Compliance Corner: The Vemma Ruling Heard Around the World

Mannatech’s Compliance Team wants to help you and your business be successful – and that starts with being compliant! This article is part of a series of compliance-related updates to serve as friendly reminders of what you as an Associate should and should not do while operating your Mannatech business.

This post is about the recent legal developments that pertain to Vemma, a direct selling company specializing in nutritional, weight management and energy drinks. As an Associate, the following information should give you better insights into Vemma’s situation as well as help you maintain your compliance responsibilities and regulations specific to compensation and earning claims.

Regarding Vemma: On September 18, 2015, the Court replaced its initial temporary restraining order and asset freeze with a preliminary injunction that allowed Vemma to resume business operations under a limited fashion. The Court outlined the following prohibitions against the company:

• Touting misleading earning claims;
• Paying compensation for recruiting new members;
• Incentivizing members to purchase goods or services to maintain eligibility for bonuses;
• Paying compensation related to the purchase or sale of goods, unless the majority of compensation is derived from sales or purchased by persons not part of the marketing program; and
• Selling or linking packs as the only means for eligibility of bonuses.

What does the Vemma ruling mean for Mannatech Associates? Some items are still unclear on how it will impact the direct selling industry, but we will know more as the case progresses. However, what we do know is that Mannatech fosters a culture of compliance with federal and state regulations, and it is important to continue that momentum. Here are some reminders to stay on track:

• Earning claims must be true and accurate, and they must represent what a substantial number of Associates will earn. All earning claims should be accompanied by a disclaimer that results vary by individual, and the representation depends on the person’s individual efforts and skill, the availability of customers, and the time devoted to the business. Visit Mannatech’s Resource Library to use the latest average income statement accompanied by an earning disclaimer.
• Focus on retail sales of our products and not on the recruitment of Associates to maintain eligibility for compensation. Not only do we have great products that promote health and wellness, but each purchase is tied to a donation of nutrients to malnourished children through our Mission 5 Million℠ movement.  With a charitable mission in mind, why not share our products with others?
• Packs and automatic orders are available for the convenience of the Associates to purchase products for personal use and/or retail sales.
• Actively discourage any inventory loading within your organization.

Although certain provisions in the Vemma ruling are still open for interpretation, we should stay ahead of the curve and continue our campaign for compliance. If you have any questions, do not hesitate to contact our Legal, Ethics & Compliance Department at lec@mannatech.com.