Vemma’s retail comp plan – the new MLM benchmark?
One of the my staple fallbacks if I’m not sure about retail in an MLM compensation plan, is to recommend asking a potential upline about it.
See how they qualify for commissions and try to get a sense of what their retail volume is. Compare this to their recruited affiliate volume and you’ll have a pretty good idea of what you yourself will be focusing on.
After a scuffle with the FTC over whether not affiliate’s should be able to qualify for commissions at the expense of retail focus, Vemma’s new compensation plan is the most retail orientated I’ve seen to date.
And that’s great news for the industry.
The core of Vemma’s new compensation plan is the “51% rule”:
You will only be paid on the volume in your organization if your organization’s sales to Customers are at least 51% of the total
sales for your entire organization. You will be paid on all volume that meets this requirement.
In other words, if 51% of your volume is Customer volume, and 49% of your volume is Affiliate volume, you will receive commissions on the entire 100% of your organization’s total volume.
For example, if you had $100 in organizational volume of which $51 came from Customers and $49 came from Affiliates, you would be paid on the entire $100.
However, if only $40 of your organizational volume came from Customers and $60 came from Affiliates, you would not be paid any amount on your organizational volume.
TO QUALIFY FOR ANY OF THE COMMISSIONS AND/OR BONUSES DESCRIBED IN THIS COMPENSATION PLAN, AT LEAST 51% OF THE TOTAL SALES FOR YOUR ENTIRE ORGANIZATION MUST COME FROM CUSTOMER SALES.
The above is straight from Vemma’s new compensation plan documentation, and spells out the need for affiliates to generate retail volume.
Not enough retail volume = no commissions. Period.
There is a contingent of the MLM industry who will continue to see this as an “attack on the industry”, which to be honest baffles me.
I mean let’s have a real think about what the FTC, through the court, has mandated Vemma enforce.
Rather than rely on self-reporting and *winkwinknudgenudge* optional retail, Vemma affiliates do not get paid residual commissions unless the majority of their sales are to retail customers.
Retail customers. Isn’t this what MLM is about?
Finding retail customers and getting paid when your downline does the same, with any downline volume commissions incidental to this core model, is a healthy model for the MLM industry.
Why then is there a sizeable component of the industry against these new changes?
And it’s not just Vemma outsiders either. Vemma themselves, by way of owner BK Boreyko’s own handling of the changes, reflects opposition seething just below the surface.
On November 13th, John Wilson, a Vemma affiliate, responded to BK Boreyko’s compensation plan announcement on Facebook with the following:
I worked for 3 years to be a Gold now you are screwing me out of the commissions I earned.
Boreyko himself replied:
John, I know how you feel. Know this, I’m not the one screwing you. It’s not fair, but I have to follow 100% the court orders.
Presumably Wilson does not have anywhere near the required 51% retail volume, and has been earning a commission each month based on recruited downline purchases (otherwise known as a chain-recruitment pyramid scheme).
But rather than acknowledge this, BK Boreyko agrees he’s being “screwed” out of commissions. But don’t point the finger at him, this is the FTC’s doing.
How dare they put a stop to an autoship chain-recruitment scheme and force Vemma to enforce retail quotas! Who do they think they are?!
That Vemma opt to see this as a screwing of affiliates with insignificant retail activity, instead of the company being at the forefront of a new era of retail focus in MLM, is disappointing to say the least.
Outside of Vemma corporate the resistance to retail is equally as troubling.
In a rare opinion piece amidst a sea of (paid for) PR riddled press-releases, Ted Nuyten declared the following on November 8th:
The USA is not longer the Direct Selling Center of the universe, Asia is, and rules are there less strict.
The statement was made in a piece titled “Legit Direct Selling Companies, Ponzi’s, Pyramids And Our Opinion”, with the implication being the US standard for Ponzi and pyramid schemes, despite these labels extending beyond a legal scope, does not apply globally.
According to Nuyten, scams in Asia are justifiable because “the rules there are less strict”.
The thing is, “the rules” (in the US or otherwise) don’t determine whether or not an MLM company is or isn’t a Ponzi or pyramid scheme – their business model does.
And for pyramid schemes, that isn’t clarified any clearer than whether or not genuine retail sales are taking place. It doesn’t matter if your MLM company is based in the US, Asia or the moon.
The rules simply determine the level of punishment those running such scams face. And in that respect I totally agree with Nuyten;
Asia is miles behind the US in stamping out Ponzi and pyramid scheme scams. Europe isn’t much better.
But again, that in no way justifies the existence of such schemes. In the absence of regulatory action Nuyten has a responsibility to evaluate the opportunities he directly and indirectly showcases (promotes) on BusinessForHome.
“The rules are different” can not justify promo pieces for obvious scams that regularly pop up on the front page of Nuyten’s blog.
But I digress.
The bitter truth of the matter is that had Vemma themselves been enforcing retail activity quotas, affiliates like John Wilson shouldn’t have been getting paid. Perhaps not an “all or nothing” scenario as is currently in place, but certainly not much with little to no retail activity taking place.
How much retail activity is taking place in Wilson’s downline I have no idea. But it can’t be much if he feels he’s getting screwed over.
Personally I think any affiliate’s relying on autoship chain recruitment getting “screwed” out of commissions is great. This is exactly what the FTC wanted to stamp out of Vemma.
And once this is done and precedents have been made, the rest of the MLM industry will, if they haven’t already, be put on notice.
I myself have already adjusted my reviews, focusing much more heavily on the emphasis that retail quotas are no longer optional (which in MLM means totally ignored).
Long term Vemma is going to have to make this compensation plan work. They’re going to rely on retail customers and if the retail activity isn’t there – Vemma and Boreyko are done.
And that’s not anyone getting screwed out of anything. This is what Vemma should have been enforcing themselves all along.
But they didn’t, and so here we are.
Take a long hard look at the MLM company you’re in, your own retail sales volume percentage and see if you stack up.
Personally I think Vemma are going to lose the FTC case hard, with these new retail focused comp plan changes either adopted industry wide, or forced through litigation.
Vemma have tried to wiggle and seek out the grey in the court’s orders. They’ve thus far been blocked at every turn.
Once the FTC’s lawsuit against Vemma concludes, you can bet other companies who have failed to enforce a retail focus will be next.
Personally, i think every real networker should welcome this change. This is what MLM is designed for, retail sales to end costumers.
If this rule will be enforced with all other companies, the result will be a much better and clear market.
