Popehat Signal: Help A Blogger Threatened By A Multi-Level Marketer WorldVentures

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105 Responses

  1. Connie says:

    I went to investigate the 'not a scam' link and my company firewall rejected it for 'spam links'.

    Totally unsurprised…

    And shared on my Facebook to help with the exposure.

  2. Dan Weber says:

    Curse you Wil Wheaton!

  3. WDS says:

    I hope the Popehat signal gets a quick response, since the self imposed deadline by the bumptious attorney is two days away.

  4. Aelfric says:

    Best of luck to Ms. Yoder, and it says something about me that I subconsciously expected her to be based in Wisconsin….

  5. Dan T. says:

    The threat letter simultaneously demands that she remove her postings, and that she preserve them as evidence. (I guess that could be complied with by saving copies to her own computer and then deleting the online copies.)

  6. Fatwa Arbuckle says:

    Ken –

    Cheers yet again for your efforts in standing-up for First Amendment rights and helping folks fight censorious asshats.

  7. Julian says:

    Well I am not a lawyer, but isn't there a 4th way and just ignore that? A cease and desist letter is just a cheaper alternative to remove a legal wrongdoing before the other party goes to court. However they also need to find a legal reason to do so. As there clearly is non (because they would have stated it), I would just consider this a "smoke grenade" and a desperate attempt to just frighten her.

  8. SarahW says:

    But now I know about the grenades they lob, which is a warning sign, and coincidently found out that they exist and are all kinds of scammy. That's a good thing.

  9. Oliver says:

    No, you do not ignore such thuggery. You must
    fight it! This is called "Punching back twice as hard"

  10. tmitsss says:

    Take Me To Your Thought Leader;

    Shawn E. Tuma is an experienced business, litigation, and intellectual property attorney …he has developed a niche practice as a thought-leader in emerging areas of such as computer fraud, data breach, privacy, and social media law, with a strong command of the Computer Fraud and Abuse Act.

    And PH called him bumptious

  11. Dan Weber says:

    Julian makes me wonder: do you need to file a lawsuit in court to trigger anti-SLAPP? Or is the threat of a lawsuit enough? What's the test for when it's been triggered?

  12. Connie says:

    @Tmitsss – Social media law? This is a thing now?

  13. tmitsss says:

    Connie
    @Tmitsss – Social media law? This is a thing now?

    See, this why he is a thought leader and we are not.

  14. You can place a review on his Facebook page if you were so inclined – https://www.facebook.com/ComputerDataPrivacy/reviews

  15. Julian says:

    I agree, you should fight back publicly. But _I think_ legally this does not pose a real threat.

  16. Dan Weber says:

    I'm sure social media law is a thing, the same way Internet law is a thing.

    That is, there's not a section in the US code about "social media" but, if you are involved in a lawsuit about social media, you would want someone who knows the relevant case law.

    I suspect this guy knows it, and knows his client doesn't have a case, but is throwing the scary letter around anyway.

  17. Connie says:

    Oh dear me… his facebook is… fascinating.

    And by that I mean absolutely nothing is there except links to other things.

  18. mmmwright says:

    I LOVE these letters! Don't these attorneys read? Good work, Popehat!

  19. Dan Weber says:

    so, that lawyer's blog has this post:
    http://shawnetuma.com/2014/06/06/deleting-social-media-posts-during-lawsuits-can-be-sanctionable-spoliation-of-evidence/

    which contains this money quote:

    You cannot selectively delete individual posts from your social media account if those posts could potentially be relevant to the lawsuit.

    Is there a name for opposing counsel's lawyer demanding you do something that will get you in trouble with the court?

