The FTC has ordered Vemma shut down temporarily for suspicion of being a pyramid scheme. The energy drink company was allegedly preying on college students and costing them more than they could afford.
What a pyramid scheme consists of is a business structured with an elite few at the top and levels of “employees” which spread out rapidly toward the bottom. Those at the bottom rarely see a profit, while the few at the top earn plenty more than they need. The way it works is that each “employee” buys an expensive starter package including a selection of products which may or may not work as described. These starter packages are mandatory for starting your portion of the business, and in order to even dream of making a profit you need to enroll others and have them do the same.
Some such as Melaleuca offer the option of simply buying the product without buying into the business. However, the business side is very similar and usually a waste of money if you’re not a great salesperson with an impressive network. The chances of actually becoming wealthy are minute, as reported by Pyramid Scheme Alert.
This is the same business model that ended up getting Vemma shut down. Bottom level “employees” were expected to pay hundreds of dollars for products and business tools, according to CNBC, and $160 in products were required for purchase every month.
The Federal Trade Commission noticed what Vemma Nutrition was doing with its line of energy drinks, protein shakes, nutritional beverages, and one which was alleged as a cure for ADD and ADHD. In 2013 and 2014, the company earned $200 million, and is now under investigation. Jessica Rich of the Bureau of Consumer Protection explained what the problem was that the FTC found.
“Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization. We are also alleging that Vemma is an illegal pyramid scheme.”
Having Vemma shut down could lead to many other MLM companies being treated likewise. If multi-level marketing companies are indeed proven to be pyramid schemes, we could see Herbalife, Melaleuca, CyberWise, and Amway eventually all get the proverbial axe.
Tempe, AZ: Tempe company, Vemma, accused of running illegal pyramid scheme – ABC15 Arizona http://t.co/hHSE8a63M1
— Tempe Arizona (@TempeArizona) August 29, 2015
As previously reported by the Inquisitr, the Arizona-based drink company was contacted and they offered no comment. Even former Vemma leader Mirojean Guezoumian had noticed those under his level struggling to break even, with only four out of 118 not seeing a regular loss. This led to him stepping down because “a lot of people were working hard” and getting nowhere.
What do you think? Should Vemma be shut down permanently? Will this cause a ripple effect with other MLMs meeting the same fate?
[Image via Vemma / Jaimes Oriano]