Overpriced products will be gone… and finally the basic question before joining any deal, would be really: “will i buy this product for myself if there is no business opportunity attached to it? Will i buy it for this price?”
nope. vemma’s comp plan is the outcome of an injunction which is ‘vemma specific’, and is a strong warning to MLM which have self qualifying autoship.
when the FTC cracks their whip against an MLM which is behaving badly, they usually set down terms and conditions which are stringent and have ‘extra constraints’.
the FTC may enter a consent order with such MLM, or move the court for an injunction to stop the company or stop certain practices of the company.
by the FTC’s own admission, such ‘extra constraints’ ordered on misbehaving MLM, are not reflective of the state of law in general.
in this case we have a court ‘injunction’ rather than a ‘consent order’, but the spirit behind the FTC’s stringent demands of vemma are in line with their 2004 advisory.
the 51% retail rule is vemma ‘specific’ and is a guidance for MLM which function like vemma did, but is not a ‘benchmark’ for the entire MLM industry.
as i see it, there is no change in the FTC’s position as held in their 2004 advisory. they were against self qualifying autoship and continue to hold that position. they have demanded ‘extra constraints’ on vemma, which are not reflective of the ‘general state of the law’.
the MLM industry and commentators are overreacting because the FTC action against self qualifying autoship has come as a ‘shock’ because autoship was an ‘accepted norm’.
the 51% retail rule thrust on vemma is not the ‘general’ stand of the FTC which by its own admission stated:
since the FTC’s stand on ‘autoship’, ‘extra constraints not reflective of the general state of law’ remain unchanged, i do not see why their stance on ‘the amount of internal consumption’ will change.
before burnlounge the question was ‘is internal consumption a sale to an ultimate user?’. after burnlounge, the inquiry is just a deeper dissection of the same question ‘which kind of internal consumption is sale to an ultimate user?’.
vemma’s internal consumption was not a sale to an ultimate user, and hence it got specially punished by the FTC/court injunction. it’s that simple.
I wouldn’t want to be running an autoship recruitment MLM company with insignificant retail after Vemma lose the FTC case.
Also FTC litigation in 2015 trumps advisories dug up from 2004 (seriously?).
Vemma tried to weasel on affiliate purchases counting as qualification PV, and were shot down. That’s a clear a signal as any that retail in MLM can no longer be optional.
Suggesting that this is Vemma specific is a strawman defense. Vemma aren’t using some unique never been seen before compensation plan.
The FTC litigation against Vemma will effect the entire MLM industry in the longrun.
correct. autoship recruitment is out. but, all MLM are not based on autoship recruitment.
the FTC advisory is dug up and used in current court cases [burnlounge/vemma] so it is seriously relevant even in 2015, and until such date that the FTC either retracts it or revises it. also, the FTC action against vemma is in concert with their 2004 advisory, they have not developed some new stance about MLM.
affiliate AUTOSHIP purchases for SELF qualification has been shot down. this does not mean that ALL affiliate purchases will be NOT be considered sale to an ultimate user.
the FTC litigation will effect all the MLM companies that are modeled along the same lines as vemma [which are many].
again, its not the ‘entire’ MLM industry. for instance amway, herbalife etc are not modelled like vemma. nuskin has a self qualifying autoship model IIRC, this may spell trouble for them.
btw, i’m surprised that though nuskin is a publicly listed MLM, the current debate in the industry is not addressing the nuskin model’s similarity to vemma. how about a nuskin review boss?
Trump has a function in card games. It doesn’t have the same function in interpretation of legal sources.
The injunction indirectly referred to the FTC/DSA Advisory Letter as a valid legal source on page 6, as a relevant part of the BurnLounge decision.
If Vemma lose their case and you’re running a similar MLM opportunity with little to no retail taking place, do you really want to be next?
You’re watching it play out as we speak, claiming it’s Vemma specific is planting your head in the ground.
Despite the specious nitpicking being undertaken by (IN)expert observers, the FTC told Vemma (and the MLM industry) to behave itself and ensure non affiliate retail sales form the majority of their business or face the consequences and Vemma is doing so.
Everything else is just stuff and nonsense
stuff and nonsense.
the FTC told Vemma (and the MLM industry) to behave itself and discontinue self consumption via self qualifying autoship, as this is not bonafide sales to ultimate users.
the requirement for non affiliate retail sales to form the majority of their business, is a punishment specific to vemma.
when the FTC finally wins the case against vemma, the court will make a finding that self consumption via self qualifying autoship is not a bonafide product sale, and that will be the new ‘benchmark’ for the MLM industry. the court will not establish a 51% retail rule across the board for the entire industry.
there is just a fine difference between what you and i are saying, but specious nitpicking or not, law is about technicalities.
That’s the reason for why I suggested “Now is probably the right time to question 51% or 50%, what is the correct interpretation?”.
Vemma typically sell and ship products in cases of 6 boxes, 12 boxes, 24 boxes.
51% will be almost completely unacceptable for most new affiliates. They will need a 2:1 ratio instead of a 1:1 ratio between customer orders and affiliate orders because of that extra 1% — if everyone buy similar products in similar quantities on autoship.
Affiliates with more people in downline will probably be less affected by that extra 1%. They will only need one more customer order than affiliate order.
51% sounds rational enough in theory, but it will create a lot of frustration among the affiliates when that rule should be applied to realities.
The worst part is that Vemma introduced that definition itself. The court didn’t specify any specific percentage, and FTC simply accepted Vemma’s interpretation.
I had two statements …
I’m ready for some corrections. 🙂
I’m going off memory here, but didn’t the court specify “majority”?
51% is the minimum percentage that would satisfy that condition.
Unless your objective is to derail and hijack any discussion, in which case you could probably fill up three pages with arguments about whether 50.1 / .2 / .3 / .4 etc % would satisfy the courts’ requirements.
I take it those in opposition to the new comp plan ruling may find it hard to change their main focus from recruitment to actually marketing the products on their own merits.
Some may feel they’ll be entering more competitive territory if they have to sell the products at their regular retail prices knowing people tend to shop around looking to buy similar products at the cheapest price.
I think this ruling will also force companies to produce truly exclusive, and effective, products in order to be able to stand out
your objective is to derail and hijack the discussion, by attacking norways opinion without providing any answer to his question.
if vemma is not sold as individual cans but in cases of 6 boxes, 12 boxes, 24 boxes, then affiliates will have to have a ratio of 2:1 to achieve the majority 51%.
in a previous thread i had suggested that to break the 1:1 ratio logjam and satisfy the ‘majority’ requirement, 1% of the sales amount may be flushed away and retail be calculated at 50% versus affiliate downline sales of 49%.
what is your suggestion LRM?
Yes, it did.
That depends on which question you ask.
* If you ask “What is the definition of majority?”, then the answer will be “more than 50%”. 51% is correct.
* If you ask “What does the law require?” (if you ask specifically about pyramid scheme definitions), then the correct answer will be “minimum 50%” (not “more than 50%”). 50% is enough.
The judge didn’t specify anything, i.e. he didn’t give any guidance in other parts of the order. He didn’t back it up with any case law or other references to legal sources.
