You’ve read the opinions, you’ve read the mostly one-sided accounts of what went on at the September 15th preliminary injunction hearing, you’ve seen Vemma’s CEO declare god is on his side all week…

Now let’s take a look at the facts.

The whole purpose of the September 15th hearing was to have the court examine

whether the FTC has still met its burden to show that it is likely to succeed on the merits of its claims against Defendants and the balance of equities tips in its favor, in light of the arguments and evidence presented by Defendants.

Or in other words, did the FTC’s initial arguments hold up under scrutiny (provided via Vemma’s legal defense)?

The FTC charged Vemma were in operation of an illegal pyramid scheme and guilty of false and misleading representations.

Is Vemma a pyramid scheme?

As defined in Judge Tuchi’s order (citing Omnitrition and Koscot):

A pyramid scheme, like a simple chain letter, ensures that most of its participants will lose money and is thus, by its very design, unfair and deceptive under the FTC Act.

To establish this, Judge Tuchi sought to differentiate affiliates from customers:

Affiliates are those participants who seek to avail themselves of the business opportunity of promoting Vemma and/or selling Vemma products and thereby earn bonuses, as opposed to customers, who are solely or primarily interested in purchasing Vemma products for their own consumption.

The FTC had alleged Vemma by design focused on recruitment, and Judge Tuchi agreed:

While no purchase, payment or fee is required to become an Affiliate under Vemma’s policies and the Affiliate Agreement, in practice, Vemma strongly encourages any person wanting to become an Affiliate to

(1) purchase an Affiliate Pack—currently costing $600 and containing Vemma products, audio and video recordings, printed materials and branded items— upon which eligibility for certain bonuses is contingent, and

(2) sign up for $150 monthly auto-delivery of two cases of product to maintain eligibility for bonuses.

It is this focus that defines Vemma as a product-based pyramid scheme, but only so if this was the focus of the business.

To that end Vemma sought to manipulate its sales data, incorrectly redefining affiliates as retail customers.

Judge Tuchi shot this argument down:

(Vemma’s) proposed reclassification of Affiliates to customers 
is not based in fact
.

(Vemma) have offered
no evidence
to support a finding that a Vemma participant who intended to be just a customer accidentally identified himself or herself as an Affiliate, or had any motivation to do so.

In addition, as the FTC points out, the reclassification proposed by Defendants would serve to
misrepresent how many failed Affiliates there likely are
.

Indeed, the present data shows that, between January 2013 and August 2015, more than 73% of Affiliates who received commissions did not earn enough to recoup their investment in Vemma’s programs.

I’ve been highly critical of data manipul

🤖 Quick Answer

What was the outcome of the FTC's preliminary injunction hearing against Vemma in September?
The court granted the FTC's preliminary injunction against Vemma, determining that the FTC likely succeeded in proving its claims of illegal pyramid scheme operation and false marketing representations. The judge found sufficient evidence supported the FTC's arguments and that the balance of equities favored granting the injunction to protect consumers.

What charges did the FTC bring against Vemma?
The FTC accused Vemma of operating an illegal pyramid scheme and engaging in false and misleading representations in its business practices. The agency challenged whether Vemma's compensation structure and marketing claims complied with federal consumer protection laws.

What standard must the FTC meet for a preliminary injunction?
The FTC must demonstrate it is likely to succeed on the merits of its claims and that the balance of equities favors the

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