    Bonus: here's the image from that blog post in case this guy tries to scrub it. Hey, that would be irony, wouldn't it? http://imgur.com/SugKbKq

  20. Anon says:

    You are hereby on notice of your obligation to preserve evidence in anticipation of litigation regarding
    this matter. Parties to litigation have a duty to preserve potentially relevant evidence for the other
    parties’ use as evidence in pending or reasonably foreseeable litigation. See Gatto v. United Air Lines,
    Inc., et al., 2013 WL 1285285 (D. NJ Mar. 25, 2013) (deleting and deactivating Facebook account is
    sanctionable); See also Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003). The failure to do so
    is sanctionable by the Court as spoliation of evidence for which the other parties can obtain their costs,
    attorneys’ fees, and a spoliation inference for the jury. Gatto, 2013 WL 1285285; Tech Systems, Inc. v

    WorldVentures hereby demands that you (1) immediately cease and desist from publishing any
    further statements or information about WorldVentures in any form, and (2) immediately remove
    from the Internet all website pages, postings, or other information in any form that you have made
    regarding WorldVentures and ensure those statements are no longer publicly accessible

    Aren't these two statements in opposition as to the Facebook statement at least? You can't deactivate and must preserve statements but then you must remove statements and sites??

  21. z! says:

    Maybe Mr. Tuma should start by rereading FRCP 12(b)(6): “Failure to State a Claim for which Relief can be Granted”.

    (And did anyone else misread the firm as Button Tuna? or was that just me?)

  22. De_Village says:

    Funny bit is if you go to there web site and look at there blog they have a post that the Norwegian GOV just passed a ruling against them as being against the law there labeling it more of a scam. LOL!

  23. Robert Reese~ says:

    I offer to let Ms. Yoder repost her article(s) to my blogs. She'll both have Safe Harbor and force these scumbags to sue me too. I push back. Hard. ;c)

    Alternately, without her permission, I'll reblog them myself.

  24. ZarroTsu says:

    I have to compliment the balls on anyone who seriously tells a person that they made up information that uses the very website they represent as a citation.

  25. Bill says:

    Is there a specific state where you need a pro bono lawyer (e.g. hers or the scammers), or would it be a Federal matter?

  26. Good to have you back and enthusiastically bludgeoning the unrighteous, Ken.

    Hope whatever kept you away is well and truly past you.

  27. tmitsss says:

    "Oh dear me… his facebook is… fascinating.

    And by that I mean absolutely nothing is there except links to other things."

    Instapundit hardest hit

  28. Someone says:

    I kept reading Mr. Tuna.

    Keep up the coverage Ken, I enjoy your posts.

  29. azteclady says:

    I think if you have little disposable income, or some of "legal services" insurance, any state is a state where you need pro bono legal help when faced with legal threats.

  30. Chris says:

    Stephanie we're with you. This hype of World Venutres needs to end. I joined this company and it took me a year to realize their unethical ways. Stephanie, Thank You! You're helping people! Believe me!

  31. Ben E. says:

    z!, I think Button Tuna may just have been you… what I heard when I read that was {ARNIE}"It's not a Tuma"{/ARNIE}

    Very nice to see you back, Ken! You still make me wish I was a lawyer.

  32. FrancisT says:

    So I'm thinking this 11 month delay between the article being published and the legal demand sounds like someone wants to beat a statute of limitations deadline. I am not a lawyer but I seem to recall that many defamation and similar claims have a limit of 1 year.

  33. SirWired says:

    It's very easy to determine if an MLM company is or is not a scam. (Legitimate MLM companies do exist! It's not inherently flawed or illegal, it just seems to attract a high proportion of scum, in the same way that strip clubs do.)

    If a company seems to spend most of their time and effort training you to sell the product that is the ostensible purpose of the business (to people not involved in the business), it's probably legit. If all the time and effort is spent trying to get you to sign up other "sellers", it's a scam. (I believe the FTC requires 75% of the sales to be outside sales, but they do a horrible job enforcing the rule. I guess they figure that if people insist on being that stupid and gullible… well, it's wack-a-mole trying to shut them all down, and the penalties are feckless, in any case.)

    I wonder what the repercussions would be if the first response to the demand letter was simply a single sheet of paper consisting of the outline of an outstretched middle finger, and signed by the target and her lawyer.

