The flawed systems of Vemma (shut down) and Herbalife (under investigations) are boiler plate for hundreds of other MLMs.
Last year, the FTC posted a notice with this title: “FTC Acts to Halt Vemma as alleged Pyramid Scheme.” The first heading reads: “Promised unlimited income potential, but most participants lose money.”
Really? Is not this the mantra used by hundreds of MLMs in their recruitment campaigns? The FTC release continued:
At the Federal Trade Commission’s request, a federal court has temporarily halted an alleged pyramid scheme, Vemma Nutrition Company, that lures college students and other young adults with the prospect of getting rich without having a traditional 9-to-5 job. The FTC seeks to stop the operation, which earned more than $200 million annually in 2013 and 2014 and has affected consumers throughout the United States and in more than 50 other countries, from continuing as an unlawful pyramid.
“Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We are also alleging that Vemma is an illegal pyramid scheme.”
In its complaint, the FTC lists 45 different aspects of Vemma’s business that cumulatively add up to a model that rewards Vemma affiliates “for recruiting . . . rather than for selling products.”
Again, as a person who has studied the MLM industry for 20 years and analyzed over 600 MLMs, I am struck with how closely the specifics of the complaint match up with other MLMs, including Herbalife, which also came under investigation after the attention given to it by hedge fund investor Bill Ackman in his shorting the stock and predicting its price would drop to zero once regulators understood the fraud. Unfortunately for Ackman, that hasn’t happened.
Vemma may have stirred action by its focus on recruiting students and leading them to believe that their education funds would be better spent on the Vemma “opportunity” with a potential of residual income for life – without incurring further student debt. Herbalife targeted the vulnerable Latino market for new recruits. It may have been inevitable that consumer advocates for Latinos would support Ackman’s claims that Herbalife was a scam.
What is becoming increasingly clear to those who take the time go get informed, the flawed system used by both Vemma and Herbalife are boiler plate for hundreds of MLMs that use the same MLM business model, which can be appropriately dubbed “product-based pyramid schemes.” For compelling evidence to support these conclusions, read the eBook Multi-level Marketing Unmasked – the Case against MLM as an Unfair and Deceptive Practice.