MLM Attorney Kevin Thompson: Update on the Fortune Hi Tech Case – FTC Passes on Scalpel, Goes for Sledgehammer

As a refresher, in early February of 2013, the FTC got an injunction issued against Fortune Hi Tech Marketing. The summary of the lawsuit can be found here: FTC vs. Fortune Hi Tech.

FTC’s Strategy

FTC passes on the scalpel and picks up the sledgehammer.

FTC passes on the scalpel and picks up the sledgehammer.

Since the lawsuit was filed, I’ve had a lot of time to study the FTC’s arguments against FHTM. In particular, I closely studied the FTC’s expert report prepared by Dr. Peter Vander Nat. The FTC’s entire case hinges on the validity of Peter Vander Nat’s report.

In the lawsuit, the FTC passed for the scalpel and picked up the sledgehammer. In summary, they’re no longer relying on Vander Nat’s convoluted math formula, which I discussed in my last article regarding the FTC’s economist. If you’re following the news with Herbalife, I think you’ll find this next point interesting. Currently, there’s a lot of bickering back and forth between MLM proponents and critics alike over the interpretation of Vander Nat’s formula. People are discussing how Herbalife stacks up to the standard. With one word, I can put the entire debate to rest for both sides.

Are you ready for it?

The word is:


The formula is irrelevant. In Vander Nat’s lengthy declaration used against Fortune Hi Tech, the formula is never mentioned. Not once. Why? The answer is obvious. The FTC is distancing itself from it because the formula is too broad and too confusing. The FTC’s case against BurnLounge (sued in 2006) is jeopardized due to the ambiguity of this standard. The case is currently under appeal. The main source of contention: Vander Nat’s qualification as an expert. Vander Nat had never studied an MLM that he concluded was legal. Where’s the fairness in using an objective standard to measure right from wrong when you never find anything right? There’s no wisdom in designing a water-filter if there’s no opportunity for water to pass through.


In his declaration, Vander Nat opines and argues that FHTM was operating as an illegal pyramid scheme. Instead of relying on his formula, he bases his finding on a few assumptions. Those assumptions are all addressed in Charles King’s declaration (available below). Dr. King was retained by FHTM as its expert in their effort to dissolve the injunction. Out of Vander Nat’s assumptions, there’s one that should be concerning for all people in the network marketing industry: commissions triggered via internal consumption are “recruitment bonuses.” In other words, rewards triggered via distributor consumption are illegal. This argument represents a dangerous and irresponsible strategy employed by the FTC. In one of the footnotes in his declaration, Vander Nat writes, “…I also understand that the ultimate users of the products – for purposes of the Koscot test – are people who are not participants in the business venture.” With this framework, he pulls out all revenue garnered from distributor consumption. He then compares the money left over (not much) with the money paid out in bonuses. He then concludes that the pay plan is underfunded and relies on “recruitment bonuses” to survive. Charles King sums it nicely when he writes:

Since Vander Nat is not counting commissions generated via internal consumption, it creates the impression that the plan lacks sufficient revenue from product sales to support the commissions. He treats the difference between revenue available for commissions and the amounts paid as recruitment bonuses. Using his own definition of “end user,” he’s able to dramatically shrink the commission pot; thus, creating the false impression that the Commission Plan is insufficient and underfunded.

Optimal Scenario

Vander Nat also relies on an economic theory known as “Optimal Scenario.” Using the Optimal Scenario framework, Vander Nat assumes that if EVERYONE were to hit the high levels in the FHTM business, the plan would be underfunded. The reality: not everyone hits the levels nor does everyone try. While Vander Nat acknowledges that breakage exists (money in the plan from un-earned commissions), he ignores it completely. In network marketing, the participants operate with various goals. There are some that want to earn a few hundred dollars a month, some do it for social reasons, some want to save money on product, some are supporting a friend or relative, etc. They’re not all trying to “max out” the pay plan. This assumption was faulty and led to a faulty conclusion.

What does all of this mean?

Change is coming. Stay tuned. In 2004, the FTC said that the amount of internal consumption is inconsequential for pyramid scheme analysis. Based on their recent case against FHTM and various posts on their website, the FTC appears to be back-tracking. It’s going to take strong leadership to steer this conversation in a favorable direction for the industry. And strong leadership requires that we at least acknowledge the areas where we’re weak. Cultures of hype need to stop. Product value matters. Without question, the industry is going to look different within 18 months. How different? We’ll see.