  34. DaveK says:

    >"I hate to overuse the word "bumptious," but nothing else suits. Blustery? Blowhardish?"

    How about good ol'-fashioned barratry?

  35. I tried posting the URL to this post on their Facebook page and it wouldn't let me:

    https://www.facebook.com/WorldVentures

  36. gramps says:

    "Professional Philosophy
    Shawn believes his greatest strengths are his integrity, judgment, creativity, and intensity which help him best serve his clients. "

    With all those strengths going for him, are we to assume that Shawn Tuma, Esq. has by now become aware of Popehat and even browsed around enough to discover yesterday's post and comments?

    I'm guessing that it might be too late for him to gracefully back out of this one unscathed. And I don't see "grace" as one of his claimed strengths. I wonder how far he will push it.

  37. Dan Weber says:

    gramps, he has a professional duty to his client. He shouldn't "back out" just because the Internet said mean things to and about him.

  38. bridget says:

    Happy to help out if I can. Email me!

  39. Mika says:

    Typical bully tactic. Stand up for your right of freedom of speech.

  40. Matthew Cline says:

    I hope that WorldVenture supporters show up here. *crosses fingers*

  41. weberdan says:

    Whoa, I can respond to myself now? SWEET!

  42. WDS says:

    @Dan Weber,

    He shouldn't back out because the internet said mean things about him. He should back out because he has no case and by now should be able to figure out that the threatened person knows it, and will have some support to fight him.

  43. Dan Weber says:

    Remember we're talking about the lawyer. As crappy as it was for him to have written that demand for his client, it would be even crappier if he were to suddenly say "you know what? I never should have gotten involved" and dump his client. It's not like he suddenly found out his client lied to him about critical facts in the case.

  44. Dan says:

    @Dan Weber
    Yes, a lawyer has a professional duty to his client. He also has a duty to opposing parties, to the courts, and to the law in general. He violated his ethical duties when he sent a letter that he knew had no legal or factual basis (a conclusion which I draw from the fact that his demand letter fails to identify any specific false statements, IP violations, or deceptive trade practices, and from the fact that his demand that she never write anything about WV again goes far beyond the alleged harm done to WV).

    His ethical duties do not compel him (though they likely permit him) to immediately withdraw from all representation of World Ventures. But, unless he's simply very bad at drafting demand letters, they do preclude him from further pursuing this demand.

  45. saccw says:

    https://web.archive.org/web/20140208012400/http://twenty-somethingtravel.com/2013/07/worldventures-this-is-not-the-way-to-travel-the-world/

    The Wayback Machine paints a slightly different picture of her blog post, which has quite obviously been edited.

    Statements like "According to this study, 99% of WorldVentures associates actually LOSE money. 99%. 99% lose money. You can get better odds at a casino. " are likely to earn a C&D letter, especially when the study linked is an FTC study from 2011 that does not name WorldVentrures specifically, and only references MLM's in general. It seems like a legitimate complaint about the blog.

    There are also statements like "Additionally, someone involved with the company is shelling out for a good SEO specialist, because when you search for terms like “is worldVenture a scam?” or “worldVenture pyramid scheme” you will find tons of enthusiastic users expounding on why it’s definitely not a scam." will be difficult to defend without some evidence, which she probably won't have or will be difficult and expensive to obtain.

    There are a couple of others, but you get the point.

    That said, she's modified her post, so it's possible that this will die down on its own. It was a cease and desist, not a lawsuit, and the blogger appears to have cleaned things up. I didn't bother to read through the comments, which the blogger has claimed to have actively moderated, but that may be another sticky area.

  46. Ken White says:

    @saccw: If the 99% thing is their argument, it's going to be very hard for them to prevail for a number of reasons — one of which is that she links to the very study that she is (for the sake of argument) misreading.

    The SEO sentence is another classic example of opinion based on disclosed facts. "I think X because Y." Here she thinks they have an SEO expert because of the results that "is it a scam" yields. You may disagree with the conclusion based on those facts, but that doesn't make it an actionable false statement of fact.

