The chances are that most of the world has never heard of Vemma, an American owned direct selling MLM Company. According to reports they only have 150,000 customers and affiliates which is insignificant when looked at as a percentage of the world’s total 7.2 billion populations which would explain why most have never heard of them. That being said the company is creating a storm of concern within the direct selling/MLM industry.
Vemma is meant to be selling products that consumers want to buy, but according to the USA’s FTC who state that “in reality they are actually selling dreams to susceptible individuals whose only focus is making huge amounts of money without a care for others”.
Now, before we go any further we are not decrying these direct sellers “affiliates” for wanting a better life, or for wanting a more secure financial future, but we are decrying them for buying into and believing "unbelievable stories of success" that just don't ring true, and then perpetuating the lies that they have been told for pure personal gain.
Although Vemma has only 150,000 (approximately) affiliates the industry as a whole has attracted in excess of 90 million direct sellers “affiliates” around the globe. Some of the top or better known direct selling MLM companies are Herbalife, Amway ,Forever living products, USANA , etc. all of whom have come under scrutiny at one time or another or will do at some time in the very near future.
Let's make it clear from the outset that in general the concept of Direct selling (MLM/Network Marketing) is a fine example of entrepreneurship, as well as being a sound vehicle for providing additional income for the average person. But for it to work it has to be supported by an ethical company, with soundly proven products, with an identifiable retail market, as well as realistic earning possibilities that are easily understood and achievable.
It has to be acknowledged that each company does have at their disposal legal counsel, who are hired to vet the companies’ documents, policies and procedures, as well conduct in-depth analysis of the company’s compensation plan to ensure that it complies with international laws, avoids the label of pyramid and is equitable in terms of how compensation is earned and paid out.
But the question that needs to be asked of these attorneys being hired by direct selling companies is “are you trying to find ways to circumnavigate the laws/rules or are you applying the laws as they apply at that time”.
In Vemma's case it appears to be that the laws were being either ignored or flouted. If that were not the case, then the FTC would have no action to file.
This case is not just about Vemma, it concerns the entire industry as a whole – every company is under the microscope and open to scrutiny at any minute of any day. So company owners, beware, your days could be numbered.
As a Network marketing consultancy we are often asked “Are any companies safe?”
Yes, those that have strong legal and compliance departments.
The main role of the legal and compliance department is to pre-empt, detect and correct the behaviour of their direct sellers, and be seen to be doing so. But so often, in the pursuit of the dollar many turn a blind eye to the shortcomings of their affiliates only to eventually end up fighting their corner in court.
This is both very damaging to the public, the company and the industry.
The numerous complaints received by the authorities are triggers to open a Pandora’s Box which help the government agencies take down the company by initiating investigations in all directions including import duties, taxation, approvals, cross border transactions, product approvals and safety.
Therefore, the direct selling company after ensuring that it offers an equal and a fair deal to the participants / direct sellers / consumers should also enforce as strongly as possible their code of conduct.
To help you identify some of the elements in a direct selling company and to avoid:
- A minimum Compulsory Purchase– This is called “front loading”. If you are required to purchase product before joining or to start earning income- Do not join
- If you are required to sponsor others in return for income - Do not join
- If you have to achieve a minimum monthly purchase to earn income - Do not join
- If the products are something which will not be purchased and used by masses - Do not join
- If the product is worthless now and can be promoted only by propaganda – Do not join
There are many elements that one needs to look out for when assessing a complaint or non-compliant operation.
Always seek professional guidance from a network marketing consultancy before joining a company or parting with money.
There are other areas also which the FTC (Federal Trade commission) should look at if it wants to further bolster the case against the direct selling company.
Many direct selling companies around the world are doing the same as Vemma irrespective of the compensation plan they use be it infinity, binary, fixed matrix, etc. and for far too long the Direct Sales Industry (MLM/Network Marketing) has been allowed to make any claim or statement they wish and to confuse the gullible public by writing far too complicated explanations of their compensation plans.
When will the owners and promoters of such programs wake up to the fact that if they want to survive that, yes, they can be entrepreneurial and push the boundaries but that they must do so within the rules and guidelines of fairness.
The responsibility also lies within those associations like WFDSA, DSA and IDSA to name just a few. They are fully aware of their members who are breaking the rules, but so long as those members are paying their dues they turn a blind eye. They should, according to their own rules challenge and ban such companies from being members.
Almost 4 years ago the network marketing consultants at Strategy India presented a document (Self-regulation guidelines published in 2013 on http://www.strategyindia.com/mlm-guidelines-preface.html) to the authorities outlining what needed to be done to curb such illegal activities, to protect the consumer, as well as protecting the longevity of legitimate operations.
When these proposals were presented to concerned stakeholders most suggestions were rebuked due to the fact that in majority of cases the direct selling- MLM companies rely solely on recruitment and not retail sales.
Yes, we are sorry for the many direct sellers “affiliates” that a closure of this company affects, but we are happy for the fact that far more people will be avoided the embarrassment of failure and a loss of much needed money.