Article – FTC Submits a Notice of Supplemental Authority to the U.S. District Court in Neora Case

As part of the headline feature story in the latest edition of Social Selling News (SSN), the Federal Trade Commision (FTC) has submitted a Notice of Supplemental Authority to the U.S. District Court in the Neora trial. According to the article …

“At the conclusion of the bench trial, the FTC submitted a Notice of Supplemental Authority to the U.S. District Court of Texas that is adjudicating the ongoing FTC case against Neora, a direct selling company headquartered in Dallas, Texas, that the FTC is suing as an alleged pyramid scheme. The purpose of this submission is to bring to the attention of the Texas court the relevant legal authorities and information that was established in the Noland decision. In the filing, the Commission noted four components from the Noland decision that it believes should have a bearing on the ongoing Neora case.

1. The credibility and persuasiveness of two FTC witnesses, which the Arizona Court found to be credible and relevant to its liability findings.
2. The proper test to apply for determining if an MLM is a pyramid scheme. The FTC points out that in the Noland decision, the Court evaluated whether participants in the business could succeed through recruitment only, without customer sales. The Court also noted the MLM’s emphasis on a lack of safeguard policies, the use of false product demand, and the high percentage of affiliate incentives to “buy rank” through the purchase of products.
3. The proper test to apply and evidence to consider when evaluating whether an MLM has made misleading income claims. The Commission’s Notice referenced the Arizona Court’s findings that the “Defendants” income claims were false in theory and in practice.
4. Marketing and training materials were used to spread the defendants’ false income claims, which violates the FTC Act for furnishing the means and instrumentalities to mislead others.

Whether or not the FTC’s Supplemental Notice to the District Court of Texas will make a difference in the Neora case remains to be seen. Regardless, the Commission appears intent on continuing its targeting of direct selling companies that it believes are placing a higher priority on recruitment over customer sales.”

And to gain greater insight into the impact of these developments, be sure to register for the upcoming SSN Webinar – The FTC’s Recent Anti-Pyramid Case Win: “What Direct Sellers Should Know,” set for Wednesday, July 12 at 1 pm Central. Click here to sign up today!