  47. saccw says:

    @Ken: Would that defense really work? If I publish an article that makes the claim "Ken White is a lawyer who overcharges his clients", then link it to an article that asserts that 99% of lawyers overcharge their clients, can I just claim to have misread the article I was citing as evidence?

  48. weberdan says:

    If she edited her post months ago to remove those things (it seems she did so in May), is it really proper to say "cease and desist saying those things you already stopped saying?"

    The FTC PDF is written weirdly, such that an honest person could misread it as saying that 99% of WorldVenture members lose money.

  49. Gene Duffy says:

    All I have to say is " It's not a Tuma!"

  50. Vince Clortho says:

    @saccw

    Well, the statement that Ken White overcharges his clients WOULD be actionable, since it is obviously false. Ken is a bargain at any price.

  51. SirWired says:

    Even if the "99%" study didn't mention WorldVentures specifically, it wouldn't surprise me if 99% of their "business owners" lost money with this venture too. Once the monthly fees and all the motivational junk everybody is strongly encouraged to buy are taken into account, pretty much nobody actually turns a profit.

  52. JorgXMckie says:

    Didn't barratry used to be punishable by death in England? Is that still possible here? [I'm going from a long ago memory that the last two crimes punishable by death in England were barratry and "treason to the body of the king" which evidently meant having sex with the queen.]

  53. SaltyDroid says:

    You'd think that a lawyer who trained at the prestigious Pat Robertson School of Law would know better.

    … or not.

  54. Connie says:

    @Vince – I dunno. A pony can be pretty expensive to come by.

  55. machintelligence says:

    To clear up a possible source of confusion (I thought I had seen the WorldVenture name here in Denver) the company named WorldVentures (plural) is the one this post is talking about. WorldVenture (singular) is a Christian missionary organization based in Littleton, Colorado.

  56. perlhaqr says:

    I gotta say, that lawyer seems kinda fishy to me.

  57. CJK Fossman says:

    @saccw

    Read a little more closely. This is a quote from the referenced report. Note that it calls out World Ventures by name.

    World Ventures
    World Ventures Highlights – Marketing
    ―In November 2007 we gave away a brand new 2008 Mercedes C-300 Sports Sedan.
    ―In March 2008 we gave away a brand new 2008 Porsche Cayman. In November 2008 we gave away a brand new 2009 Mercedes C
    300 Sports Sedan. In March 2008 we launched a brand
    new Premium Service Program (PSP), featuring Video. [etc.].

    [All this sounds exciting, but World Venture fails to disclose that approximately 99% of all participants lose money]

    (emphasis in the original)

    As to her SEO statement, she has already cited supporting public information and explained how she drew the conclusion. IANAL but I believe by so doing she has cleared the bar for not claiming to have private information.

  58. Dan Weber says:

    CJK, I believe the "all" in that sentence is referring to all MLM participants. Although an honest person could misread it to be referring to only WV.

    Is access to private information necessary for a libel/slander suit?

  59. Justin S. says:

    I don't mean to hijack this blog entry, but thought y'all would be interested in knowing that Dennis Toeppen, the bus company owner and serial litigator in Illinois, is back in the news:

    http://arstechnica.com/tech-policy/2014/07/bus-stopped-suburban-express-owner-makes-bail-after-e-harassment-arrest/

  60. Wesley says:

    @saccw

    @Ken: Would that defense really work? If I publish an article that makes the claim "Ken White is a lawyer who overcharges his clients", then link it to an article that asserts that 99% of lawyers overcharge their clients, can I just claim to have misread the article I was citing as evidence?

    Yes, though independently because "overcharges" is clearly subjective opinion.

    The First Amendment strongly protects opinions based on matters of public concern. "Opinion" in this sense is almost indistinguishable from "conclusion," at least in the context of a conclusion drawn from disclosed facts. In the blog post, "WorldVentures has an SEO expert" is her opinion/conclusion, and the evidence/facts she cites is the results of her own internet searches. Her logic may be faulty and worthy of critique, and she may be drawing unreasonable inferences from those facts, but it is firmly protected opinion.