If you’re reading this via email, click this link to review the declaration prepared by Charles King.

Kevin Thompson

MLM News: Network Marketing Companies Are Making Headlines Worldwide

Without a doubt Direct Selling worldwide is coming on strong. Having weathered the economic recession of 2008, we are now seeing the rise in sales as well as distributors. And 2013 has started off on a strong note for both the public and private network marketing companies as we can  see with this most current MLM News Report.

Video Plus Success University 2013

Success University 2013

Mary Kay Implements Latest Mobile Technologies to Support Worthy Cause

Domestic violence remains the number one cause of injury for women ages 15 to 44 and each year, in the U.S. alone, victims of domestic violence lose nearly 8 million days of paid work. In efforts to promote prevention and raise awareness, Mary Kay has launched innovative strategies to put a stop to violence and educate others about how to identify abuse.

In 1996, Mary Kay Ash first launched the Mary Kay Foundation with a commitment to help bring an end to cancers affecting women. Just five years later, those efforts were expanded to include working toward an end to domestic violence, a cause that has remained one of the foundation’s primary focuses ever since. Today, as part of its efforts, the company takes a uniquely innovative approach to furthering the cause through the use of mobile technology to provide support and assistance to those impacted by domestic violence who may feel they have no place to turn. (Read The Whole Article Click Here)

DSA Participates in Events with State Attorneys General

This week Washington, D.C., was the site of conferences hosted by the National Association of Attorneys General (NAAG), the Republican Attorneys General Association (RAGA) and the Democratic Attorneys General Association (DAGA). DSA’s involvement with these organizations has long been recognized by the DSA Government Relations Committee as an integral tactic of the Association’s government relations and political outreach strategy. DSA attorneys Valerie Hayes and John Webb participated in these events and spoke with numerous State Attorneys General about issues important to the direct selling industry. Specifically, they discussed the recent enforcement action filed against Fortune Hi-Tech Marketing by the Kentucky, North Carolina and Illinois Attorneys General in conjunction with the Federal Trade Commission. DSA staff discussed the Association’s membership review process and members’ compliance with DSA’s stringent Code of Ethics. In addition, DSA staff discussed legislation introduced in various states that would impact direct selling companies and distributors, as well as other issues.

Vice President Joe Biden and U.S. Attorney General Eric Holder gave keynote addresses at the NAAG meeting, focusing on the Administration’s gun control initiative. Thomas Curry, Comptroller of the Currency, and Richard Cordray, Director of the Consumer Financial Protection Bureau, discussed how the federal government is working with states to enforce consumer protection laws.

As prescribed by the DSA Government Relations Committee, DSA will continue to meet with State Attorneys General to foster these relationships and advocate the interests of the direct selling industry.

Network Marketing Companies In The News

Amway recently opened a new facility at Citi Field, home of the New York Mets baseball team. The Amway Business Center will be used for classes and serve as a resource for distributors. The company has also announced a sponsorship package with the team that includes a sign on the right-center field scoreboard, hospitality opportunities, season tickets and other ways to put its sponsorship into action.

Natura Cosmeticos was ranked No. 2 on the 2013 Global 100 List of the Most Sustainable Corporations in the World. The list is created by Corporate Knights Inc. using data on corporate sustainability from the top 100 large-cap companies in the world. The rankings are announced each year at the World Economic Forum.

Origami Owl has partnered with the country music band Rascal Flatts to promote its TAGGED™ collection. For a limited time customers will receive a digital download of Rascal Flatts’ latest single, Changed, with the purchase of Origami Owl’s Changed Tag.

Stella & Dot has established its European headquarters in London and is now looking to expand to Scotland with the recruitment of up to 450 new sales representatives there.

USANA announced that its China subsidiary, BabyCare Ltd., received official government approval from the Ministry of Commerce People’s Republic of China to expand direct selling activities in three additional provinces/municipalities: Jiangsu, Shanxi and Tianjin. These licenses are in addition to a license in Beijing.