I wanted to add that some thinking outside of the box when selling products at retail will benefit those who master the art of selling in a highly competitive environment.
Of course, the company will have to provide better sales training to their distributors, and may even have to adopt a similar support system to that of successful franchises.
Law THEORY may be about technicalities and television law may be all about technicalities.
In the real world, the FTC got what it wanted, Vemma didn’t and the MLM industry, if it’s smart, will heed the warning.
If anyone in the MLM industry wants to take your advice and argue whether a 50% or 51% affiliate / retail sales ratio is adequate or whether or not “autoship” is / was the problem, then good luck to them (and their bottom line)
Prudent companies, on the other hand, will ensure retail (without any attempted obfuscation) is the main focus of their business
i really do hope and am actually quite convinced that the MLM industry will nitpick and argue and discuss about what the law says about retail ratios and autoship.
after all, the MLM industry has to follow the law and not your sledgehammer interpretations of it.
Here’s the relevant part, paragraph 4.
Here’s a relevant legal source, Arizona statutory pyramid scheme definitions.
“Primarily” is also defined to be “more than 50%”. So the law doesn’t really require more than 50% of the commission to come from non-participants. It will only require minimum 50%.
Injunctions should normally not have much room for interpretations. But Babener pointed out that paragraph 4 was “ambiguous and difficult to understand”. I focused on a different issue than him. It actually has room for many different interpretations.
I’ve been posting for well over a year, and other critics have posted for much longer… Direct Selling in the US had long lost the focus on “selling”.
So-called Direct Selling is really “direct buying”, and nobody gives a **** about retail. Practically all the emphasis on MLM is focused on recruiting and “organization building”. DSA’s own position on “legalizing self-consumption” highlights this corruption of its own alleged core values.
This new comp plan does much to restore the balance, and the fact that prior Vemma high flyers are pissed off shows just how far Vemma itself had strayed, and clearly so had the rest of the industry.
The signal to the industry is clear: reform yourselves… or watch the government do it by forcing it down your throats.
The choice is yours.
Just like the Amway safeguard rules are “specific to Amway”, yet they became basic legal standards of what defines a MLM.
This will be forever mentioned as the “Vemma standard” or “Vemma threshold”.
anjali’s interpretation of the FTC’s 2004 guidance letter is on the nose.
The very reason the DSA asked for this guidance was as a result of injunctions in the cases of FTC v. Five Star Auto Club and FTC v. Jewelway, both of which enjoined the defendants from paying commissions on sales volume derived “primarily” from distributor purchases.
This has been universally interpreted to mean the *majority*, or over 50%, of commissionable sales must come from retail (non-participant) sales.
As virtually all MLM programs would likely fall short of such a criteria (including the most retail oriented, such as AVON and Tupperware), this obviously was a concern – which the FTC completely alleviated by clearly declaring these “extra constraints” as applying only to “the defendant signing the order”, and they “do not represent the general state of the law.”
If there were still any doubt as to what implications these retail requirements may have had on other MLM companies, the FTC specifically and explicitly stated, “when the Commission brings a pyramid scheme action, the case often concludes with a consent order… most such orders contain definitions that exclude any sale to a participant in the business from the calculation of the venture’s legitimacy… but are not intended to represent the state of the law for the general public.”
Furthermore, Mr. Kohm, the author of this “Staff Advisory Option”, was one of the FTC’s lead attorney’s in the Five Star Auto Club case.
And although this is certainly subjective, I would suggest that such legal guidance provided by the FTC to an entire industry of over 1,400 applicable companies, that so clearly and unambiguously declares, “In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme”, would, in fact, trump litigation today applicable to a single case, and company, if it were applicable at all.
Which, in this case, it is not.
The FTC appears to be “fencing in” Vemma exactly as they did Five Star Auto Club and Jewelway, and if the DSA were to once again ask them if this was the new line in the sand, I see nothing to even suggest that their response would not be to find the archived, original version of the 2004 DSA letter, cut and paste it into a new file, and change the date to 2015.
In fact, if there is any divergence at all between those cases then and the Vemma case now it is that those cases involved far more worthy targets, and the focus, effort, and zeal the FTC is applying to Vemma’s case appears to be unusually myopic – almost as if it was something personal, to somebody.
I don’t think the sales force will successfully make the adjustment.
If 90% of the affiliates were losing money selling a product based pyramid scheme, then virtually all of them will be wasting their time trying to sell the products alone.
I doubt Vemma can profitably operate under the new constraints and so by applying the law (or fencing in Vemma) the court has all but ensured Vemma will collapse. Score one for the FTC.
The ruling is Vemma specific but the implications extend beyond Vemma.
or perhaps FTC is hoping to send a message and hope that somebody is smart enough to see it.
Self-consumption itself is not a criteria, but it is SYMPTOM of lack of retail, and retail itself, enshrined as 1/3 of the Amway Safeguard Rules (i.e. 10 retail customer rule) is what separates MLM from pyramid scheme.
Without clearly documented retail, it is impossible to separate pyramid scheme from MLM.
And it’s clear that Vemma had gone far off the reservation, if it required “fencing in”
Perhaps it’s time for all the OTHER MLM companies to ask themselves “where am I?” and get themselves back to the reservation, before the Feds drag them back by the nose.
Though it’s far more likely that they would rather pat themselves on the back and say “I’m so glad it’s not me… this time”.
After all, perhaps the criteria “legally” only apply to the companies in question, but the entire MLM industry live by the Amway Safeguard rules, even though they are not Amway. Right?
Or has the industry taken up the attitude that it will operate however it wishes… Until it was enjoined by the FTC? Clearly it is NOT that stupid… or is it?
the amway safeguard rules became ‘acceptable’ standards after a protracted definitive trial. these rules were not established via an injunction pending trial.
injunctions do not create caselaw, they work specifically against the target company. caselaw will be created if the FTC/vemma litigation completes trial, and does not end in a consent order.
assuming [in the best interests of the industry and for clarity] that the FTC/vemma litigation completes trial, i expect further clarification on the issue of ‘ultimate users’ and self consumption.
i do not see the court arbitrarily enforcing a 50% retail rule on the entire MLM industry.
how can the court implement a 50% retail rule across the industry when the FTC itself does not envisage such a rule across the board?
the FTC’s 2004 advisory clearly differentiates between downline sales in product based pyramids [where the product is incidental to the opportunity] and downline sales in buyersclubs [where downline sales are intrinsic to the model of defraying costs].
unless the FTC deletes the mention of buyers clubs MLM from its staff advisory of 2004, it cannot ask for a 50% retail rule across the board.
Is this the comp plan where you’ll need 180point on your weak and 360 on your strong to make a WHOPPING $20?
Most likely, but I haven’t looked at it.
I looked at the “revised compensation plan” that was denied by the court a couple of weeks ago. It was based on 180/360 “cycles” (recruitment driven).
