WASHINGTON (Legal Newsline) — The Federal Trade Commission (FTC) announced Dec. 15 that Arizona-based Vemma Nutrition Company will end alleged pyramid scheme-inducing business practices.
Vemma allegedly targeted college students and other young adults, promising them that becoming an affiliate was a good alternative to traditional employment. The company purportedly failed to disclose that the program’s structure ensured most affiliates would not earn substantial income. Vemma also provided affiliates with false and misleading materials for recruiting others, the FTC said.
“Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the multi-level marketing [MLM] industry,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “MLM companies must ensure that their promotional materials aren’t misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors.”
Vemma has been banned from compensating affiliates for recruiting new participants, tying an affiliate’s compensation to that affiliate’s purchases, or paying an affiliate compensation related to sales in a pay period unless the majority of the revenue generated came from sales to general consumers.
A $238 million judgment will be suspended upon payment of $470,136.