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November 30, 2015

U.S. News

Vemma Launches New Comp Plan

Vemma may be down, but don’t count it out.

When the Federal Trade Commission served Arizona-based Vemma Nutrition Co. with a temporary restraining order on Aug. 24, many observers inside and outside the direct selling community assumed it marked the end of the 11-year-old company. But Vemma’s management team has fought back. First, it regained some control over the business, while the court case continues, and restarted product sales to the tune of nearly $1 million in October. More recently, it launched a revised compensation plan that puts it squarely back in the business of direct selling. It expects to pay its first commissions Dec. 2.

The company once again began selling product on Oct. 8, offering a “thank you” sale, with discounts as much as 40 percent off the prior retail price. Happy customers began posting pictures on social media soon after, celebrating the arrival of boxes of Vemma, Verve and Bod-e products. The company continued to mark its progress through its various social media accounts, tweeting on Oct. 28, “We’re blessed with a second chance and we’ve sold $809,522.00 so far this month! You all are AMAZING, thank you!!”

At that point, the company had not yet gained approval for a new compensation plan, so no commissions were paid on any of those sales. But Vemma’s goal has been to get back to direct selling as soon as possible. The company recently obtained the FTC’s approval for a new compensation plan, which it began marketing Nov. 12. By Nov. 25, company executives say, sales had reached nearly $1.59 million since Oct 8.

Getting back in business has not been easy. After it was served with the temporary restraining order, or TRO, more than three weeks passed before Vemma was able to make its case to the judge. The company currently is operating under a preliminary injunction that restricts many of its operations. Its new compensation plan is a binary structure as in the past, but in order to qualify for any commissions or bonuses, at least 51 percent of the total sales for an Affiliate’s entire organization must come from sales to customers who are not participating in the business opportunity. In addition, Vemma has removed any bonuses on first-time product orders, and Affiliates’ personal purchases no longer qualify them for commissions. Only personally enrolled customer and Affiliate purchases can qualify an Affiliate for commissions.

In addition to the restrictions put in place by the court, Vemma has had to contend with the logistical fallout from the TRO. One of the first hurdles was staffing. In the first few hours after Vemma was served with the TRO, a court-appointed receiver had laid-off nearly all of the employees. Another hurdle was establishing a mechanism for accepting customer payments by credit or debit card. Vemma has been transparent about its challenges in re-establishing a relationship with a merchant account that would integrate with the company’s system, describing the challenges in social media posts addressing customer service and acknowledging wait times of up to two hours for phone support. International sales also have taken a hit. Before the FTC action, Vemma was operating in 50 markets. So far, it has only been able to reopen in the U.S. and Canada.

The company’s recent sales volume, particularly in light of those challenges, shows that Vemma is a customer-driven model, said Richard Brooke, a veteran of the direct selling channel. “It may have been a recruiting-driven model for growth, but the backbone, bedrock of the company is customers,” Brooke said. “…The only people who would jump through those hoops are people who absolutely want your product.”

With the company back in business, the Vemma team also continues to prepare for its ongoing legal battle. Experts say defending a case of this nature typically costs millions of dollars, with the cost of preparing for the preliminary injunction hearing alone running $500,000 to $1 million. Vemma has established a Direct Selling Defense Fund, which is accepting donations to assist with the expenses.