    There are also statements like "Additionally, someone involved with the company is shelling out for a good SEO specialist, because when you search for terms like “is worldVenture a scam?” or “worldVenture pyramid scheme” you will find tons of enthusiastic users expounding on why it’s definitely not a scam." will be difficult to defend without some evidence, which she probably won't have or will be difficult and expensive to obtain.

    She does not have to defend anything. The burden is on the plaintiff to prove malice: an actual knowledge of falsity or a reckless disregard for the truth. Truth is a defense to libel, but not a necessary one; the mere fact that a statement is false does not make it legally actionable.

  61. You says:

    Did Tuma ask Stephanie for permission to use her name in the C&D letter?

  62. Cystennin says:

    Interestingly enough, the site for twenty-somethingtravel.com is blocked by most secure gateways for having a reputation score of -7.3. The reason listed is for having been reported and verified as serving malware.

    Here is a link to the senderbase score for her site:

    http://www.senderbase.org/lookup/host/?search_string=twenty-somethingtravel.com

    I would be very interested to know how the report of the site serving malware was obtained because it seems pretty fishy that the site is no longer browsable by people behind advanced corporate firewalls that filter content based on reputations scores.

  63. J. says:

    Bumptious?

    bloviating, boisterous, bovine braggadocios, blowhards, bleating 'bout being bound by by laws. but besmirching them?

    I missed "Bumptious", but thank you.

  64. CJK Fossman says:

    @Dan Webber

    That "all" is part of the last sentence of a paragraph under a heading that references World Ventures. It refers to the claims made by World Ventures.

    If I recall correctly the next sentence is a heading referring to another MLM scheme.

  65. Alan Bleiweiss says:

    As a forensic SEO consultant with ORM experience, I'd say the cached content on her site about the SEO tactics used by World Ventures are pretty accurate. After perusing a number of links for various "scam" related phrases, I found enough to be pretty confident already that yeah, they've attempted (with the very typical half-assed success) to pollute legitimate search results with fake "it's not a scam" content.

    If myself or someone else with the right experience actually put in a few hours there'd likely be enough to validate her claim.

    Just my observation. Doubt this factor will ever see the light of a courtroom.

  66. AlphaCentauri says:

    @Cystennin — The report relates to the IP address where it is hosted. An unrelated site, okolosports.com, which is hosted at the same IP address, was reported for sending spam advertising its website.

    Okolosports.com may have been spamming, and their hosting service was remiss at enforcing their terms of service, bringing discredit on all their other customers. Or okolosports.com might have been victims of a joe job by an enemy which was sending fake spam in their name, and their hosting service was courageously standing behind their customer. You can't tell from the single email posted as evidence at Spamhaus.

  67. How do you go about getting the popehat signal up? I may need help w/a freedom of speech issue on the internet very soon. I reside in Utah. I want the information on hand for when I get my cease and desist letter or served papers.

  68. Matthew Cline says:

    She does not have to defend anything. The burden is on the plaintiff to prove malice: an actual knowledge of falsity or a reckless disregard for the truth.

    Does WorldVentures count as a "public figure" in this context?

  69. John G. says:

    Have her ping Marc Randazza – he's always been a major proponent of free speech, and wrote an epic slanging of the TSA employee who was threatening Amy Alkon with a slander suit over talking about the Gate Grope she endured.

  70. Ken White says:

    Never heard of him.

  71. Brandon says:

    "…which is totally true but not in the way I think he means it."

    Coffee, meet monitor. Monitor, coffee.

  72. markm says:

    I expect in that case Ken would send a letter pointing out the error, rather than send a threatening letter that claimed the blog was libelous but cited NO factual errors.