In additional company news, the USANA True Health Foundation donated $10,000 NZ to KidsCan, a nonprofit organization in New Zealand, in response to Mike Allsop completing the 777 Project. The challenge included running seven marathons in seven days on seven continents.

Vemma has won five graphic design awards in two competitions sponsored by GDUSA magazine. The company took home three awards in the American Graphic Design Awards competition and two from the American Package Design Awards.


FTC Action Against Alleged Pyramid Scheme Affirms DSA Membership Process


Washington, D.C. (Jan. 29, 2013) – Following the Jan. 28 announcement that an enforcement action against Fortune Hi-Tech Marketing (FHTM) is being initiated by the Federal Trade Commission (FTC) and several attorneys general for allegedly operating a pyramid scheme, the Direct Selling Association (DSA) has received numerous inquiries regarding whether FHTM is a member of the Association. “FHTM is not a member of DSA,” confirmed President Joe Mariano. Additionally, he stated that “the Association’s membership application process is rigorous, and is designed to ensure that only legitimate direct selling companies become members of the direct selling industry’s trade association.”


FHTM had applied for DSA membership, but withdrew its application in 2011. A rigorous review of each applicant’s marketing and compensation plan is conducted to ensure compliance with DSA’s self-regulatory Code of Ethics. DSA works with applicant companies to address any deficiencies in policies and procedures prior to recommending to the Board of Directors that the company be approved for full membership. Mr. Mariano explained that “the membership review process serves to identify pyramid schemes that are masquerading as legitimate direct selling companies.” Mr. Mariano also stated “that well over half of the companies that apply for membership in the Association withdraw their applications for a variety of reasons including failure to come into full compliance with the requirements of the DSA Code of Ethics,” thus making the company ineligible for membership. Pyramid schemes and other fraudulent scams are ineligible for DSA membership.

While DSA cannot comment on the specific allegations regarding FHTM, Mr. Mariano commended the FTC and state attorneys general “for their comprehensive, ongoing efforts to identify and prosecute illegal and fraudulent pyramid schemes, an approach that is consistent with concerns raised by DSA through its membership application process and its long-established self-regulatory efforts.”

As part of the membership review process, DSA welcomes comments from the public about pending member companies. A full list of pending members of the association can be found at

For more information about DSA’s membership review process visit


Amy Robinson

Breaking MLM News: Fortune High-Tech Marketing Raided And Shut Down By Regulators As Pyramid Scheme

Paul Orberson the founder of Fortune High-Tech Marketing aka FHTM, who was one of the highest paid Excel Communication distributors in history, may now be looking at criminal charges before all the dust settles. Over the last 24 months, FHTM has been in many lawsuits, and regulator demands, yet the founder and his executive team seemed to not care as they continued to over-hype the compensation plan. (See FTC vs. FHTM)

Jayne O’Donnell, USA TODAY reported the following…

The Federal Trade Commission and three state attorneys general announced Monday that they shut down a national multilevel marketing company they called a “global pyramid scheme” that rewards people for recruiting others.

Fortune Hi-Tech Marketing of Lexington, Ky., and its top two executives were sued by the FTC and the attorneys general of Kentucky, North Carolina and Illinois for “unfair and deceptive actions” that violated state and federal laws. Among the charges: Misrepresenting that the company is “a good way for average people to make substantial income and achieve financial independence.”

“Today’s actions are the beginning of the end for one of the most prolific pyramid schemes operating in North America,” said Kentucky Attorney General Jack Conway.

The headquarters and a warehouse for Lexington, Ky.-based Fortune Hi-Tech Marketing were raided Monday morning and the contents confiscated by a receiver appointed by the U.S. District Court for the Northern District of Illinois. The receiver, Robb Evans, and his firm met with FHTM employees today and sent most home.

Linda B. Blackford — of the Herald Leader wrote…

Fortune Hi-Tech was founded in 2001 by Paul Orberson, a Danville native who made his initial fortune with multi-level marketing in the Excell Communications company. He has donated at least $1.6 million to UK Athletics, making him title sponsor of the Paul Orberson Football Office Complex at the Nutter Training Facility.

Fortune Hi-Tech’s business model is based on new representatives joining the group for rates that have ranged from $99 and $299. Representatives receive commissions for selling goods and services — such as Dish Network, Frontpoint Home Security, and various cell phone providers — and for bringing other people into the sales force.

