Financial Advice

Messages from a multi-level marketing settlement

You might have read about the FTC’s case against Vemma Nutrition Company, a business “opportunity” with pitches that promised big money from selling energy, health and wellness drinks. In 2015, the FTC filed suit, alleging that Vemma was running an illegal pyramid scheme and targeting college students.

Well, today, Vemma settled with the FTC. Under the settlement, the company’s business cannot be based on recruiting more and more people to join the Vemma network as distributors. Instead, the business has to be driven by real sales to real customers outside the Vemma network. In fact, the company will be able to pay distributors only if the majority of the money generated in that sales period came from sales to people outside the Vemma network. And the company can’t mislead people about how profitable the business could be – or about the so-called health benefits of the product.

If you’re considering going into a multi-level marketing business, or know someone who is, do yourself a favor. Start with some research, which could save you time and money down the road. And consider these questions:

  • Can you see yourself selling to your friends, family, and other people you know?
  • Will the people you know like this product? Will they buy it once as a favor? Would they buy it repeatedly and consistently? For how long, and at what price?
  • How much will it cost you to make those sales? Consider not just the cost of the product – but also other things like gas, shipping and packaging costs, sales aids, trainings, and your time. What does the math say about the costs versus your realistic sales and income projections?

Keep in mind that, in a legitimate multi-level marketing program, you make money by selling the product, not by recruiting others to join and buy product. Remember: if you can’t make money selling the product, others probably can’t either. 

If you spot a business “opportunity” that you think crosses the line, report it to the FTC.

This article by the FTC was distributed by the Personal Finance Syndication Network.

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