Thinking of buying into a business opportunity? If so, you should know there’s a thin line between multilevel marketing plans and pyramid schemes. That thin line was blurred by Vemma Nutrition Company (“Vemma”), a multilevel marketing company alleged to be an illegal pyramid scheme. Recently the Federal Trade Commission (“FTC”) filed a complaint against Vemma, alleging they lure college students and young adults with false prospects of getting rich, when in reality the vast majority of participants make no money, and most of them lose money.
Vemma claims to use its members, or “affiliates,” to promote its health and wellness drinks, but the FTC complaint alleges they are focused more on recruiting others rather than selling products to generate income. They are charged with operating a pyramid scheme, making false earnings claims, and misleading participants, while earning more than $200 million annually in 2013 and 2014 throughout the United States and in more than 50 other countries. Check out Vemma’s Reputation Report for more information about the FTC action and reasons for its F rating.
Before you reply to a business opportunity or consider joining a multilevel marketing plan, evaluate the plan and ask: Do distributors sell more products or services to other distributors or to the public? Does the amount of money distributors make depend more on recruiting and selling to other distributors rather than to the public? If the answers to either are yes, you may be dealing with a pyramid scheme which you want to avoid.
Some tips to help you include:
- Always research a company’s track record by obtaining a BCA report and search the Internet for information regarding how long the company has been in business, what participants and consumers are saying about the offer, if there are any complaints, and information regarding disciplinary actions or lawsuits.
- Seek information on the product or service offered to identify any problems or potential issues. Consider how the product or service is marketed and any advertising claims.
- Ask questions regarding the terms and conditions of the opportunity, such as how you will be compensated, your potential expenses, verification of any earnings claims, and who you can speak with if you have questions, need training, or support.
- Speak with other distributors and ask them how much time and money they spent on marketing materials, training, and seminars if these are required. Also, inquire about whether you are required to participate in periodic training and what happens if you opt out of the training. You should also ask about their success with the plan and any questions you have asked the sponsor to see if the answers are the same.
- Determine if the plan suits your talents and goals. If you do not enjoy selling to the public or do not have the time to devote to selling, this may not be the right choice for you.
- You should take time to mull over all the details and avoid yielding to high-pressure tactic to get you to pay now and join.
Being vigilant and carefully evaluating the pros and cons of any offer can help you avoid losing money and precious time to a scheme. For more information, check out BCA’s resource guides on “Multi-Level Marketing” and “Work-At-Home Schemes”.
You may also enjoy this BCA Scam Watch: “Money Flipping” is a Flop.
About Business Consumer Alliance
Business Consumer Alliance (BCA) is a non-profit company that started in 1928. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization and who agree to abide by high standards of ethical business practices.