Neora, a multi-level marketing company, filed a lawsuit against the Federal Trade Commission on November 1, the same day the FTC accused Neora of operating an illegal pyramid scheme. This legal challenge from Neora follows a federal investigation that began in June 2016.
Neora's federal court filing claims the FTC seeks to "retroactively change federal law" and override state regulations by labeling the company a pyramid scheme. Neora and its founder, Jeff Olson, also cite an October 9 executive order from President Trump. This order requires regulators to provide businesses with fair notice of operational rules. Neora asserts it could not have known in 2011, when it launched as Nerium, that the FTC would enforce existing anti-pyramid scheme statutes.
The FTC Act of 1914 established the illegality of pyramid schemes. This legal framework has remained consistent. The FTC has also provided specific warnings to the multi-level marketing industry regarding insufficient retail sales. The agency issued these public alerts in 2015, 2016, and 2017.
Federal regulators have pursued other companies for similar violations. The FTC previously took action against Herbalife, Vemma, and AdvoCare. These cases established a clear precedent for enforcement actions against businesses where commissions are tied predominantly to recruitment rather than genuine product sales. Neora and Olson, therefore, had years of public guidance, established precedent, and federal court decisions to consider.
Neora's defense hinges on the argument that it sells skincare products, classifying itself as legitimate direct sales. However, this claim holds true only if most products reach actual consumers outside the distributor network. Courts and regulators have long distinguished between legitimate direct selling and product-based pyramid schemes. The latter exists when the majority of inventory moves within the participant network, meaning individuals buy products primarily to gain an income opportunity, not because they genuinely desire the goods.
Evidence shows less than one percent of Neora's commission payouts were derived from actual retail sales. The overwhelming majority, 99 percent, instead linked to recruitment activities. This structure stands in stark contrast to legitimate business models, which prioritize customer sales. It represents the very issue regulators have consistently targeted across the multi-level marketing industry for over a decade.
Olson maintains he designed Nerium's compensation plan to comply with legal requirements. Yet, this plan yielded less than one percent in retail sales. This outcome suggests either a misunderstanding of the law Olson claimed to follow or a deliberate construction of a recruitment-driven system. The FTC, in its complaint, asserts it is enforcing long-standing federal statutes, not introducing new rules.
The company now asks a federal court to accept that its operation, which generated minimal retail sales, was somehow beyond legal foresight in 2019. The FTC seeks to recover funds for those allegedly harmed by Neora's business structure.