The Federal Trade Commission (“FTC”) has recently targeted the direct selling industry, trying to change the way direct sales companies can operate without going through the proper legislative process or formal rulemaking.
Industry leader Neora has rejected an offer from the FTC to settle a threatened lawsuit, and moreover, has stepped up to file suit challenging the FTC’s ability to retroactively change the law without proper authority from Congress or through formal FTC rulemaking.
Deborah Heisz, Co-Chief Executive Officer of Neora, noted that the FTC’s acts are in violation of efforts to rein in unelected federal bureaucracies and are a threat to the direct selling industry as a whole. “This is precisely the behavior that the President sought to prohibit in his October 9, 2019 Executive Orders, exhibit 1 and exhibit 2, as well as the Department of Justice in its November 16, 2017 Memorandum prohibiting all federal government agencies from utilizing ‘Guidance’ and other ‘off the book’ regulations to change the law. Neora has complied with all laws and the FTC’s most recent 2018 business guidance regarding direct sales business models.
“Eight years ago, Neora began as a family-owned business seeking to change lives through our products and opportunities,”
says Founder & CEO Jeff Olson.
“We are the real deal; in the business of making people better, whether it is a hardworking parent or the budding entrepreneur looking to represent the industry’s leading products. Our brand partners work hard, and now it is our job to stand for them and protect the businesses they worked so diligently to develop.”
From day one, Neora has been known for its innovative products that have created a significant consumer demand. The majority of people who purchase Neora’s products are customers who have no tie to Neora’s compensation plan.
Direct selling companies are legal under every state and federal law. In contrast, pyramid schemes prey on people by not offering products in demand, thus resulting in a certain collapse of the pyramid. Although rare, in the direct selling context, an illegal pyramid scheme thus consists of an opportunity wherein the business compensates the business participant primarily (i.e. more than 50 percent) just for signing up other business participants rather than primarily for product sales for signing up customers.
Neora retained renowned Ankura Senior Managing Director, Dr. Walter Vandaele, to conduct a thorough analysis of its data. Dr. Vandaele is a University of Chicago-trained econometrician who previously served as the Assistant Director for Regulatory Evaluation and Economic Advisor at the FTC’s Bureau of Competition. His analysis establishes that 77 percent of commissions paid by Neora in the 2012 to 2017 time period (with approximately 82 percent in 2017) are for sales of product to ultimate end users. This greatly exceeds the law’s “primarily” standard.
Further evidencing the demand for Neora’s products, in 2016 and 2017, about 60 percent of Neora’s total sales were to non-business participants called “Preferred Customers”; which is considered high for the industry. The FTC has admitted that it has no material issues or concerns with the calculations or methodologies used by Dr. Vandaele.
Nevertheless, despite repeated requests, the FTC has flatly refused to provide Neora with its own alleged analysis. Instead, the FTC, according to Neora, is attempting to announce a new retroactive interpretation of how direct selling companies can operate without considering the actual data.
Olson believes no direct sales company is safe under the FTC’s new arbitrary retroactive standards.
“We are an American small business and will take this David and Goliath-like issue and fight for the rights of the men and women who deserve a place in our American economy, and will not be bullied into settling for anything less,”
The leading national trade organization representing the industry is the Direct Selling Association (“DSA”), which Neora is a member company in good standing. The DSA has estimated that 20.5 million Americans are involved in direct selling. Accordingly, differentiating between legal MLMs and illicit pyramids is a matter of importance to millions of Americans, the direct selling industry, and the economy as a whole.
Based in Dallas, TX, Neora is a global relationship marketing leader that was founded in 2011, and has shattered industry sales records while developing a strong customer base in North America, Latin America, Europe and the Asia-Pacific.
Neora is committed to helping its Independent Brand Partners and their customers by providing a holistic lineup of skincare and wellness products, a flexible, forward-thinking business opportunity and a positive culture focused on personal development. For more information, please visit neora.com.
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