Multi-Level Marketing

Published on May 30th, 2017

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What You Should Know about Nerium

What better way to earn a part-time to a full-time income than by sharing and selling products you love…

That’s the pitch by Nerium International, LLC, which promises “financial freedom” and boasts that “Nerium changes lives.” The Texas-based MLM founded in 2011 claims that it was rated number one on the Inc. 500 list of America’s fastest-growing private companies in the consumer products and services category in 2015, had cumulative company revenues of $1 billion that same year, and was named one of the Direct Selling Association’s 20 top companies in 2016. The company markets anti-aging products that include creams, serums and a brain supplement.

But is the company running a legitimate MLM business or an illegal pyramid scheme? And has the company and its distributors crossed the line when it comes to making health and income claims?

TINA.org first investigated Nerium in 2016 as part of a probe into MLM companies that were receiving awards from the Direct Selling Association (DSA). At that time, TINA.org found that Nerium and its distributors were making illegal health and income claims to sell Nerium products and market the business opportunity. As a result, TINA.org alerted Nerium to these deceptive marketing issues, and subsequently filed a complaint with the FTC as well as the Texas Attorney General when the company failed to rectify the issues. Later that year, TINA.org also alerted the DSA’s third-party administrator, who enforces its ethics requirements, to Nerium’s illegal health claims along with 59 other DSA member companies.

In response to TINA.org’s concerns, Nerium’s General Counsel Eric Haynes said in a letter that Nerium shared TINA.org’s “interest in protecting consumers from deceptive advertising,” and that the company takes “proactive measures . . . in an effort to prevent these types of issues from occurring in the first place.” But a year after advising the company of the deceptive marketing claims, many of the inappropriate posts listed in TINA.org’s databases remain on the internet, and TINA.org gathered more than 100 new examples of outsized income claims and 100 new examples of inappropriate health claims. Many of these new illegal health claims focus on Nerium’s EHT, a ‘brain supplement’ that distributors say treats everything from ALS to dementia.

As a result of Nerium’s apparent disregard for truth in advertising, and after receiving multiple consumer complaints, TINA.org delved deeper into Nerium and its business practices. Here are some key issues you should know (click to expand each point):

+ Incredible Income Claims

When discussing the earnings of its distributors, an MLM may not make deceptive use of unusual earnings realized only by a few distributors without running afoul of the law. Likewise, a failure to disclose that the structure of a program ensures that the vast majority of consumers cannot achieve substantial income is deceptive under the law.

Given this legal backdrop, it might surprise you (then again it may not) to learn that Nerium – right on its website — and its distributors are making or have made the following deceptive income claims to show “how people just like you are building their dream lifestyles!”

Here are a few of note:

  • “I get paid to party
  • CEO Jeff Oslon claims, “We have people who’ve earned their iPads, they’ve earned their cars, earned dream vacations, great incomes, six figure incomes, people making adult incomes, people making incomes that put them in the top 5 percentile of the United States.”
  • “I wanted to be able to get out there and retire my parents. I wanted to be able to go out there and make an impact in their life, and Nerium gave me that opportunity.”
  • “When you don’t worry about money anymore, you don’t have to stress out over the bills, you know it’s about the choices you have – the freedom you have.”
  • “Nerium has just completely changed my life; everything about my life has gotten completely 100% better. We recently purchased our dream home and it’s absolutely gorgeous.”

To view TINA.org’s database of more than 200 inappropriate earning claims about Nerium, click here.

+ Inappropriate health claims

Marketing supplements as having the ability to treat, cure, alleviate the symptoms of, or prevent developing diseases is simply not permitted by law. But that hasn’t stopped a multitude of Nerium distributors from claiming that its products can treat a host of diseases including Alzheimer’s, Parkinson’s, and psoriasis. TINA.org has amassed a database of well over 200 instances of inappropriate health claims. To view, click here.

+ Fake endorsements

In its Success Planner Nerium counsels its distributors to market their business and sell their wares by using before and after pictures of people to show the dramatic effects that Nerium products can have on a person’s skin. Some distributors, however, seem to just make it up, and in one instance it resulted in a lawsuit being filed against Nerium and distributors by “Goodfellas” actor Ray Liotta in March 2014.

According to the complaint:

Nerium uses “before and after” photos with fabricated results to fraudulently induce consumers to purchase Nerium AD skin cream and to entice them to become Nerium Partners …. Liotta has never used Nerium AD.

In January 2015, Liotta, Nerium and the distributor defendants entered into an undisclosed settlement agreement.

Distributors also claim that Michael J. Fox endorses Nerium’s EHT brain supplement, or that Nerium has partnered with the Michael J. Fox foundation.

But the Michael J. Fox foundation website states:

The Michael J. Fox Foundation has a policy of refraining from advocating, endorsing or promoting any drug therapy, course of treatment, or specific company or institution. It is crucial that care and treatment decisions related to Parkinson’s disease and any other medical condition be made in consultation with a physician or other qualified medical professional.

Further, in 2012, MD Anderson Cancer Center issued a statement aptly entitled “Setting the record straight about MD Anderson and Nerium,” which basically tells consumers not to believe Nerium distributors when they market Nerium as having any sort of relationship with the health care center.

