FTC v. Trek Alliance, Inc. et al., No. 02–9270 DSF (AJWx) (C.D. Cal. 2002)

FTC v. Trek Alliance, Inc. et al.

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Trek Alliance ran a multi-level marketing program selling water filters, cleaning products, nutritional supplements and beauty aids. Trek's rules included a "6 Receipt rule," requiring sales representatives to have six retail sales per month, a "70% rule," requiring representatives to have sold or used 70% of previously purchased product before placing a new order, and a buy-back policy. The FTC brought a complaint alleging that Trek Alliance engaged in false and deceptive business practices and was in fact a pyramid scheme. The FTC alleged that Trek would induce people to show up for recruiting meetings by implying that there were salaried positions available, induced people to sign up as representatives and purchase starter kits by representing that Trek representatives were likely to realize substantial financial gain and that Trek was in fact a pyramid scheme because, in practice, Trek's focus was on making money by recruiting more representatives, rather than selling product. Additionally, the FTC alleged that Trek's "6 Receipt rule," "70% rule" and buyback rules were routinely disregarded and not enforced, and even if they were would still not tie compensation to retail sales or prevent inventory loading under Trek's compensation plan.

Full case and summary are available at: http://www.mlmlegal.com/legal-cases/FTC_v_TrekAllianceInc.php

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Published In: MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates

Reference Info:Federal, Federal Circuit | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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