The rest of the industry should embrace the rule VOLUNTARILY just as they embraced Amway safeguard rules without being in a prolonged lawsuit with the FTC.
Unless the industry is NOT PROFITABLE when run this way. And what dos *that* tell you?
Buyer’s clubs are not designed to PAY members. You may want to read up on laws on buyer’s clubs at the state levels before throwing that around. In fact, I do recall that MLM lawyers specifically warn new MLM founders away from organizing buyer’s clubs.
Here’s what I’m wondering about this case, if a company doesn’t have autoship requirements, but people can be either a customer OR a referring member… does that mean the 51% rule comes into the play.
Because looking back at this case the only reason why that 51% rule was in place was because the FTC was claiming people are buying products only so they could qualify for commissions. From there the FTC came out with the 51% of your business needs to be customers.
So could this all have been avoided if autoship requirements were not part of the business?
After all, if you don’t have to buy products to qualify for commissions then wouldn’t that mean people are buying products because they want to buy products, not because they are incentivized to buy products?
The POINT is, BK has sucked out $19 million and that would not have been available to him if the company wasn’t a scam.
I doubt he is interested in putting even a million back into that money losing carcass that is left.
So WHAT if Vemma is shut down ? One guy is $19 million richer. That was the plan.
Somehow you seemed to have focused on what I consider to be the least important aspect of this entire situation.
Whoa. there goes a kangaroo.
Just out of curiosity, is it likely that an individual will have retail and organizational volume that are exactly equal. Is it a realistic possibility? I don’t know how this would be calculated.
Pyramid scheme shutdowns will usually result in “disgorgement of illgotten gains” for the main organizers — full amount of what they have been paid in the relevant time period (not only the net profit).
So Boreyko can’t expect to make any profit here.
There is no way he is giving back his entire $19 million.
Probably settle for a few million, leaving him $15 million richer for scamming people.
(Ozedit: quoted text removed, no source cited)
are you bonnie patten of truthinadvertising [TINA]?
your post#35 is a copy paste of pattens article ‘settling up: vemma’ dated sept 29th,2015.
if you are not bonnie patten, you should credit the source.
Didn’t realize that was a quote.
the root of all problems in MLM is ‘inventory loading’ and ‘autoship’ is a form of inventory loading.
when a large part of the affiliate base has to subscribe to autoship in order to make commissions, it sets up the majority for financial loss as they are unable to recoup their autoship investments.
thus wherever there is autoship, strict rules for retail should be enforced to ensure that participants can recoup their investments.
vemma allowed affiliates to selfconsume their autoship, and qualify for commissions on such self consumption. common sense dictates that the ‘intent’ of vemma affiliates was not genuine self consumption but qualifying for commissions. vemma enforced no retail rules to either prove the market value of the product they were forcing onto affiliates, or to prevent financial loss.
moreover vemma had no retail margin to encourage retail. the thrust of the program was autoship and recruitment.
so yes, to begin with, if vemma did not have self qualifying autoship it may have never been on the FTC radar.
secondly, even after the court injunction vemma went back to court with a smartass comp plan, which shifted the inventory loading [autoship] to ‘customers’ and ‘fresh affiliates’. the judge found that even though this class of consumers could not earn commissions off their own purchases, they were probably inventory loading and the ‘intent’ was still questionable. so vemma got slammed once again for forcing autoship into its plan.
IMO vemma missed a great chance when it did not come up with a ‘clean’ plan to sell its products to genuine ultimate users, and its penchant for autoship sank its ship.
the amway safeguards were embraced voluntarily by the industry because the trial court found that amway was not a pyramid scheme because of these safeguards.
the day caselaw establishes that a 50% retail rule distinguishes between an MLM and a pyramid scheme, the industry will have to adopt the standard.
so far, the standard in caselaw is ‘sale to ultimate users’ and not ‘sale to retail customers’. in fact, in burnlounge when the FTC submitted that ultimate users could only be outside the marketing plan, the court turned them down saying that there was no caselaw to support their position.
as i have pointed out in post#26, even the FTC’s own advisory to the MLM industry does not demand any particular retail percentage. how much retail will satisfy the FTC depends on the marketing plan of the MLM.
IMO, it is unwise to arbitrarily enforce a particular retail percentage across the board. retail rules, retail margins, valuable products should suffice to keep an MLM balanced.
btw, the amway rules you espouse, asks for 10 retail sales without specifying any ‘sales volume’ to these sales. these prescribed retail sales could be any volume of an affiliates total sales.
the 70% rule can be satisfied by sales to downline distributors too. so, the idea behind the amway safeguards appear to be aimed more at establishing ‘product value’ and discouraging ‘inventory loading’, rather than establishing fixed percentages for retail.
And Vemma, by adopting these new stricter standards, will be allowed to resume operations rather than be injuncted as a pyramid scheme.
One should also note that Amway case was tried by a FTC Administrative judge, not a Federal Court.
vemma is being punished and forced to adopt stricter standards. this injunction is not necessarily reflective of the law, and is not incumbent on the rest of the MLM industry.
so, an FTC judge found in favor of amway and against the FTC. wow.
So, are you advising they should ignore what has transpired, then ??
no. i’m saying the 50% retail rule is not incumbent on the MLM industry.
Correct enough, but the purpose isn’t about “punishment”. It’s about “preserving status quo” of something until the case can be decided by a court.
The injunction will prevent some specific illegal activities by the defendant until the case has been resolved, but it will not restrict legitimate business activities.
Vemma hasn’t been forced to follow stricter standards. It can follow quite normal standards as long as they clearly don’t violate any law. It hasn’t been ordered to follow specific standards. The 51% rule was its own invention.
AFTER Amway instituted reforms and adopted what became known as Amway safeguard rules.
The hope that this ruling will not be applied to other MLMs is dangerous, wishful thinking for MLM members.
A lot of where MLM operates currently is legal gray area. Even the DSA has called for clarity in the past, and we sometimes see them attempt to clarify previous rulings by paraphrasing and adding statements such as, “… regardless whether those ultimate customers are also distributors.” That’s their hope.
This case shows that hope will not apply to Vemma. Whatever happens with Vemma will be applied to Herbalife and others. It will, just like the burnlounge ruling has been applied as the FTC brings indictments against these companies.
The FTC is likely waiting to bring Herbalife to court until after they build this case law with Vemma. If it ends the way it appears to be going now, it will be easy to apply this case to herbalife, autoship or not (in fact, the court doesn’t seem to care about autoship at all).
If the preliminary injunction was about preserving the status quo Vemma would be permitted to operate in the same way as it did before enjoined.
The injunction does not preserve the status quo, but to the contrary sets a DIFFERENT standard of conduct that Vemma must meet.
