What Does The DSA Have To Say About The FTC Claiming VEMMA Is A Pyramid?

Direct Selling Association Preliminary Analysis - Federal Trade Commission Action against Vemma Nutrition Company


John W. Webb, Associate Legal Counsel & Senior Director, Government Relations of the Direct Selling Association wrote the following preliminary analysis on the FTC .vs Vemma pyramid allegations. 

FTC Amends Door-to-Door Sales Rule (Not Really)

What Is The FTC Door-To-Door Rule?


The FTC recently announced that it has finalized the amendments to the Federal Cooling-Off Rule, (aka Door-to-Door Sales Rule).  The amended Rule will go into effect on March 13. When the proposed amendment was published, there was some anticipation on the part of the direct selling industry that sellers would be granted some relief from the Rule.

For those not familiar, the Rule requires that customers (including new distributors or consultants) be given two copies of the 3-day Notice of Right to Cancel whenever a purchase transaction for consumer goods or services takes place at a location other than the seller’s place of business.  While there are some possible exemptions, for the most part the rule covered many transactions between distributors and their customers and between distributors and their newly recruited distributors.

The major exemption that has been in place since the Rule was originally enacted (in 1972) was a $25 threshold requirement.  If the purchase amount was less than $25, the Rule did not apply and there was no requirement to provide the customer with two copies of the Notice of Right to Cancel.

When the FTC initially proposed the amendment, the threshold was raised to $130, which would have accounted for inflation since 1972.  This change would have been a relief to many direct sellers with lower cost items and kit prices.

Ultimately, the FTC left the $25 threshold in place for transactions that occur at the buyer’s residence.  For transactions that take place at other locations but are otherwise subject to the Rule, the threshold was raised to $130.

For many direct sellers, nothing has changed.  A company cannot print separate contracts, order forms or sales receipts for different sales locations.  Because a company will not always know the actual location of a sales transaction, the better course will be to include the Notice of Right to Cancel on all order forms, receipts, and purchase agreements.  For additional information, please feel free to contact our office.