In a statement released today, Neora, a leading skincare and wellness products direct selling company, states that the Federal Trade Commission (“FTC”) has recently targeted the direct selling industry, trying to change the way direct sales companies can operate without going through the proper legislative process or formal rulemaking. Not only has Neora rejected an offer from the FTC to settle a threatened lawsuit, it has stepped up to file suit challenging the FTC’s ability to retroactively change the law without proper authority from Congress or through formal FTC rulemaking.
Deborah Heisz, Co-CEO of Neora, noted in the release that the FTC’s acts are in violation of efforts to rein in unelected federal bureaucracies and are a threat to the direct selling industry as a whole. “This is precisely the behavior that the President sought to prohibit in his October 9, 2019 Executive Orders, exhibit 1 and exhibit 2, as well as the Department of Justice in its November 16, 2017 Memorandum prohibiting all federal government agencies from utilizing ‘Guidance’ and other ‘off the book’ regulations to change the law,” says Heisz. “Neora has complied with all laws and the FTC’s most recent 2018 business guidance regarding direct sales business models.”
Founder and CEO Jeff Olson also went on the record about why they are taking the action against the FTC. “Eight years ago, Neora began as a family-owned business seeking to change lives through our products and opportunities. We are the real deal; in the business of making people better, whether it is a hardworking parent or the budding entrepreneur looking to represent the industry’s leading products. Our Brand Partners work hard, and now it is our job to stand for them and protect the businesses they worked so diligently to develop.”
In the release, it states Neora retained renowned Ankura Senior Managing Director, Dr. Walter Vandaele, to conduct a thorough analysis of its data. Dr. Vandaele is a University of Chicago-trained econometrician who previously served as the Assistant Director for Regulatory Evaluation and Economic Advisor at the FTC’s Bureau of Competition. Neora states that this analysis establishes that 77 percent of commissions paid by Neora in the 2012 to 2017 time period (with approximately 82 percent in 2017) are for sales of product to ultimate end users. This greatly exceeds the law’s “primarily” standard, says Neora.
The company gave further evidence of the demand for Neora’s products. In 2016 and 2017, about 60 percent of Neora’s total sales were to non-business participants called “Preferred Customers”; which is considered high for the industry. The FTC has admitted that it has no material issues or concerns with the calculations or methodologies used by Dr. Vandaele.
“The reality is the lawsuit that we filed doesn’t just protect your business; it’s to protect the businesses of the 20 million Americans that are engaged in direct selling.”
– Deb Heisz, Neora Co-CEO
Nevertheless, despite repeated requests, the FTC has refused to provide Neora with its own alleged analysis. Instead, the FTC, according to Neora, is attempting to announce a new retroactive interpretation of how direct selling companies can operate without considering the actual data.
Olson believes no direct sales company is safe under the FTC’s new arbitrary retroactive standards. “We are an American small business and will take this David and Goliath-like issue and fight for the rights of the men and women who deserve a place in our American economy, and will not be bullied into settling for anything less,” says Olson.
Neora Field Leadership
Both Olson and Heisz addressed their field leaders this morning to discuss today’s developments before the announcement was made. Heisz said the suit was filed because first and foremost they wanted to protect their brand partners’ businesses. “In talking with the FTC they wanted to limit commissions in our businesses to only the person making the sale and the person who recruited the person making sale,” says Heisz. “We’re not willing to make that change, and disrupt the businesses that our brand partners have worked so hard to create. The reality is the lawsuit that we filed doesn’t just protect our business, it is to protect the businesses of the 20 million Americans that are engaged in direct selling.”
Founder and CEO Jeff Olson stated that he was ready for the challenge ahead. “We live in a land of laws, and there’s nobody above the law, even an agency within the government.” Olson also reiterated that he and his team have met with members of congress and feels support for their cause will only grow as a result of the action they are taking against the FTC. “We have the industry behind us, and I believe you’re going to see a lot more support for our cause in the next couple of weeks. This is not only about us, it’s for our industry and it’s the right thing to do.”
You can read Neora’s lawsuit against the FTC here
This story will be updated.