    Either Tuma merely put his signature on a form letter without doing any research on the facts of this case, or he cited no specifics because he knew that he had nothing. E.g., to win on the "99% of WorldVentures associates actually LOSE money" post, it would be necessary not only to point out the logic error in the post, but also for WorldVenture to submit records showing that less than 99% of their associates lost money. And I doubt that the court would consider "99%" libelous if it turns out that only 95% of the associates lose money – I think it would have to be a big enough difference to cast doubt on the conclusion that signing up with WV was a bad bet.

  73. SPQR says:

    Ken, are you signalling for Texas counsel or another state?

  74. Hudsonsedge says:

    SirWired, could I get a list of those "good" MLMs?

  75. Richard says:

    Hudsonsedge:
    Not a complete list by any means, but some classic examples of MLMs that aren't generally considered scams:
    Amway, Tupperware, Herbalife, Avon, Mary Kay, The Pampered Chef

    Now, I'm not saying that these are any better than the others, but these are the ones that pro-MLM people tend to point to when stating that MLM is not only used to scam people.

  76. jimmythefly says:

    Markm wrote:

    … to win on the "99% of WorldVentures associates actually LOSE money" post, it would be necessary not only to point out the logic error in the post, but also for WorldVenture to submit records showing that less than 99% of their associates lost money.

    Even then that wouldn't do it. They would need to show a third thing: That Stephanie Yoder KNEW that the 99% number was wrong, and that she intentionally published the false information anyways.

    That is, making a mistake because you drew your opinions from incorrect information is not something you are liable for.

  77. markm says:

    Jimmy: You seem to have confounded three different sorts of errors or lies: "KNEW that the 99% number was wrong" would be having information to the contrary, that is a deliberate lie, but that is not the case here. Nor did Yoder rely on incorrect information, which I think (IANAL) may or may not be a defense against libeling a private figure, but would be a defense against a public figure. (Surely a MLM company is a public figure?)

    She possibly misread correct information (or not, some commenters above think the source can be reasonably read to say 99% applies specifically to WV as well as to most MLM's in general). If the source was clear, this could be construed as reckless disregard for the truth. Draw the wrong judge and this would be a reason to deny summary judgment and schedule a jury trial – if WV could prove her post was substantially in error.

    Yoder has one more defense: was "99%" a literal statement of fact, or a rhetorical flourish for "the vast majority". I'd be very surprised if WV's books do not show that the vast majority of their associates lose money.

  78. markm says:

    Richard:

    Even definitely legitimate MLM organizations like Avon or Amway don't look good from the bottom of the pyramid. My wife was an Avon lady. She never sold as much product as she used herself or bought as samples, but it did get her discounts on her cosmetics, so whether she came out ahead or behind depends on how you account for that. To do much better than breaking even on Avon, you have to treat it as a nearly full-time job rather than a hobby, and to make a living you have to work very hard and get up a few levels.

    I once went to an Amway recruiting presentation. What saves them from being fraudulent is that they get more income from actual sales products than from associates' fees and purchases of samples, and that the presentation is truthful if you pay attention and do the math. I learned from it that you won't make money until you have moved up a level and are getting a share of other associates' sales, and it won't work as a part-time job.

  79. DonaldB says:

    A little illumination on MLM schemes.

    They are all pyramid scheme. The vast majority of people involved do not make a normal profit. But for a few "legitimate" ones, you can come out ahead without being at the top of the pyramid.

    Amway is the MLM scheme that has the most comprehensive approach. They teach you to set it up a business, and document everything as a deductible business expense. Using the garage to store a few boxes of product? Write it off (and that fraction of the utilities) as a business expense. Driving to visit a friend? Sell them something and write the delivery off as a business expense. Need soap? "Evaluate" one of the products you are selling.. another expense. It works especially well because they have such a wide range of products.

    So if you think of a MLM scheme is a tax dodge, rather then a business that can make a real profit, it doesn't look quite as bad as the numbers suggest.

