[2] On December 15, 2016, the FTC announced that “Vemma Nutrition Company will end
the business practices that the FTC alleged created a pyramid scheme,” with a monetary
judgment of $238 million in f avor of the FTC. “Vemma Agrees to Ban on Pyramid Scheme
Practices to Settle FTC Charges.” FTC Press Release, December 15, 2016, Accessed
February 15, 2020, https://www.ftc.gov/news-events/press-releases/2016/12/vemma-
agrees-ban-pyramid-scheme-practices-settle-f tc-charges.
[3] On July 15, 2016, the FTC announced that Herbalif e agreed “to restructure their U.S.
business operations and pay $200 million to compensate consumers to settle Federal Trade
Commission charges that the companies deceived consumers into believing they could earn
substantial money selling diet, nutritional supplement, and personal care products.” FTC
Press Release, July 15, 2016, Accessed February 15, 2020, https://www.f tc.gov/news-
events/press-releases/2016/07/herbalife-will-restructure-its-multi-level-marketing-
operations. See also https://www.ftc.gov/system/f iles/documents/cases/160715herbalife-
stip.pdf.
[4] On October 2, 2019, the FTC announced that “Multi-level marketer AdvoCare
International, L.P. and its former chief executive of ficer agreed to pay $150 million and be
banned from the multi-level marketing business to resolve Federal Trade Commission
charges that the company operated an illegal pyramid scheme that deceived consumers into
believing they could earn signif icant income as ‘distributors’ of its health and wellness
products.” FTC Press Release, October 2, 2019, Accessed February 15,
2020, https://www.ftc.gov/news-events/press-releases/2019/10/multi-level-marketer-
advocare-will-pay-150-million-settle-f tc.
[5] For example, see the remarks delivered by Andrew Smith, Director of the FTC’s Bureau
of Consumer Protection, to the participants of the DSA Legal and Regulatory Seminar on
October 8, 2019. The excerpts of Director Smith’s speech are included in Plaintif f s’ Original
Verif ied Complaint f or Declaratory Judgment, Preliminary, and Permanent Injunctive
Relief , Nerium International and Jeff rey Olson v. Federal Trade Commission, Civil Action No.
1:19-cv-7189, The United States District Court for the Northern District of Illinois, Eastern
Division, filed on November 1, 2019.
[6] Former FTC Economist Dr. Peter Vander Nat characterizes a pyramid scheme in an MLM
context as follows: “An organization is a pyramid scheme if it rewards participants primarily
for recruitment, while the firm’s product is incidental to the proposed business opportunity;
moreover, the incidental nature of the product is chief ly evidenced by the payment of
recruitment rewards having no cognizable or substantive relation to retail sales.” Vander
Nat, Peter, “Former FTC Economist Calls f or Federal Pyramid Scheme Rule,” August 31,
2015. Last Accessed April 6, 2018. https://www.truthinadvertising.org/f ormer-ftc-
economist-calls-f or-federal-pyramid-scheme-rule/.
[7] A participant in an MLM company is an individual who (i) pays a membership fee or
purchases a sign-up package required for participation and (ii) by paying a membership fee
and purchasing a sign-up package, has the right to sell the company’s product and earn
compensation when participants they recruit purchase the company’s product.
[8] Director Smith spoke in detail about how MLMs should report its participant’s typical
earnings during his remarks at the DSA Legal and Regulatory Seminar on October 8, 2019.
Specif ically, Director Smith stated that MLMs should take into account participant’s costs,
include participants who did not earn any compensation, and stay away from truthful
testimonials made by top earners.