In most network marketing groups, people who join early can make a lot of money because commissions automatically flow to the early members of a pyramid-shaped sales force that is based on recruiting new people. Illegal pyramid schemes are generally defined as those that focus mostly on recruiting new people, rather than selling products.

Steve Baker, the FTC’s midwest regional manager, said his office estimates Fortune Hi-Tech made $30 million a month, but 93 percent of its sales representatives made less than $15 a month. He said Fortune Hi-Tech’s sales representatives can call the FTC hotline with questions at 202-326-2643.

Officials with Conway’s office and the FTC could be seen entering and exiting the company’s Lexington headquarters much of Monday morning. Lexington police were seen leaving the building at 11:45 a.m., along with people unloading boxes marked with the FTC logo. A trickle of workers exiting the building said they had been sent home for the day.

Monday’s action was the latest in a long line of legal problems for Fortune Hi-Tech, which has said it has as many as 160,000 representatives around the world who sell specialized products and recruit others to continue that selling.

In 2011, Fortune Hi-Tech agreed to pay nearly $1 million settle allegations by Montana officials that it was operating an illegal pyramid scheme there. Fortune had a similar problem in North Dakota and paid a $12,000 fine. The company did not admit wrongdoing in either case.

In another 2011 settlement Fortune Hi-Tech agreed to pay $1.3 million to claimants in Texas after an investigation by that state’s attorney general’s office. The company did not admit to any wrongdoing,

In North Carolina, Attorney General Roy Cooper’s office launched an investigation into Fortune Hi-Tech in mid-2010. Consumers said they paid money to the company but were able to make money only by recruiting others, not by selling goods or services, according to a news release. A total of 25 consumers have now complained about Fortune Hi-Tech in the state.

Several complaints about Fortune have been made to the Kentucky Attorney General’s office. In addition, at least one class action suit against Fortune Hi-Tech has been filed in federal court in Lexington.

Orberson keeps a low profile in Lexington but made headlines in 2010 when he gave $100,000 to the Hoops for Haiti fundraiser put on by University of Kentucky basketball coach John Calipari.

In 2010, Orberson told the Lexington Herald-Leader that he makes $600,000 a year as the founder of Fortune Hi-Tech. Orberson said he used to take minimum wage, but his accountants told him it would look like a money-laundering scheme.

Read more here:

MLM Attorneys by Thompson Burton wrote the following…

After Six Year Slumber, FTC Wakes Up Big And Goes After Fortune Hi Tech

The FTC has sued Fortune Hi Tech marketing, alleging them to be a pyramid scheme. As of today, an injunction has been issued and the offices in Kentucky have been raided. Read below for the FTC’s press release. Also, a copy of the complaint is provided below.
FHTM Promoted Itself as a Path to Financial Independence, But Most People Made Little or No Money

At the request of the Federal Trade Commission and the states of Illinois, Kentucky, and North Carolina, a federal court has halted an allegedly illegal pyramid scheme pending trial. The FTC and the state attorneys general seek to stop the allegedly illegal practices of the Fortune Hi-Tech Marketing (FHTM) operation, which claimed consumers would make substantial income by joining the scheme. The operation affected more than 100,000 consumers throughout the United States, including Puerto Rico, and Canada. In some areas, including Chicago, the scheme targeted Spanish-speaking consumers.
“Pyramid schemes are more like icebergs,” said C. Steven Baker, Director of the FTC’s Midwest Region. “At any point most people must and will be underwater financially. These defendants were promising people that if they worked hard they could make lots of money. But it was a rigged game, and the vast majority of people lost money.” Read on…

The FTC Complaint…

FTC Action Leads Court to Halt Alleged Pyramid Scheme
FHTM Promoted Itself as a Path to Financial Independence, But Most People Made Little or No Money
At the request of the Federal Trade Commission and the states of Illinois, Kentucky, and North Carolina, a federal court has halted an allegedly illegal pyramid scheme pending trial. The FTC and the state attorneys general seek to stop the allegedly illegal practices of the Fortune Hi-Tech Marketing (FHTM) operation, which claimed consumers would make substantial income by joining the scheme. The operation affected more than 100,000 consumers throughout the United States, including Puerto Rico, and Canada. In some areas, including Chicago, the scheme targeted Spanish-speaking consumers.