    Of course that doesn't apply here. Travel MLMs are usually a pretty bad deal. You tempt someone with the promise of a free trip. In exchange they become a salesperson, collection agent, take financial risk they don't know about or can't evaluate (e.g. are on the hook if someone drops out, a flight is canceled or a bus breaks down), and likely have to do a bunch of work while everyone else is enjoying the vacation.

  80. jimmythefly says:

    Thanks I see what you are saying.

    I misunderstood what you wrote, I though you were saying, essentially "conditions for a WorldVentures win are if they show A and B". To which I responded "They would additionally have to at least show C, A+B is not enough on it's own."

    I see now that you were saying more along the lines of "to get started World Ventures would have to at least show A and B…but that wouldn't automatically create the win, just get things moving."

  81. Tex says:

    WorldVentures looks like a typical MLM scam. Click on my name to see the details of Amway, the largest MLM scam, and most of them operate very similar to it.

    I sent her an invitation to use a Dallas area lawyer I used to beat Amway down after they frivolously sued me.

  82. Rick says:

    Why did Amway sue you?

  83. Richard says:

    @markm:
    As I said, I'm not saying these guys are any better than the rest. All I'm saying is that if you ask a MLM proponent for examples of legitimate MLMs, those few will probably be among those listed.

  84. Tex says:

    Because I was telling their distributors the truth about the Amway Tool Scam, and that the distributor was breaking Amway's own rules by advertising on Craigslist. Amway lost…BIGTIME.

  85. Fasolt says:

    @markm:

    "What saves them from being fraudulent is that they get more income from actual sales products than from associates' fees and purchases of samples…"

    I remembered something I had written in a paper I did a few years ago, and dug it out of my backup drive.

    MLMs give themselves a veneer of legitimacy by showing that their retail-based income meets the Federal Trade Commission’s guideline that at least 70% of their total revenue be made from retail sales. This guideline also states that these sales must be made from customers that are not sales associates or distributors. The MLMs uses a variety of creative interpretations of the 70% rule to attempt to convince the FTC they are in compliance. One such attempt by Amway in 1979 was rebuffed. Amway stated that they required their distributors to resell at least 70% of the product they purchased each month. Amway claimed that sales at a wholesale level from one distributor to another counted as retail sales and met the requirement. The FTC did not accept this claim since it violates the 70% of sales to customers other than distributors rule. After court ordered disclosure, Amway revealed that less than 20% of their sales were to non-Amway representatives.

  86. Tex says:

    Fasolt,

    Actually, most of the consumption is self consumption by the distributors, not samples or sales to external customers.

    Also, the 70% criteria is misunderstood. It is intended primarily to prevent inventory loading. There are normally separate rules for sales to external customers, such as Amway's 10 customer/month or 50 PV/month rule. Also, Amway's current 70% rule allows the self consumption (and samples) to count towards the 70%. Except for the occasional sale to downline, which is largely a relic of the past, as everybody, including customers, can order online, downline sales do NOT count towards the 70%. In fact, the 70% inventory rule itself is largely a relic of the past, as most people don't keep an inventory, they simply order when they need it, distributor and customer alike.

    Also, I don't believe the following statement is accurate, "Amway stated that they required their distributors to resell at least 70% of the product they purchased each month. Amway claimed that sales at a wholesale level from one distributor to another counted as retail sales and met the requirement. The FTC did not accept this claim since it violates the 70% of sales to customers other than distributors rule. After court ordered disclosure, Amway revealed that less than 20% of their sales were to non-Amway representatives."

    I don't recall seeing Amway claiming the 70% can include downline sales, do you have a link to that?

    I also don't recall seeing the 20% retail sales level, do you have a link to that?

    I should point out when Amway was sued in 2007, part of the lawsuit included a confidential study showing external customer volume was 3.4%. That link in on my blog, just go there and search for 3.4%, and you will find a copy of the original lawsuit. Me and many other Amway distributors are explicitly taught how to manipulate the computer to show a self consumption purchase look like an external sale. Also, many people use a close friend/relatives's credit card, ship the product to them, and then go over and pick them up, check in hand, to cheat the system as well. Throw in the "sympathy sales," which are technically legitimate, but obviously a significant part of the 3.4%, which are made to relatives and friends, and you have a full blown scam.

