In August 2015, the U.S. Federal Trade Commission (FTC) temporarily suspended Vemma Nutrition, which makes energy drinks for the college crowd, from targeting students with a get-rich-quick pyramid scheme that promised to bring in way more dough than a part-time job as a barista or server.
In December 2016, the agency announced a settlement that put a permanent stop to Vemma’s multilevel marketing (MLM) activities, likening them more to a Ponzi scheme that makes “misrepresentations about the profitability of business ventures or the health benefits of products.”
Students Were Lured Into Making $600 “Investment”
Vemma Nutrition managed to bring in an average of $200-300 million annually by convincing students to make a $600 initial investment in the company’s products, sell them to friends and family members, and recruit new salespeople along the way. That is a typical MLM pyramid, and many of the student recruits found themselves quickly in debt to Vemma.
A federal court levied a $238 million judgment against Vemma.
After the initial investment, they could not sell the required $150 monthly minimum of products. Instead of making money as the company promised, students found themselves in even more debt, and with cases of energy drinks that they were unable to unload.
A little over a year after the initial complaint, a federal court ruled that Vemma Nutrition is permanently banned from using the MLM business model, and for requiring minimum monthly purchases. Moreover, a $238 million judgment has been levied against the company, although that amount is not expected to be recovered. Instead, it will be forced to surrender over $470,000 in real estate and other assets. (The judgment is expected to be suspended once those assets are turned over.)
“Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the MLM industry,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “MLM companies must ensure that their promotional materials aren’t misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors.”
Energy Drinks Can Adversely Affect Your Health
The decision to ban Vemma from targeting students is a victory for health experts attempting to convince adolescents and teenagers to drastically reduce their energy drink consumption due to the health risks they pose. The combination of sugar, caffeine, and other stimulants can be a serious health risk to young people as well as adults. Excessive consumption of energy drinks can cause heart problems, weight gain, kidney problems, and other issues such as insomnia, nervousness, and depression.
Many energy drinks are labeled as nutritional supplements.
Much of the confusion over the benefits of energy drinks stems from the labeling on the package. Since the drinks contain natural substances like taurine and guarana, which are said to boost energy, they are labeled as nutritional supplements. Combine those substances with sugar and caffeine, and you get a toxic cocktail that can do more harm than good.
Many people who have had issues with energy drinks drink several of them daily, and the adverse effects become cumulative the longer they consume them.
The ban on Vemma Nutrition for targeting college students is a step in the right direction in looking for alternative ways to boost the energy we all need.