“Pyramid schemes are more like icebergs,” said C. Steven Baker, Director of the FTC’s Midwest Region. “At any point most people must and will be underwater financially. These defendants were promising people that if they worked hard they could make lots of money. But it was a rigged game, and the vast majority of people lost money.”

According to the complaint filed by the FTC and the state attorneys general, the defendants falsely claimed consumers would earn significant income for selling the products and services of companies such as Dish Network, Frontpoint Home Security, and various cell phone providers, and for selling FHTM’s line of health and beauty products. Despite FHTM’s claims, nearly all consumers who signed up with the scheme lost more money than they ever made. To the extent that consumers could make any income, however, it was mainly for recruiting other consumers, and FHTM’s compensation plan ensured that most consumers made little or no money, the complaint alleged.

“This is the beginning of the end for one of the most prolific pyramid schemes operating in North America,” Kentucky Attorney General Jack Conway said. “This is a classic pyramid scheme in every sense of the word. The vast majority of people, more than 90 percent, who bought in to FHTM lost their money.”

As alleged in the complaint, FHTM promoted itself as a way for average people to achieve financial independence. Some FHTM representatives claimed they earned more than 10 times as much as their previous earnings in their second and subsequent years with FHTM. One person claimed that another representative earned more than $50,000 in his sixth month and millions of dollars in subsequent years. Another person promoted a recruitment meeting on her Twitter account, stating, “Bring ur friends & learn how 2 make $120K aYR.” At its 2012 national convention in Dallas, FHTM called its top 30 earners to the stage to present them with a mock-up of a $64 million check, which several of them shared as a photo on social networking websites.

To participate in the scheme, consumers paid annual fees ranging from $100 to $300. To qualify for sales commissions and recruiting bonuses, they had to pay an extra $130 to $400 per month and agree to a continuity plan that billed them monthly for products unless they canceled the plan. Those who signed up more consumers and maintained certain sales levels could earn promotions and greater compensation, but contrary to FHTM’s claims, the complaint alleged, its compensation plan ensured that, at any given time, most participants would spend more money than they would earn.

According to the complaint, recruits were told they could earn high commissions by selling products to people outside the operation, but instead only minimal compensation was paid for sales to non-participants, and few products were ever sold to anyone other than participants. The scheme provided much larger rewards for recruiting people than for selling products, and more than 85 percent of the money consumers made was for recruitment.

In addition to charging the defendants with operating an illegal pyramid scheme and making false earnings claims, the FTC charged them with furnishing consumers with false and misleading materials for recruiting more participants. The attorneys general offices of Illinois, Kentucky and North Carolina joined the FTC complaint, as well as alleging violations of their respective state laws.

The defendants are Paul C. Orberson, Thomas A. Mills, Fortune Hi-Tech Marketing Inc., FHTM Inc., Alan Clark Holdings LLC, FHTM Canada Inc., and Fortune Network Marketing (UK) Limited. On January 24, 2013, the court halted the deceptive practices, froze the defendants’ assets, and appointed a temporary receiver over the corporations pending a trial.

The Commission vote, including Commissioner J. Thomas Rosch, authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division.

For more information about the case, in English and Spanish, consumers can call 202-326-2643. To learn more about multi-level marketing, read the FTC’s Multilevel Marketing and Business Opportunity Scams ( Estafas de Oportunidades de Negocio ).

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Frank Dorman
Office of Public Affairs

Allison Martin, Director of Communications
Kentucky Attorney General’s Office

Maura Possley
Illinois Attorney General’s Office

Noelle Talley, Public Information Officer
N.C. Department of Justice

David A. O’Toole
FTC’s Midwest Region

Paul Orberson has responded with the following…

Today, January 28, 2013, members of a Court Appointed Temporary Receiver temporarily suspended FHTM, your beloved business. The Federal Trade Commission, the Commonwealth of Kentucky, and the states of Illinois and North Carolina filed a complaint in Federal Court and the Judge issued a Temporary Restraining Order appointing the Receiver. We are confident that our side of the story will be heard and we are already making positive strides towards reopening.