Huh? Vemma and many others have adopted and used the shorthand phrase ” 51% rule” since its meaning is virtually synonymous with, and understood by 99.9999% of everybody to mean an amount greater than half, even if by the narrowest of margins. In other words a MAJORITY.
Its also easier to say, write, and read, than “the rule that says Vemma may only pay compensation related to the purchase or sale of goods or services unless the MAJORITY of such compensation is derived from sales to or purchases by persons who are not members of the Marketing Program” which, if you will consider is a direct quote from paragrah 4 of the ORDER written by the judge
Right. Yeah. Except that it has.
Its not punishment if the court is only denying the defendant the means and intrumantalities of causing harm…amd that is all an injunction does.
So correct me if I am wrong – if Vemma is forced to become more retail focused, this means that eventually, the FTC will crack down on ALL MLMs and force them to become more compliant as well? Is that the precedent the court is aiming for?
Vemma was halted completely, with assets frozen and a temporary receiver appointed. It’s possible to preserve status quo on some parts but not all, e.g. a monitor can replace some of the functions of a receiver and preserve status quo for that.
An injunction can partially replace an assets freeze, etc.
Then you must explain it. “It has” isn’t a valid explanation.
The court ordered what Vemma couldn’t do.
* It didn’t order Vemma to follow any specific rule, e.g. “Boreyko is hereby ordered to continue to operate a network based business based primarily on sale of products to non-participants”.
I simply identified the reality. Vemma came up with that 51% interpretation itself when it decided to continue to operate a network marketing based business very similar to its old model. It could have made many other decisions, and it wasn’t forced to make that particular decision.
Kevin Thompson (Facebook)
I have no idea what you’re talking about there. It’s “out of context” with my post, i.e. it derails from that topic into another one.
The meaning of the quoted part should normally come from the context of the whole paragraph or the whole post. A meaningful comment based on the quoted part only could have been “No, the 51% rule wasn’t Vemma’s own invention” plus an explanation for why it wasn’t.
The action thus far suggests so.
It seems like a stretch to view the transitory and changeable terms of a Temporary Restraining Order as the “status quo” but its your party.
He had some valid points, and had interpreted it correctly as far as I could see and hear.
It isn’t an attack on the industry as a whole or on binary compensation plans. The resistance from FTC is case specific, e.g. based on Vemma’s history of unwillingness to follow the law.
i love kevin thompson because he said pretty exactly what i’ve said in this thread and so yay!
yes, and this resistance from the FTC is in the form of ‘extra constraints’ on vemma which i am calling a ‘punishment’. and this ‘punishment’ is not reflective of the general state of the law.
It did not order him to keep living either but it was a rather forgone conclusion that he would. By the same token if Boreyko wanted to keep Vemma alive he had to comply with the “so called 51% rule … and that “rule” was a provision of the Order.
But hey if you think Boreyko is in control here and made up a 51% rule for his own benefit that’s cool. Perhaps you believe in the tooth fairy as well.
at first glance, i cannot find enough articles on MLM buyers club to understand exactly how they pay commissions though i assume some of the discount is paid as commissions.
but MLM buyers clubs seem to abound-
-the FTC gives them a honorable mention in their 2004 advisory
– the bostick/herbalife settlement order mentions that herbalife functions ‘like’ a buyers club
– when tupperware exited the DSA, it commented that the DSA was populated with buyers clubs and product based pyramids
if herbalife can submit to a federal court that it functions like a buyers club, do you think they will work in the USA without satisfying laws at the state levels [if any apply to MLM]. so, there is something incomplete in your information and i am not finding enough information.
I have no idea what you’re talking about there. Boreyko had many different options for how to run his own business. You try to make it sound like it was his only option, that the court ordered him to run his business in a specific way.
That simply isn’t true. It’s based on a distorted interpretation of the realities.
The injunction will preserve status quo of something until the case can be tried in court or be resolved in other ways. It isn’t about punishment.
That’s why I said it was “correct enough” in the way it was used.
That’s be illegal as “referral selling”.
Isn’t that about a very specific type of referral sale, e.g. where the sales person offer discount or rewards based on referrals BEFORE the sale is made? “If you buy this product, then you can make a profit if you refer 5 of your friends or neighbours and they buy it too”.
That type of sale will most likely generate some complaints from people, e.g. when they find out that most of their friends or neighbours already have been referred by others.
Referral sales is illegal per MLM lawyers (Grimes and Reeve’s website, IIRC). They didn’t cite specific laws or such that I recall.
And doesn’t that describe product-based pyramid schemes where member/self-consumers benefit by recruiting member/self-consumers? Just reverse the order:
Boreyko is permitted to run his own business PROVIDED he complies with Para 4 of the Preliminary Injunction. He does not have a free hand.
Do you actually believe that Boreyko coincidentally and without compulsion “invented” a comp plan where a “majority of the compensation is derived from sales to or purchases by persons who are not members of the Marketing Program?”
Of course he didn’t. He’s marching to the beat set by the judge.
There hasn’t been any disputes about that.
I have never claimed that Boreyko has free hands to run his business exactly as he wants. He has clearly been restrained in many different ways.
I have already covered that in post #50.
Paragraph 4 is a part of I. PROHIBITED BUSINESS ACTIVITIES, what Vemma cannot do. You may have interpreted it differently, but that’s the reality.
according to mlmlegal.com most US states have sales referral laws .. :
however these referral sales laws are hardly ever applied to MLM, as referrals in MLM are made in the capacity of ‘independent contractor distributors’ and not in the capacity of ‘consumers’.
the state of iowa tried to prosecute an MLM called american professional marketing under the referral sales laws, but the court rejected the argument.
the FTC in its 2004 advisory to the DSA explained the reasons why recruitment and downline sales in buyersclub MLM are different from downline sales in product based pyramids:
in a company like vemma where all distributors get the product at the same discount, there is no ‘Valid’ reason to explain downline sales.
since everyone is getting the product at the same price you are essentially earning ‘recruitment commissions’ via downline sales.
in a buyersclub scenario distributors get different levels of discount, and hence there is a ‘Valid’ reason for downline sales. the downline sales are for increasing the discount levels on the product, and are not merely recruitment commissions.
Anjali explained the difference.
My explanation would have been to point out some differences. It’s a “sales trick” rather than an “opportunity”. The referring customers don’t do the sales job themselves, they don’t sell anything. They don’t join the sales force. It’s limited to the first few friends or neighbours: It’s not an ongoing opportunity, it will end rather quickly after the first few sales.
Some MLM companies may use a similar strategy as a part of a compensation plan, but there you can earn commissions through multiple levels of referrals. Referral sale is typically about single level rewards, “personal referrals only”.
Regardless of whether the wording of the injunction proscribes or prescribes certain actions, the bottom line is that the judge has ordered that the majority of compensation MUST be derived from non-participants in the marketing plan.
This is the new “reality,” as you are wont to call it, and it was “mandated” by the judge not “invented” by Boreyko.
