Courts may be signaling concern over the regulator’s authority to obtain injunctions and freeze assets in enforcement cases.
By Spencer Reese, founder and partner at Reese Poyfair Richards LLC
The bottom line for direct sellers is that if the Federal Trade Commission (FTC) loses its 13(b) authority, it loses its punch. Legitimate direct selling companies do not fear squaring off against the FTC so long as they are not blind-sided.
In 2014, a court-appointed receiver under the direction of the Federal Trade Commission (FTC) arrived at the corporate headquarters of Vemma with police in tow. Within a few days they had for all intents and purposes forced the company out of business. The company was given very little advance warning, and no time to mount any sort of sufficient defense.
The company had come under a regulatory “ambush,” a fast-action “shut down” of an operating business utilizing an ex parte injunction providing little warning to the intended targets of the raid.
Since 1982, the FTC has brought actions against network marketing businesses that it considered pyramid schemes by utilizing Section 13(b) of the Federal Trade Commission Act [15 USC §53(b)] to obtain injunctions, asset freezes, profit disgorgements and receiverships.