This is a process and we will be defending ourselves vigorously on Thursday, February 7, 2013. While operations are now temporarily suspended we truly expect to be vindicated.

At this point we are unable to provide you with any additional information. As soon as we know more about the situation and how it impacts your business, we will inform you immediately.


Paul Orberson

No matter where you stand in the Fortune High-Tech Marketing case, if you are a proponent of direct selling, network marketing, MLM or whatever you call it, then we MUST come together and create best practices that the regulators agree are in the best interest of the consumers.

Living An Epic Adventure,
Troy Dooly
The Beachside CEO

MLM News Report: Truth About Verve Oxyfresh At The Top Of Their Game, FHTM Lawsuit Update, MLM Sales Growth

MLM News Report

Truth About Verve Oxyfresh At The Top Of Their Game,

FHTM Lawsuit Update, MLM Sales Growth

This has been a great week for Direct Selling News, and the Network Marketing community as a whole, read on to see how Multi-Level Marketing is changing lives worldwide.

This week’s MLM News is sponsored by Rada Cutlery



Attention: Any company looking for a location for a Winter convention, we have access to a great deal at the Summit Lodge In Snowbird!



Summit Lodge, Snowbird, Utah


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Complimentary Ballroom Meeting Space – 7800 Sq Ft. (Beautiful space!!  Very private)

(Capacity 864 Theater and 553 Classroom – deduct for stage/AV setup)  16′ ceiling

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Two complimentary 1 Bedroom Suites for up to 7 nights

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Super congenial and cooperative Snowbird Staff to work with.  Lodge all recently updated.

Beautiful surroundings!!  Lots of team building opportunities.  Very private venue.

Contact Troy Dooly at for additional information!



FHTM Victory in Federal Court – Federal Judge Dismisses Nationwide Lawsuit

A proposed class-action lawsuit against Fortune Hi-Tech Marketing, Inc. (FHTM) was dismissed in Kentucky by a federal judge.

Lexington, KY (PRWEB) February 24, 2012

On Wednesday, the United States District Court Eastern District of Kentucky dismissed a proposed class-action lawsuit against Fortune Hi-Tech Marketing, Inc. (FHTM). The judge ruled in favor of FHTM and all named individual defendants on their motion to compel arbitration. The judge upheld the arbitration clause contained in FHTM’s Independent Representative Agreement, determining that the Plaintiffs had contracted with FHTM, that the contract contained an enforceable arbitration clause for all of the plaintiffs’ claims, and therefore that the case should be dismissed.

FHTM is a direct selling company with a business model that has existed for over 100 years in the United States. The company has been in business for over 10 years and has operated with the highest ethical standards and business practices.

“We feel this is a just and correct decision by the federal court and we are glad that our Independent Representatives can once again conduct business without the challenge of this inappropriate lawsuit. ” said Keith Kuder, Chief Legal Officer for FHTM.

Paul Orberson, President and Founder of FHTM added, “We are excited about this ruling, but, frankly, we trusted the system to get the right result. FHTM is moving forward with the business of doing business.”

Now I was not able to find the actual Judge’s ruling, but I did receive a copy of a draft, where the plaintiffs  are going to appeal the Judge’s decision, so this is not over yet.

I also want to direct our viewers over to Ty Tribble’s blog because he has been following this for a while and have some great back story on things. 


Direct Selling News wrote a great article on the growth of MLM in Peru, tha tis well wroth the read. To many times we in America seem to forget that Network Marketing/Direct Sales is a live and growing worldwide.

Direct selling is alive and doing well in Peru. The industry, which is the largest category within non-store retailing in the country, has allowed hundreds of thousands of Peruvians to create their own business opportunities, and also helped to reduce poverty. And, according to industry leaders, the future looks bright.

Direct selling started in Peru in the 1960s. When the country’s military government imposed severe restrictions on imports in order to promote and protect local production, one company—Yanbal (currently known as Unique, a manufacturer of cosmetic products)—adopted direct selling as its marketing model, providing women with an opportunity for economic and professional growth that did not then exist. In the following years, Avon, Natura and Belcorp entered the market.