Incorrect. The court has mandated that a majority of compensation… etc.
The fact is, that if Vemma does not follow the specific standards set by the court regarding majority compensation (call it the 51% rule if you want) then consequences will almost certainly follow, which could nclude the refreezing of bank accounts and the reimposition of a Receivership.
The court may not be able to literally “force” Boryeko to do anything, but it can make him suffer the consequences of not complying with the terms of the injunction.
Specifically, I believe he would lose control of his company, and that would be followed by Vemma’s liquidation at the hands of a receiver.
I can’t see anything to discuss here.
Post #44 was correct enough. It described what the injunction was about. It didn’t try to describe how the reality had changed for Boreyko.
“Mandated by the judge” is a type of reality distortion, some type of “constructed idea”.
Boreyko and others are preliminarily restrained and enjoined from different activities. That’s the main meaning of it if you read it in context with the rest of the injunction.
All the other paragraphs are clearly about restrictions.
There simply isn’t anything to discuss here.
You’re derailing or extending the discussion into something new.
Post #44 was correct enough in itself. It was very close to how legal dictionaries describe preliminary injunctions. Nuff said.
The fact that I used “preserving” rather than “maintaining” isn’t really important. The meaning was understandable anyway.
Hardly. Apparently even though you have cut and pasted from here to eternity, you still do not understand that the P.I. prohibits certain types of compensation except under specific conditions.
Boreyko’s “51% rule” communications were his attempt to explain how Vemma would be operating in light of the judge’s mandate.
You truly have put the cart before the horse here. The judge leads. Boryeko follows. I do not know how to make it any clearer for you. You have the whole process turned inside out.
I referred to two sources to show that I have interpreted it correctly — to the injunction itself plus a dictionary. You have only referred to your own ideas — rather distorted ones.
So there’s really nothing to discuss here. Post #44 was correct enough as it was written, and I have managed to prove it. You have failed to prove the opposite.
You have also failed to prove your own “extended reality view” that Boreyko only had one option for how to run his business, that he was ordered to run a network marketing program in a specific way — that he didn’t have any other options than to follow a specific plan.
NO? I want to know what evidence you have that Boreyko “invented the 51% rule. Maybe while your at it you might explain what you think the 51% rule is.
In my opinion its only a reiteration and interpretation of Para 4 of the Preliminary Injunction and can hardly be called Boreyko’s invention or something the court did not mandate first.
While you are pondering it perhaps you could offer one plausible reason why he would invent something that is more restrictive than current law.
Perhaps you missed it. I did not say he was ordered to run the company in a specific way, but never-the-less he must run it in a way that complies with the terms of the Preliminary Injunction.
Then you must first show that you’re able to recognize proof.
* I have provided proof for that the injunction is about prohibited business activities rather than about allowed business activities (post #71). You didn’t recognize it, it still seems to be a disputed area.
* I have provided proof for that “preservation of status quo” was a proper description (post #72). You didn’t recognize it, it still seems to be a disputed area.
If you’re not able to recognize proof then it will be meaningless for me to provide it = the discussion should be ended because it doesn’t have any meaningful function.
1. The injunction itself, relevant parts quoted in post #71, should normally be recognized as good enough proof.
2. legal-dictionary, relevant quote in post #72, should normally be recognized as good enough proof when the injunction itself doesn’t contradict it, but rather supports that definition.
If you have recognized those sources as good enough proof, then you have failed to say so. You haven’t clearly stated the opposite either, e.g. “those sources cannot be recognized as proof because … (some good reasons for why they cannot be recognized as valid proof)”.
You have failed to explain properly why para 4 should be interpreted as “mandated business activities” rather than as “prohibited business activities”.
That interpretation isn’t supported by the injunction itself. “unless the majority of such compensation is derived from …” should normally be interpreted as an exemption to the rule rather than as the main meaning of it.
I’m not able to recognize your “bottom line” reasoning in post #70 as a valid explanation. Boreyko had many different options for how to run his business.
“The judge has ordered that the majority of compensation MUST be derived from non-participants in the marketing plan” is a misinterpretation of the injunction — an out of context interpretation.
Really? then why did Boreyko submit a compensation plan for approval by the court?
Boreyko invented the 51% rule. That’ a good one Norway. You never cease to thrill the crowd.
The specific interpretation of “majority” as 51% first appeared in Vemma’s revised compensation plan — if we only should count official documents as “valid evidence”.
155.pdf DEFENDANTS VEMMA NUTRITION COMPANY AND VEMMA INTERNATIONAL HOLDINGS, INC.’S MOTION TO APPROVE REVISED COMPENSATION PLAN, page 4.
In reality, it first appeared in Vemma’s communication to affiliates posted on Facebook. It appeared as an example for how the new compensation plan would work. I will be able to find that source too if needed.
“Form and scope of preliminary injunctive relief” Post #239
I carefully analysed relevant parts of “Form and scope of preliminary injunctive relief” in a different thread, e.g. for whether the judge had specified something about interpretation.
Boreyko would need to find out himself how to run his own business. The judge didn’t instruct him to follow any specific plan.
You have got two valid sources as proof …
1. “Motion To Approve Revised Compensation Plan”
2. “Form and scope of preliminary injunctive relief”
I have also identified where the 51% interpretation first appeared in communication from one of the parties, in non-official documents. That Facebook post was later deleted, but it still exists in one of the comments here as a quote.
Because it was disputed by the FTC. The dispute wasn’t about the interpretation of the term “majority”, it was about much more than that.
One of the parties — Vemma, FTC or the court — must have been the first one to come up with a specific 51% interpretation. Vemma was the first one, in its own communication to affiliates.
Here’s the relevant source …
The fact that Vemma’s own communication to affiliates was the first source can be verified by looking at other court documents. It generated a “complaint” from the FTC.
[Vemma’s Motion To Approve Affiliate Communication]
132.pdf MOTION FOR AN ACCELERATED HEARING ON: (1) MOTION TO COMPEL TURNOVER OF FUNDS HELD BY FORMER TEMPORARY RECEIVER; AND (2) MOTION TO APPROVE AFFILIATE COMMUNICATIONS
[FTC’s motion to not approve it]
134.pdf PLAINTIFF FEDERAL TRADE COMMISSION’S MOTION TO PROHIBIT RECLASSIFICATION OF AFFILIATES WITHOUT THEIR AFFIRMATIVE CONSENT AND TO PREVENT DISSEMINATION OF MATERIALS DESCRIBING PROPOSED COMPENSATION PLAN BEFORE APPROVAL
From that last source …
Your killing me. Looking at 155.pdf – “MOTION TO APPROVE REVISED COMPENSATION PLAN page 4, ” Vemma states (referring to the requirement mandated in Section I.A.4 of the Preliminary Injunction) that, “The Revised Compensation Plan enforces THIS REQUIREMENT IN THE ORDER through a 51% rule.”
