Vemma Shut Down by FTC

Who should be worried by the Vemma Shut Down?  What Does it mean for the network marketing industry?  What can we learn from it?  How can distributors behave in such a way that they do not raise red flags with the federal trade commission and other governing bodies?  Today’s video covers some of the main reasons why the FTC went after Vemma and how you can look at your own company’s comp plan and your personal marketing strategies to make sure that you are 100% compliant and that you are not in danger of getting in trouble.

When selecting an MLM company to partner with, compliance is one of the top 6 factors that you must look for.  If you want to know what the other 5 are, feel free to grab this additional free video where I show you the 6 traits to look for in a stable and secure network marketing business.

Vemma Shut Down Video

Compliance Item #1

The first thing you want to look at to make sure a company is compliant (FYI – this is the most obvious red flag for a pyramid scheme) is whether commissions are being paid out for recruiting new members or for actually moving a real and viable product.  I don’t believe that Vemma is guilty of doing this or that this had anything to do with the Vemma shut down, but the FTC has made it very clear that this is the #1 sign of running an illegal pyramid scheme or a scam.

Compliance Item #2

The second item to look for is whether or not people are incentivized to buy more product in order to maintain eligibility for commissions or to earn higher commissions and/or bonuses.  This is often called “Pay to Play” and it seems that for Vemma FTC is cracking down on this one pretty hard.  For example, if your company has a $100 monthly autoship and a $200 monthly autoship and you can earn higher commissions in the comp plan by doing the $200 autoship, this can be a problem according to the FTC lawsuit responsible for the Vemma shut down.  This is definitely one area where many MLM companies are going to have to look closely at their comp plan and commission requirements to make sure they are complaint.  I don’t know if Vemma is guilty on this charge but it seems that there may be some grey area and I believe many companies are going to start examining this practice very closely and altering accordingly.

I know the company that I’m in changed their plan a few years ago to where you did not have to be a customer at all in order to be a business rep and vise versa, they made it such that you did not have to be a business rep in order to be a customer.  They are 100% completely independent of one another.  In our particular company, you could theoretically reach the top of the comp plan without EVER purchasing or using the product (although it’s unlikely that you would be able to do that since it’s hard to sell something that you don’t own and believe in yourself), but in order to be overly compliant with the federal trade commission, that’s what our company decided to do just to make sure that we were 100% clean and out of danger.

Compliance Item #3

Item #3 is income claims and disclosures and this is a BIG one.  In fact, this seems to be one of the biggest reasons why the FTC had Vemma Shut Down.  Once again, I don’t know if Vemma or any of Vemma’s reps are guilty of doing this or how much it contributed to the Vemma Shut down, but I do know for sure that the FTC has a problem with hyped up income claims and telling people that “it’s easy”.  In fact, you should probably remove the word “easy” from your vocabulary when talking about your MLM company.  You can say it’s simple, but no business is easy.  It requires skills and hard work and when you tell people it’s easy, you’re just setting yourself up for them to quit when they find out it’s harder than they thought (plus the FTC hates it).  You also need to make sure that your company has proper income disclosure statements on their website.  According to the FTC, one of the claims they are making in the Vemma Shut Down lawsuit is that they doctored the income disclosure statements to make the numbers look better than they really are so that it looked like more people were making money than actually were.

What Else to Look for in a Good MLM

Obviously Compliance is a big factor to consider when selecting an MLM company.  Especially if you want to avoid another Vemma Shut Down (and I’m certain we all do).  But compliance is not the only factor to consider.  There are a total of 6 things I look for when selecting a solid, stable and secure network marketing company where I want to make a long term home and a long term residual income.  If you want to know what those 6 factors are, feel free to download this free video where I show you how to find a company that is likely to be around for a long time and avoid the same fate that Vemma reps recently faced in the Vemma shut down.

Did you like this post about the Vemma Shut Down and how to be FTC complaint in your own MLM?   If so, make sure you comment below and share this post with your friends …

To your success!

Tyson’s Marketing and Success Blog
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P.S. If you haven’t recruiting anyone (or less than 10 people), you should check out this free “Sponsoring Secrets” Training.