Direct selling grew slowly over the next 40 years. In 2001, an initiative by Avon led to the creation of CAPEVEDI (Camara Peruana de Venta Directa), the Peruvian Chamber of Direct Selling ( With the participation of Unique, Belcorp and Natura, CAPEVEDI helped promote the spirit of cooperation between direct selling companies as well as represent the interests of its members to public and private institutions for the development, consolidation and prestige of the business model.

In the following years, direct selling grew quickly. The period between 2004 and 2009 showed the strongest growth—an average rate of 24 percent per year—generating important sources of incomes for more than 350,000 independent entrepreneurs, more than 90 percent of whom were women.

In 2011, the growth of direct selling continued to expand, not only in the capital city of Lima, but also in the provinces, which represent 47 percent of the independent entrepreneurs. Top selling products last year were cosmetics with 25 percent and nutritional products with 18 percent of market participation in direct selling. Within the cosmetics category, direct selling had 57 percent of the market versus 43 percent in retail.

Hakki Ozmorali over at The World Of Direct Selling released the following finding of the biggest companies in direct sales. 

As we have their reports from direct selling industry’s six giants for last year, it’s the time to review and compare their growths. Just like it has been the case throughout the year, we see mixed results at the end of 2011.

The last 5 years’ winner in sales growth is clearly, Natura. Natura increased its sales by 103% in this period! With its 83% growth, Herbalife is a strong second! The slowest of all is Avon, growing at quite modest rates starting from 2008.

It is true that Avon is the biggest of all but at this pace, it should not take too long for other public companies to catch. As an example, while Herbalife’s sales was 22% of Avon’s in 2007,  this is 31% as of end-2011.  On top of this, Herbalife CEO Michael Johnson announced their “aspirational goal of 10 billion volume points by 2020″. This is more or less equivalent to $8.8 billion sales! On the other hand, Avon is most likely to be overtaken by the end of 2012 by Amway who announced 17% growth in 2011, reaching a turnover of USD 10.9 billion!

Vemma’s Policies for Video Clip Use

You can click here to see the actual Video Clip


Breaking News Update: Fortune High Tech Marketing aka FHTM Still Facing Legal Issues

I started reporting about a year ago the issues facing Fortune High Tech Marketing (FHTM), and the fact I thought Paul Orberson had taken his eye off the ball, and was allowing others to cause huge issues for the company. You can read the reports here!

Several states and at least two difference groups have filed legal action against Fortune High Tech Marketing aka FHTM and the business model. Here are a few of the news reports we found.

The most current issue comes from Texas where FHTM lost their most recent round of legal battles. (Read Here)

Now I do want to report, the the Fortune leadership now seem to have taken seriously the legal battles they are facing and have completely revamped their internal legal team. In the spring of 2011, they started to hire some very focused lawyers in-house to help clean up the external mess, and to look at their business model for flaws.

I strongly suggest anyone interested go to the FHTM website (Click Here) and listen to Keith Kuder, Chief Counsel for Fortune as he explains why he took the job, and the promises Paul Orberson.

Patrick Pretty Just Broke The News That FHTM Has Settled With The Texas AG

I received information last week that FHTM had settled, but waited until Patrick reported on this situation. Patrick is one of the best reporters on this type of situation, and I felt as an advocate for network marketing I might comes across to biased to give a fair opinion. I flat out hate it when companies, especially DSA member companies put their field force at risk in these situations!

MLM Firm Fortune High-Tech Marketing (FHTM) Agrees To Refund Up To $1.3 Million To Texas Customers Amid Pyramid Allegations — But Don’t Delay If You’re Only Learning About The Agreement Today

“Fortune High-Tech Marketing Inc. (FHTM), the Kentucky-based MLM firm that has caught the attention of multiple state regulators, has agreed to pay Texas customers up to $1.3 million in refunds, the office of Texas Attorney General Greg Abbott said.

But do not tarry if you’re a Texas resident and believe you were ripped off by the firm. Although Abbott’s office formally announced the refund program yesterday, the deadline for filing a claim is Nov. 28 — only 12 days from now.

Here is a PDF the claim form, which Abbott’s office says must be submitted to FHTM. In an “Assurance of Voluntary Compliance” between FHTM and Texas (signed in July), the address for the firm is listed as 880 Corporate Drive, Suite 300, Lexington, Kentucky 40503…”

Read Patrick’s Full Report Here