Vemma has been prohibited from paying compensation unless the requirements of Section I.A.4 are met. Conditions which you, yourself believe to be “stricter” than standard.
You’re not very interested in any evidence when it doesn’t support your own point of view. So it’s rather meaningless to ask for it.
I’m not very interested either. It has already been posted earlier in other comments. It’s rather meaningless for me to spend any time on something like that.
Here’s the relevant timeline:
Since the injunction didn’t specify any percentage, the Vemma’s own communication to affiliates is the first known relevant source where the term “majority” has been interpreted to be 51%.
Vemma came up with that interpretation itself. It wasn’t ordered by the court to have a “51% rule”. In fact, the court didn’t approve the motion.
There hasn’t been any disputes about that. You’re pointing to Vemma’s own interpretation of para 4.
Vemma interpreted it like that itself. The court didn’t specify anything for the term “majority”. That’s exactly what I have claimed, e.g. in post #9.
Yes it did. The Injunction specified any percentage Greater than 50% (a majority) and no less.
Your so-called 51% “rule” could just as well been the “Anything greater than 50% rule.” because any percentage greater than 50 complies with the Order. 51% complies with the Order, but so does 50.1% which is less than 51% but still greater than 50.
By common convention Vemma rounded up and chose 51% since its te next whole number beyond 50. This is not an “invention” but a basic mthematical rounding operation that has been around since before Pythogoras.
51% complies with the provisions of the Order and that is all Vemma was attempting to enforce by having this provision in their comp plan.
It mentioned “majority”, but it didn’t specify any percentage. Vemma came up with 51% itself.
There hasn’t been any disputes about whether that interpretion is “normal”, “mathematically correct”, “logically correct”, etc. — only a dispute about whether Vemma came up with that interpretation itself or was “forced, ordered or mandated” to follow a specific plan or interpretation.
You will need to point to some sources or something.
They were compelled by the terms of the Injunction. Decimals and fractions are messy to work with and would confuse the affiliates, so using a whole number was appropriate.
A comp plan with a “50% rule” would not have satisfied Para 4. because its not a majority, and Vemma would be making things more restrictive for itself by choosing a whole number larger than 51.
Logically 51 is the whole number they would choose since they were hemmed in by the terms of the injunction.
the source is paragraph 4 of the injunction which requires a majority and Vemma has to comply with the injunction. 51 is the least restrictive whole number that is a majority.
I think Babener or Thompson or Grimes or all of them discussed and described the requirement for “at least 51% retail weeks before Boreyko sent his e-mail.
Anyone could have inferred that 51% was required upon the first reading of the Injunction. The question at the time was whether the 51% applied to individuals or organizationally not whether 51% was the requirement.
Only a dribbling idiot would suggest that more than 51% was required and 50% clearly can not be the standard since it does not make up a majority.
Give it up.
You have a rather distorted reality view. The relevant part of the injunction was quoted in post #71. It doesn’t reflect your reality view.
Para 4 is placed under this section …
There’s nothing there that can indicate that Vemma was compelled to continue with a course of conduct
Babener’s two posts are here …
He didn’t conclude. He only mentioned some “possible interpretations”. You can try to find something yourself.
I appreciate your willingness to locate sources and references.
Concerning Post #71 —- Vemma is restrained from engaging in and doing certain things, such as paying “any compensation related to the purchase or sale of goods or services, UNLESS (see Para 4.) the majority of compensation is derived from retail… etc.
The parargaph 4. exception to Section I.’s general prohibiton on paying compensation amounts to a conditional permission to pay affiliates) and this is what compels Vemma to act in a particular way … becuase if it doesn’t Vemma may not be able to adequately compensate their affiliates for the sale of goods and services and if they can’t do that the company may go out of business. They could not ignore paragraph 4.
Therefore, a Comp Plan had to be devised that would comply with the conditions set forth in Paragraph 4. and Vemma’s so called 51% rule was an attempt to address that.
It must be taken into account that Vemma had no 51% rule prior to the FTC intervention and it was only the Court’s Order that induced Vemma to come up with a Revised Comp Plan that addressed majority retail.
Vemma did what they otherwise would not have done and while there is no wording in the Order that says “Vemma must do this”.
Vemma was obviously and most certainly pressured and given the strongest motivation to come up with a revised comp plan that complied with the conditions mandated in Para 4.
That is what you would expect an attorney to do. The fact is that 51% was the only possible conclusion that made any sense. 50 is not enough and 52 is more than enough.
The court has already covered that Vemma may fail in a different part of the order. You can’t bring in that as an argument for that Vemma has been “compelled” to run its business in a specific way.
You will find a lot of guidance in the order itself, so there’s no need for creative interpretations.
You will find more details here:
The order simply doesn’t have room for your “creative interpretations”. Vemma hasn’t been “compelled” to pay affiliates under certain conditions, it has been restrained from it.
I first looked into it in post #220 (October 1), when Anjali had brought up that it would be rather impossible to match 51% — when Vemma’s own description already had been posted in post #191 (September 29).
Babener may not have looked into that particular issue in post #53 (September 20) and post #138 (September 22/24). I hadn’t looked into it either.
So we can’t use his interpretation as a standard. It will only tell us that most people accepted a 51% definition the first time they looked into it. Even I did that.
I posted the following logical and legal reasoning:
* The injunction is a type of equitable remedy
→ equity will follow the law (maxims of equity)
→ the law only require minimum 50% (Arizona definitions)
* The court must also follow the law when a relevant law exists. The court’s discretionary powers don’t extend into modyfying existing law — into creating new law where a law already exists.
Conclusion: “Minimum 50%” will eventually be seen as the most correct interpretation. It will over-rule the other interpretation of “more than 50%”.
Para 4 can be identified to be a “reflection” of promotional pyramid scheme definitions as they have been defined in statutes. I have simply tried to correct some “reflection errors” by comparing the relected image to the original.
Don’t try to put words in my mouth. I never said the court said that Vemma had to run their business in a specific way.
They don’t, but anyone could see that 51% was the only reasonable percentage to use in the Revised comp plan. Nothing else works.
If potential failure of the business was adressed in the Order its simply that court is aware that Vemma can fail. Well tough. Too bad. The court is not going permit the company to operate illegally just so it can survive.
The PI is a death sentence for the company UNLESS it can take advantage of the one loophole the judge provided, namely bump up the retail sales to greater than 50%.
If Vemma can do that they have a chance of survival, if not their dead and good riddance.
No. Read post 71 carefully. The prohibitions are certainly there and enumerated but Paragraph four contains an exception not a prohibition.
Of course they not compelled to pay the affiliates. NOBODY said they had to pay a dime.
