The Arizona direct sales company Vemma was recently hit by the FTC and virtually shut down without a judge, jury or trial. The income of thousands, including single mothers, housewives, young businessmen, retirees and disable veterans has been instantly blocked by the government agency. Nobody will be paid, no matter what they have sold or how many years they have worked.
Ominously, among the reasons the FTC gave for its action, are methods that are employed by almost all other Direct Sales companies. If Vemma is unable to survive, it could spell the end of a vibrant industry that involves 18 million Americans, 74% of them women. It may be the last loophole allowing an ordinary person the opportunity to earn extraordinary amounts of money.
What is behind this action?
Shortly after the re-election of Barack Obama a former law enforcement – corporate security specialist called me with some interesting information. A friend in the Justice Department was asking him for details on Multi Level Marketing companies in Utah. They were talking names, income, the nature of their compensation plans and any questionable claims about their products. They would welcome any gossip about lifestyle too. Mistresses? Lavish meals? “Ahh, gonna take out a source of Republican money huh?” my friend joked.
It is no big secret that most entrepreneurs, including the kind who get into MLM’s, tend to be Republicans. Just as people who believe that government has the solutions for society, tend to get jobs in government.
Rich DeVos, the co-founder of Amway one of the nation’s most successful MLM’s, was a major donors to both the Reagan and Bush presidential campaigns. Frank VanderSloot, of Melaleuca, was the finance chairman and a $5 million fundraiser for Mitt Romney.
I have been an eyewitness to the political power of these companies and their sprawling networks of independence entrepreneurs. In 1984, when Ronald Reagan announced his re-election, he did so at an MLM event at the Atlanta Georgia Dome. Distributors came to the Dome for a weekend of seminars and forfeited the platform to the Reagan Campaign during the afternoon. In another city at yet another event, I spoke just before Reagan to an audience of 10,000 MLM builders.
During the election campaign of George H.W. Bush I would often get a call from campaign manager, Lee Atwater. “I need 500 people with signs cheering for Bush outside of Butler aviation in Raleigh Durham.” Atwater would give me five photo ops with Bush at the foot of the airplane and in return the five MLM leaders would guarantee the crowd as requested. In 1987, George W. Bush, working his dad’s campaign, spoke at an MLM event I arranged, helping to funnel distributors into campaign workers. It is not unlike what the unions do for the Democrats.
I have also been one of the pack who got the message from the top of the network. In 2008 I was building a network in XanGo when word came down to make a $1,000 donation to Mitt Romney. I complied.
It was only a matter of time before Obama would shut down this industry, which is a vibrant part of the economy of every other major western nation and flourishes in Russia.
There are many complaints about MLM. The odds of success are not high, although probably a lot higher than a career in journalism or professional sports or Hollywood or – for that matter – the FTC. The difference is MLM will take anybody and most other opportunities won’t.
In recent years the culture of MLM has diversified. Shaklee, for example, the MLM vitamin giant, is owned by a Democrat billionaire who is a friend of Oprah Winfrey. It will probably be the last one taken down and may even be permitted by the Obama administration to live out its retirement, as long as it remains quiet.
The danger for other MLM’s is the nature of the attack on Vemma. They have been hit hard on “auto-ship” a policy that has products automatically shipped to a distributor unless he or she opts out in advance. That, the FTC, contends, makes it a pyramid scheme. Most former members of the Book of the Month Club or the Literary Guild are familiar with auto-ship. If you signed up you got a book every month. You could opt out but if you didn’t you had to pay for the book or send it back. In our new “victim society” the FTC has determined that this is illegal.
It was also wrong, they say, that Vemma prospected college students. Universities are now places where beer pong is a sport, abortions are choice, date rape is so rampant that universities refuse to publicly publish the numbers but selling vitamins to your roommate is now a crime.
(Donations to defend the industry should go to the Direct Sellers Defense Fund, Morrie Aaron: email@example.com)