    Also, DeVos and Van Andel (the sons) gave a Wall Street Journal interview a couple of years ago, and when asked about the level of external sales, stated over 50%, a bald-faced lie, and even went on to say, for those not familiar with the FTC/SEC position that the PRIMARY source of income, and therefore at least 50% of external sales, must come from external sales, that 100% was sold at retail because the distributors buy the products as well.

    And all of the above doesn't even touch the Amway Tool Scam (ATS), the primary focus of my blog, which throws off 10X or more in ATS profit for the high level pins, and keeps the 99% of distributors operating at a net loss. Herbalife got rid of their most abusive part last year, the "lead generation" systems, which charged $130 PER NAME for people who may or may not even answer the phone, and they got rid of ALL tool profit last month, but these came ONLY because of Bill Ackman applying the pressure, with a $1.2 BILLION short on Herbalife stock. Unfortunately, Amway is privately owned, but that doesn't mean they can't be chopped down.

  87. Tex says:

    P.S., the first sentence above applies to almost ALL MLMs.

  88. Fasolt says:

    @Tex-I'll dig it up for you. The excerpt I posted was from a draft copy of the paper that did have the references in the text. I dropped them out of the posted excerpt since the draft copy didn't have the footnotes and Bibliography attached.

  89. Tex says:

    We agree on one thing, 3.4% is less than 20%. LOL

  90. > It's classic nominative fair use.

    And accusative fair use.

  91. Tex says:

    Fasolt, any update? To be frank, I think you may have been thinking of another MLM or situation, as I've studied Amway extensively and don't recall coming across the 20% figure. I may have missed it, but I don't think so.

  92. Fasolt says:

    @Tex
    Sorry about the delay. I gathered that information at http://www.pyramidschemealert.org in 2007. The specific link, no longer valid, was http://www.pyramidschemealert.org/PSAMain/news/MythofMLMIncome.doc.pdf.

    Fortunately, I kept a copy of the document referenced, and I just posted it to Scribd. Here's the link: The Myth of "Income Opportunity" in Multi-Level Marketing.

  93. Tex says:

    Thanks, I found the statement about less than 20% on page 27, but there was no reference to which court, which lawsuit, etc. I consider that an unsubstantiated claim, and I'll go with my experience and the 3.4% the Woodward 2007 lawsuit claimed.

  94. Tex says:

    Also, a brief review of that document shows it is riddled with errors.

  95. Fasolt says:

    @Tex
    I agree. At the time, I used a few of his points as references and didn't closely analyze the rest of the statements he makes. Most of my paper dealt with three other MLMs, one of which he mentions (Melaleuca). Most of my references were to other websites, a book and two magazine articles on the subject.

    It was a short paper and the professor wasn't looking for a lot of depth on the sources, only that we follow the dictates of the assignment. His document is thin on references other than the financial statement numbers he uses. If I had thought about it more at that time, I would have dropped his references. If that had been a true research paper or a technical paper, I would have certainly only been able to use references that cited other sources that I could verify.

    Your research is much more rigorous and I'm citing you if I ever have to do another paper on MLMs. :)

  96. Tex says:

    You don't know how much I appreciate that. My blog cites the source for every single claim I make, plus I have 16 years of inside experience, so I can put any fact within a valid, practical framework, instead of an academic/theoretical one. I take pride in being accurate, it helps with credibility. Besides, the facts are so amazing, there is no need to distort them.

    By the way, what type of assignment and course subject was the paper for?

  97. Fasolt says:

    From what I can remember from the class, we were discussing Ponzi schemes and related business models. I believe we were given a variety of topics to write an essay on and I picked MLMs as they related to Ponzi schemes. It was for an Economics 202 class.

  98. Tex says:

    Interesting, about how long ago was that?

  99. Fasolt says:

    2007

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