FTC vs Direct selling (MLM)?

On 21st August 2015 the direct selling world went into shock when Vemma, a US owned company was shut down on the orders of a US District Judge on the basis that there was enough evidence of it being a pyramid operation as well as misrepresenting on claims of income.

We ask,

  • What went wrong?
  • What caused FTC (Federal Trade Commission) take such action on the company?
  • Were they notmembers of the DSA (Direct Selling Association) who claim to represent the best of the best and who, to all intents and purposes “police” the industry to maintain its integrity?
  • Did they not have a legal and compliance team to forecast and mitigate the risk to their business, who should have had a firm grasp on what can and cannot be said or done?
  • Will affiliates have to look for a new company and start from scratch? or will the network tree be bought by some other company and be business as usual?
  • What is the guarantee that the new company they move to will not be struck down in the same way?
  • What will happen to direct sellers or “affiliates” stuck with tons of unsold/unconsumed inventory? Will they get a refund?
  • Will FTC stop only at investigating the direct selling model for being a pyramid and misrepresentation or will it look deeper to establish viability of the business model?
  • Will FTC look for the MLM compensation viability and monetary reserves required to keep it paying out as committed?

These questions are just a few of those that require an answer.

These are also the questions that other companies need to be asking of themselves before the FTC beat them to it.

Being one of the “big boys” with mega bucks does not save a company.

In 2013 Strategy India / SI International produced a white paper (http://goo.gl/24R7sm) on new guidelines, policies, and SOP’s (Standard Operating Procedures) aimed at protecting the consumer, the direct seller / affiliates as well as the company from any form of investigation by the authorities.

This leads to the next question as to whether or not the FTC will use those draft guidelines, as proposed by Strategy India, to strengthen their case against direct selling companies.

For more than a decade Strategy India has been advising companies around the world on how to be in compliance without affecting the entrepreneurial skills of the corporate team and their distributor networks or direct sellers or affiliates.

Through their relationship with the authorities Strategy India is party to what is on the table for discussion as policies are constantly being written and rewritten.

With offices in India, Europe, and North America they have a fine grasp on what can, and cannot be said and done.

There is nothing better than insurance and the best insurance is to invite Strategy India Worldwide to review your literature, assess the business plan / compensation plan verbiage as well as viability and to ensure that your company and program is compliant in all areas.

Failure to do so will inevitably lead to an audit of your company by authorities worldwide.

Protect your company by having a “non-invasive” cost effective check-up.


About Strategy India / SI Worldwide:

For more than a decade Strategy India has been advising police authorities, government departments, as well as the media on how to recognise pyramid / Ponzi schemes and those out to deceive the consumer.

Strategy India develops and conducts training programs and seminars for various departments and fraud investigators.

Strategy India does not only create compensation plans they vet them for compliance.

If unsure of your international compliance make direct contact @ [email protected]

Some of the services include -

  1. Secret Shopper SI staff will attend field training and recruitment sessions and assess content for compliance.
  2. Corporate Staff Compliance Training Program SI staff will attend your corporate offices for a 2 day training and assessment program covering all departments.
  3. Documentation Review SI staff will review all literature produced by corporate and affiliates to assess compliance-All documentation to be mailed to SI offices – review will take 10 days
  4. Compensation Plan Review SI staff will assess compensation plan description as well as pay-outs to confirm compliance and viability. All documentation to be mailed to SI offices – review will take 5 days
  5. Business model viability review SI staff will do a thorough audit of the SOP’s (Corporate and direct seller network), Accounts (Sop’s and provisioning), Product viability, Presentation (Corporate and Direct sellers), etc.

The services listed above will help point out loopholes and suggest remedies to ensure compliance with limited existing laws and those which would be implemented in years to come.