Don’t Be There When the Swat Team Comes
Herbalife’s muddy history with lawsuits is a breeze compared to what happened to Vemma.
Vemma was an energy drink company that was based right where I live in Tempe Arizona. It heavily focused on recruiting ASU college students as distributors.
Twenty year old kids were making a TON of money with it and with complaints from parents and warnings issued by colleges, Vemma was brought under the FTC’s radar.
In 2015, at the height of its momentum and explosive rise, Vemma headquarters were invaded by a SWAT team, shut down, then prosecuted by the FTC on pyramiding and deceptive practicing charges.
In 2016, the courts agreed on a settlement and Vemma was ordered to pay $238 million in fines and agreed to restructure its compensation plan and business model.
One of the main things that got Vemma in trouble with the FTC was that its monthly product purchase requirement increased as reps ranked up to maintain eligibility. So reps ended up having to spend thousands of dollars on products in order to maintain rank qualifications.
Ironically this is something Herbalife has been in trouble for in the past as well.
Both Herbalife and Vemma have adjusted their self consumption requirements along with several other aspects of their model. Today Vemma is rebranded as Bode Pro and the company follows an FTC complaint MLM business model.
Does the company have the momentum that it had before the lawsuit? No.
Many of the heavy hitters who were paying their bills through Vemma’s compensation plan had no choice but to make a move and find a new MLM company to call their home when the company got shut down and the checks stop being mailed out.
Those leaders had no choice but to take their groups and influence and start building new teams elsewhere.
Bode Pro is an entirely different company today than Vemma then. It still has the staple Vemma energy drinks but it has a complete different compensation plan, different system, different leadership team, different products, and a different culture and therefore it deserves its own evaluation.
And sometimes, leadership teams in MLMs apply drastic changes in the compensation plan, system, direction and culture, and the company gets morphed into something completely different than what it originally was.
The motives and reasons for the changes applied and put to motion can vary. Whether they are justified changes to avoid FTC litigation or unjustified because the owners get greedy, companies that undergo fundamental changes change the very nature of the business and the opportunity it presents for you.
Does it help to be in a company where there are no outstanding lawsuits or history of litigation? Sure. It’s one less objection you need to overcome, however, a company that survives litigation or beats serious charges is a testament to the genuine determination and commitment of its leaders to building a legacy company that sticks around for the long term.
Investigate wisely. Don’t throw the baby out with the bathwater. If you’re wanting to join an older more established company chances are higher they have experienced claims and litigation, which is part of the track record you’re leveraging as an entry-advantage but its also something you’ll have to provide answers for.
If you want to join a company with a spotless legal record, don’t be surprised if it’s a younger company. Younger companies during their inception phase are often given a bit of grace by regulators to put their company operations together and in legal order. If they don’t, then know that they are next.
That’s why making a thorough evaluation of a company’s litigation history is necessary to make an informed decision. Because the last thing you want is to join a company, tell all your friends about it, and be two weeks or two months down the road, and someone sends you an email or says something about your company that blindsides you.
Knowing the history of the company you’re evaluating is paramount. Being privy to past litigation filed against your company — how it was handled by the leadership team and what the impact was on distributors in the field — will help strengthen your belief and fasten your resolve in your decision to either build the company or look for a different opportunity.
It’s up to you what you do with the information and the facts you gather about a prospective company. Remember what you find, your prospects can find too.
The secret to warding off litigation objections coming at you from prospects is for you to know more about your company’s history than your prospects can find with a one minute search on google.
Here are the questions to ask:
28. If there has been litigation filed against your prospective company, by whom the litigation was filed and what was the outcome and what measures has the leadership put in place to resolve the litigation?
If you want to find out questions 1–27, you can check out my previous posts on Medium here.
Till next time,
Charles
Co-authored with Dr Maral “YESS” Yessayan, PhD.
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