Business

Side-by-Side: A Comparison of Vemma and Herbalife

On August 17th, 2015 the FTC filed a Complaint against Vemma Nutrition Company (?Vemma?) in Federal District Court in Arizona. Specifically, the FTC alleges violations of Section 5(a) of the FTC Act, including: ? Operating an illegal pyramid scheme ? Engaging in deceptive acts and practices including making false income claims ? Failing to disclose that the structure of the business ensures that most participants will not earn substantial income ? The FTC is targeting Vemma, its holding company, its CEO and a top participant in the scheme ? On August 21, 2015, the FTC filed an ex parte motion for a temporary restraining order halting the operation of Vemma, freezing its assets, and appointing a receiver. The Court granted the motion the same day ? Pershing Square believes there are substantial similarities between Vemma and Herbalife Ltd. (“Herbalife” or “HLF”) ? Although there are differences in the compensation systems, both systems incentivize distributors to focus their efforts on recruiting rather than making bona fide retail sales to customers outside the distributor network

 

The following comparison of Vemma and Herbalife is based upon our review of the following source documents from the FTC‘s recent legal action against Vemma: ? The FTC press release announcing the legal action(1) ? The FTC Complaint, filed August 17th, 2015, and unsealed August 26th, 2015 ? The FTC Memorandum of Law in support of the ex parte application for temporary restraining order and permanent injunction and the resulting court order ? The expert declaration of Stacie A. Bosley, Ph.D. ? The Vemma compensation plan, available on its public website(2) ? The Vemma Affiliate Agreement Terms and Conditions(3) ? Vemma‘s public website(4) ? The Temporary Receiver‘s report, filed on September 4th, 2015 ? All quotations regarding Vemma in the following pages come from one of the source documents listed above

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