+ Lawsuits, lawsuits, lawsuits

While Nerium has only been in business since 2011, it’s already been involved in at least 20 lawsuits, and in many of those lawsuits Nerium CEO Jeff Olsen is also a party. The allegations in the 20 cases range from product liability, defamation, employment discrimination, trademark infringement to fraud allegations.

In 13 of the actions, Nerium is the defendant, and at the time of this writing, five suits were still pending. At least eight involve distributors. In two cases Nerium sued another MLM — World Global Network Corporation in one, and Modere in the other — for allegedly poaching distributors. In another case, Olsen’s business partner of more than 25 years brought a $21 million lawsuit against Olsen and Nerium alleging breach of contract, copyright infringement, and fraud, among other things.

Below are highlights from three other cases:

  • In 2012, a scientist/beauty blogger sued Nerium and Olsen, alleging, among others, defamation, intentional infliction of emotional distress, invasion of privacy and conspiracy to defame. The complaint claimed that after the science blogger was critical of Nerium’s products and its MLM business structure, the company and Olsen “retaliated” against the blogger by publishing false statements. The case settled in 2015.
  • In 2014, a terminated Nerium distributor sued the company and Olson, among others, for $1 million. She claimed:

Nerium . . .  is a pyramid scheme disguising itself as a  . . .  MLM Company …  What separates Defendant Nerium from a legitimate MLM is that 85-95% of its participants lose money, make no money, or make a deminimis amount of money. Defendant Nerium is a pyramid scheme and because Plaintiff questioned the company’s unethical activities she [was terminated and] incurred injuries making the basis of this lawsuit.

    The case was stayed pending arbitration later in 2014, and the paper trail appears to end there.

  • In 2016, a user of Nerium AD, which is marketed as an age-defying night cream, brought a product liability suit against Nerium alleging that the night cream was unsafe, unreasonably dangerous and/or defective because it chemically burned and disfigured plaintiff’s face and neck. The lawsuit claims that Nerium should have provided adequate warnings of the possible health consequences of the cream and instructed users to spot test the product before applying it to their face and neck. The case is currently pending in Missouri federal court.
+ Federal consumer complaints galore

The Federal Trade Commission (FTC) has more than 100 complaints on file regarding Nerium. More than half of these complaints, which were filed between June 2012 and July 2016, had to do with consumers having trouble getting refunds and unwanted credit card charges.

“It seems they simply want to make it impossible for customers to cancel their orders/subscriptions and try to squeeze as many extra billings out of them as possible,” said one consumer.

For more information about the complaints click here.

+ Confusing compensation plan

Nerium’s 16-page compensation plan begins by stating that the company is proud to reward distributors “with a lucrative, innovative way to earn income.” But the “lucrative” part may best be reserved for the company and not the Nerium newbie because this comp plan is going to cost you – a lot. The predominant theme appears to be purchase products –aka possible inventory loading— and recruit, which are two hallmarks of a pyramid scheme.

Here’s the Nerium comp plan in a nutshell: In order for you and your team to be fully qualified for all commissions, bonuses and free products, you must:

  • Recruit — In fact, one of the options for earning a fast start bonus involves recruiting three new distributors in your first 30 days.
  • Buy a starter pack of productsk that can cost you anywhere from $500 to $1,500.
  • Enroll in an auto-delivery program that ships a minimum of about $80 worth of product to you each month.
  • Purchase anywhere between about $80 to $2,000 worth of products a month.

Note: Instead of personally buying all the needed products to qualify for all the bonuses, it’s possible to shift some of that purchasing burden to customers you enroll (but you’d need at least nine customers on auto-delivery in your first 30 days to qualify for the Fast Start bonus).

+ Truly sad distributor earnings

While Nerium’s website professes that it provides its distributors with financial freedom, its outdated, hard-to-find, U.S. 2013 Income Declaration tells a different story. In fact, almost no distributor actually makes it to a level of true “financial freedom.”

According to Nerium’s own statement, 43 percent of active “brand partners” earned zero commissions, and when you factor in the required purchases to remain eligible for all commissions and bonus it appears that at least 88 percent of distributors are making little to no money on average. Less than one percent of distributors earn more than $100,000. And just five out of about 75,000 distributors made over $500,000. With these odds, you might have a better chance at financial freedom by purchasing a lottery ticket.

+ Undisclosed social media ads

The FTC is very clear in its endorsement guidelines that if someone is paid to promote a product or has a material connection with a company, they must disclose that relationship since it could affect a consumer’s opinion about the product. For space-cramped platforms such as Twitter or Instagram, the guidelines state that starting a post with AD: or #ad would likely do the trick.

Yet, make-up artist Jamie Greenberg, who does have a material connection to Nerium as evidenced by the post comparisons below, continually fails to clearly and conspicuously disclose this relationship in her Instagram and Twitter posts featuring Nerium products. Who, you may ask, is on the hook for this failure to disclose – both Nerium and Greenberg.

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See Nerium’s full response to a request for comment about TINA.org’s findings here.

For more of TINA.org’s coverage of MLMs click here.

 

 

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Multi-Level Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits.

Inventory loading is the practice of requiring participants to purchase merchandise in order to receive commissions.

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