Vemma can close up shop tommorrow, liquidate their assets and soon after disappear from the face of the Earth, BUT if they want to continue in business and pay thier affiliates they MUST comply with the conditions outlined in paragraph 4.
The can not ignore the conditions imposed by the judge if they want to stay in business, and if they can’t ignore them, they have in fact been compelled to consider them.
Its Vemma’s choice how they handle it. They can take advantage of the exception offered in para 4 or not.
Does Vemma want to try and stay in business or not? Apparently they do, since they sumbitted a revised comp plan that conforms to the judge’s mandate, But the judge remains mindful that the restraints he placed on the business could result in failure for Vemma.
Personally I think Vemma will fail, because they will not be able to follow the law (as embodied in the judge’s Order) and operate a profitable business at the same time.
“If they want to continue in business” simply is too vague. The injunction is about something specific, about a marketing program.
“pay thier affiliates” is also too vague. That too is about a marketing program.
Vemma can run a business and pay affiliates as long as it’s not part of any pyramid scheme style network marketing program. It hasn’t been “compelled” or “mandated” in that order.
“Normal interpretation rules”
If you cannot find words like “compelled” or “mandated” in the text, then you will need some clear arguments for why those expressions should be used in an interpretation. It should preferrably be supported by clear and rational explanations.
But you fail there, your ideas are neither “clear” nor “rational”.
I suggest that we end the discussion about “How to interpret paragraph 4 of the injunction?”. It has been discussed in probably more than 200 posts in multiple threads. Further discussion won’t be fruitful.
I have NOT objected to the 51% interpretation. I have only objected to the idea that it’s the only valid interpretation, or the most correct interpretation. I believe the other interpretation is more correct.
I have objected to interpretations about “compelled” or “mandated”. The injunction simply doesn’t describe it that way. If you wish to continue with your own theories there then make your comments become unrelated to my posts = don’t “attach” them as replies to my comments (there’s nothing I will need to look into there).
This legal reasoning hasn’t been disputed. I still see it as valid, and I intend to post something more about it, e.g. to post something about how to use it in a legal strategy.
That legal logic hasn’t been disputed. I will not look into any arguments about “51% is more correct” since it already has been over-discussed. I have already looked into all relevant arguments there.
I agree its quitting time.
If Vemma is to compensate for the sale of goods and services the court has mandated majority retail. Vemma is compelled to meet that standard.
End of story.
One problem here for Vemma, if I have interpreted it correctly, is that the injunction as a whole is intended to “balance the harm” between the two parties. It can be amended, modified or over-ruled — or be interpreted in context with the main objective rather than the details.
SHIFTED BURDEN OF PROOF?
FTC has met its burden of proof to show that Vemma most likely will continue to violate the FTC Act, the section about unfair trade practices, if it continues to operate unrestrained.
Vemma has the burden of proof to show that activity won’t violate the FTC Act.
FTC can put up a lot of resistance against a complex compensation plan with no clear separation between internal and external sale.
Vemma must be able to prove that the majority of commission derives from sales to non-participants, it can’t simply mix both types of sales together as “sales volume”.
the initial TRO against vemma stopped its business, froze its accounts and appointed a temporary receiver to control the assets of vemma.
the preliminary injunction saw the court step back from this extreme position, in allowing vemma to continue its business, unfreezing its accounts and replacing the receiver with a monitor.
so the court ‘balance[d] the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief,’
in placing restrictions on how vemma could continue to operate its business the court ‘paying[payed] particular attention to the public consequences’.
the court did not allow vemma any sales to ‘ultimate users’ but only to ‘retail customers’, because the crux of the squabble between vemma and the FTC was about whether self consuming affiliates in vemma were ‘ultimate users’ and whether non recruiting affiliates could be defined as ‘customers’.
since these ^^ issues have to be decided at trial, the court has not allowed vemma sales to ‘ultimate users’ or affiliate ‘customers’, as to do so, it would have to explain the meaning of ‘ultimate users’ and ‘customers’. hence the injunction steers clear of any debate involving ‘ultimate users’ or ‘customers’ in vemma, as this is the purview of the trial court.
so, the preliminary injunction not only ‘balances the competing claims’ and ‘pays attention to public harm’ but also maintains ‘status quo’ on the issues raised.
Aren’t retail customers considered ” ultimate users?”
yes, retail customers are ultimate users. in the context of MLM the term ‘ultimate users’ is used to define retail sales AND bonafide self consumption by affiliates.
the court disallowed sales to ultimate users for vemma and restricted sales to retail customers, since the issue of who [besides retail customers] constitute ultimate users is a contentious issue.
My post tried to look into the “resistance” from FTC against different things. FTC offers a lot of resistance against payment of commissions derived from self consumption among the affiliates.
Vemma’s compensation plan will make it difficult to separate between retail sale to external consumers and self consumption among affiliates.
* It had a function in that it made it almost impossible for FTC to prove exactly any ratio between retail and internal sale — FTC had to use Vemma’s own numbers as evidence (page 4 in the court order).
* It doesn’t have the same function if Vemma is the one that has to prove something about retail sale. That’s why I looked at burden of proof.
How did the court accomplish a ban on sales to “ultimate users for vemma?” By banning autoship?
What strikes me is that he avoided using the term retail, preferring instead “sales to non-marketing plan participants.” Is “retail” a loaded term?
Why not use it?
Vemma’s proposed, revised compensation plan was very similar to its old plan … with no major changes to the compensation structure …
… with rather vague definitions for customers.
“They are all highly interested in the products!”. 🙂
hmm, i should have been clearer.
the court disallowed ‘all’ sales to ultimate users to be treated as bonafide sales, and restricted bonafide sales to retail customers in vemma, pending the resolution of the meaning of ‘ultimate users’ at trial.
retail means selling products in small quantities directly to consumers. legally, retail is defined as:
so ‘retail’ by definition does not say anything about the ‘kind’ of the consumer who can buy retail. it does not differentiate between internal or external purchases in MLM. colloquially we use the word ‘retail’ in MLM to describe “sales to non-marketing plan participants.”
however, in a legal document like the vemma injunction the court will have to use the ‘technically’ correct description, and say “sales to non-marketing plan participants” instead of ‘retail’.
If I could post a visual image of what you just wrote it would be of wigged and powdered judges and advocates gravely contemplating an Upside Down Cake sitting right side up. Thanks for the explanation. Whoever is in charge of the definitions should be fired.
how incredibly dignified of the judges to sit around gravely contemplating a cake when they could bloody well just Eat It !!
respect for judges, i say!
and if perchance it was a pineapple upside down cake, then humanity must bow with collective respect for such exemplary conduct of the judges 🙂
Paragraph 4 had many possible interpretations. 🙂
Corporate Defendants and others … are restrained and enjoined from … engaging in any marketing program … that sell products or services to ultimate users … unless the majority of such sale … is derived from …