post #253.
Here you have some additional arguments about the Judge, John Joseph Tuchi … so you won’t need to post them (it may derail the thread).
en.wikipedia.org/wiki/John_Joseph_Tuchi
no, you said that if an affiliate bought two cases of vemma, retailed one and resold one, then 50/50 would be acceptable, as the affiliate could not be expected to retail one more case of vemma, just to make a retail ‘majority’.
i gave the Practical Solution wrt product purchases, to this theory of yours, in post#238:
the court has asked for ‘majority retail’ and calculations will have to based on ‘majority retail’.
it’s a simple solution, no need to tie ourselves up in knots or to start dissecting the judge’s brain 🙂
The main point was about 50/50, not about which one would qualify. So I didn’t specify any details for that.
24 boxes of Verve to retail customer
+ 24 boxes of Verve to participant
= will most likely qualify as “enough retail activity”.
The affiliate’s sponsor may qualify in that way. He has 25 QV from the retail sale to an external consumer, and 25 QV from sale to that particular affiliate.
I am focused on the Order which under the terms of the injunction requires a majority of the compensation to be from retail sales during the term of the injunction.
There has been no motion for reconsideration, no notice of appeal, and the Arizona Attorney General has made no effort to intervene and assert that your 50/50 opinion is correct.
To the contrary the party in interest, Vemma, rushed to inform its affiliates that 51% is the new norm…and yet you “know” the Order is “flawed.”
All I can say is that nobody of any significance seems to think so.
“Big question mark”.
I have no idea what you’re talking about there — the intervention from Arizona AG? The idea has too little substance to be identified.
You have brought up that idea yourself from somewhere. This is the second time you receive the “big question mark”. The first time was in post #248.
Vemma has no reason to argue about that 1%. It will result in extra profit for Vemma.
The ones who may have reason to complain will be the affiliates. 51/49 may feel much more annoying than 50/50.