Washington, DC — The announcement of the settlement of the Federal Trade Commission (FTC) inquiry regarding Vemma Nutrition Company was anticipated and parallels earlier proceedings involving the company. While the settlement agreement of FTC’s inquiry applies only to the company involved and other parties named, the terms of the settlement reinforce the importance of the principles and requirements of DSA’s self-regulatory Code of Ethics pertaining to earnings, lifestyle, and product claims.
As the FTC itself has noted, the terms of a specific company settlement such as this apply only to the parties involved. “[…the provisions of a consent order or settlement] apply only to the defendant signing the order…They do not represent the general state of the law.” (see Jan. 2014 FTC Staff Advisory Opinion to the DSA.) Controlling law regarding legitimate business practices is set out more fully in judicially adjudicated cases such as the recently decided FTC v. BurnLounge, Inc., 753 F.3d 878 (9th Cir. 2014). That case identified the key legal elements regarding the definition of a pyramid scheme and related questions of compensation and consumption of products by ultimate users.
Some aspects of the settlement with Vemma are of interest to all direct sellers and effectively affirm the DSA’s continuing actions to ensure that compensation is based on product sales to real users, that earnings claims are reasonable and substantiated, and that product claims by direct sellers are accurate and truthful. Though Vemma is no longer a member of the DSA, any claims brought during the term of that company’s previous membership are still actionable under the independently administered DSA Code of Ethics.
Every member of DSA is required to abide by DSA’s Code of Ethics as a condition of membership. There are no exceptions to the rule. All companies that use the direct selling model must uphold the highest ethical business standards, including adherence to polices that protect consumers and members of the salesforce against unrealistic earnings, lifestyle, and product claims. DSA member companies are also subject to ongoing review to ensure Code compliance and adherence to state and federal laws.
As the voice of direct selling in the United States, business ethics and consumer protection are the heart of the DSA’s mission. We look forward to continuing our ongoing dialogue with the FTC and other policy makers and stakeholders on enhancing business practices that protect consumers.
About the Direct Selling Association
The Direct Selling Association (DSA) is the national trade association for companies that offer entrepreneurial opportunities to independent sellers to market and sell products and services, typically outside of a fixed retail establishment. More than 20 million Americans are involved in direct selling in every state, congressional district and community in the United States. For more information, visit www.dsa.org.
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You may contact Adolfo Franco, Executive Vice President.
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