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Breaking News: Vemma Court Case

Article by: Nancy Tobler
January 4, 2016

For the first time in 16 cases, the FTC did not succeed, at least for now. Remember I am not a lawyer. This article is another one of my opinions about the Vemma case. The case seems encouraging. The most recent court order on the Vemma case is temporary. This means that the court could still rule in the FTC’s favor.

As you will see in the court document, the court hearing on Sept 18, 2015 is a time that Vemma can present counter evidence to the FTC injunction and asset freeze. I was encouraged to see in the initial pages a more accurate explanation of how the compensation plan functioned.

The BurnLounge case is applied to the Vemma case. The key idea from the BurnLounge case is contention over what constitutes an ultimate consumer. The big question the FTC asks is are distributors buying product to consume that product or are they buying product to be qualified for bonuses (see page 5). The FTC still believes that Vemma is operating as a pyramid under this ‘prong’ of evaluating a company based on why distributors are buying product.

The next area that the FTC makes the case on is the anti-inventory-loading safeguards. The FTC makes the case that 15 out of 90,000 distributors are called each month to see if 70% of their sales were for consumption or retail.

The third area against Vemma was that the company provided false or misleading information as to income claims.

The order does state that the FTC has made a sufficient case against Vemma. However, that does not mean that they will succeed in the end at taking Vemma down. The key here is to recognize that the district court has discretion to how the case continues. On page 14, you will find that the court should make the case “no more burdensome” than necessary on the defendants. Further the court states that this case calls for “less drastic measures”. This is a win in my mind.

The court appointed a monitor (rather than a permanent receiver). Under the court and monitor, Vemma will need to change their ‘false and misleading’ representations. The court ordered that all compensation that appears to be based on recruiting rather than purchasing be changed. The order specifically states that packs will not be allowed and that eligibility for bonuses cannot be qualified through distributor’s own purchases.

One of the parts that was encouraging was on page 17 where the court did state that the product is legitimate. Overall, I think that Vemma has the opportunity to demonstrate that they have a viable product that is consumed by legitimate consumers.

Obviously, the case is not over. Stay tuned…..

For more information about how this breaking news could affect the industry, click here.

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Nancy Tobler

Nancy Tobler has a PhD in communication from the University of Utah. She specializes in research on how organizations change,...

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