Vemma () Nutrition Company was a privately held multi-level marketing company that sold dietary supplements. The company was shut down in 2015 by the FTC for engaging in deceptive practices and pyramid scheming.
The company, based in Tempe, Arizona, was founded in 2004 by Benson K., Lauren, and Karen Boreyko. In 2013, the company reported US$221 million in revenue. Most distributors were in their twenties. The company had frequently been accused of being a pyramid scheme by U.S. media, business analysts, and former distributors, and was fined by the Italian government.
History
Starting in the 1990s, the Boreyko family have been incorporating dozens of companies under the family's control sharing the same address. In 1994, the family founded New Vision International, a nutritional supplement company. The family also owns a limited liability corporation which has purchased commercial real estate, including property rented back to other Boreyko-controlled companies. Vemma Nutrition Company was incorporated in 2004, and by 2011, New Vision had been entirely folded into Vemma.
Vemma sold its products through its website, and also through independent distributors (referred to internally as affiliates) who could potentially earn a share of the revenue from their own product sales as well as those from the network of distributors they build.
In 2013, Vemma started describing itself as an affiliate marketing company, although Benson K. Boreyko has said that the compensation plan is the same. Vemma is a member of the U.S. Direct Selling Association.
In April 2014, the company announced that it was modifying its compensation plan by removing sign-up fees and the $150 minimum monthly product purchase to qualify for commission, among other things. Boreyko stated that the changes were intended to avoid the fallout from the Federal Trade Commission that has happened to other multi-level marketing companies, such as Herbalife. An analysis by advertising watchdog group Truth in Advertising has described this as a red herring, as the company has never required sign-up fees. The group's report also says that minimum monthly purchases are still required for full eligibility, which Boreyko has said is false.
In August 2015, the U.S. Federal Trade Commission filed a lawsuit against Vemma, accusing the company of operating an illegal pyramid scheme. The company was placed under an injunction which restricts certain marketing activity and compensation methods, and a monitor was appointed by the court to assure compliance with these restrictions. In December 2016, Vemma reached a $238 million settlement with the FTC, which also banned the company, its CEO, and top distributors from recruitment-focused business ventures, deceptive income claims, and unsubstantiated health claims.
Business model
Vemma was a multi-level marketing (MLM) company.
Use of college-aged distributors
Vemma heavily focused on recruiting college-aged people as distributors, which has brought attention from consumer organizations, and complaints from parents. As of July 2014, the Federal Trade Commission (FTC) received 170 complaints about Vemma and some colleges have issued warnings to their students about the company.
William Keep, the dean of business at The College of New Jersey and an expert in pyramid schemes has said that the company shows indicators of being a pyramid scheme. Keep became aware of Vemma when he found out that a student had been stockpiling unsold energy drinks in his dorm room. Keep and other analysts, as well as former distributors have claimed the company relies on recruiting as its main means of generating revenue.
In May 2015, the magazine Stern reported that German and Austrian consumer protection organizations warned that Vemma was exploiting naive customers and unemployed youths who were lured with unrealistic profit expectations into a distribution system that was losing them money.
Products
Vemma had four product lines, all based on their core Vemma nutritional formulation: Vemma, Verve, Bod-e and Next. The name "Vemma" is an acronym representing: vitamins, essential minerals, mangosteen, aloe. Several of the company's products contain caffeine, with some drinks in the Verve line being similar in caffeine content to energy drinks. The "Verve" line was one of the official drinks (along with Gatorade) of the Phoenix Suns, which also acted as a distributor.