Pyramid Scheme Alert (PSA) provides current and historical news items that are of interest to our members and visitors. None of the reports or commentaries is intended to imply that any of the referenced companies have been charged or convicted as illegal pyramid schemes.
Texas Attorney General Charges
MLM, Mannatch, with Illegal Practices, Seeks Injunction
The Texas Attorney General claims that Mannatech, a multi-level marketing (MLM) company very similar in type of product, company size, business model, and publicly traded status to Usana Health Science is deceiving and misleading consumers with its product claims.
Like Usana, Mannatech sells products it says will improve health. However, the law strictly prohibits these companies from making claims of cures of any illnesses. Those who attend meetings report many blatant claims and testimonials about cures. More
The reports of false and misleading claims of "miracle cures" are typical at MLM meetings. Often the fake testimonials and claims lure consumers into investing into the MLM pyramid recruiting pay plan, which is also "false and misleading." Miracle cure claims are matched with magical income promises.
The AG wants an injunction against the operation of Mannatech. Since the company is based in Texas and manufactures there, this is equivalent to seeking to close down the entire company.
The Texas AG did not charge the company with operating a pyramid scheme as it did in a recent prosecution of the gas mileage pill company, BioPerformance, also a multi-level marketing company. Both companies gain most revenue from new participants in the pay plan, not from retail customers and recruiting is required to earn a profit in the pay plan. Why didnt the Texas AG charge Mannatech with violations of its anti-pyramid scheme statute?
One obvious reason is that the multi-level marketing industrys lobbying organization, the Direct Selling Association, lobbied to change the law in Texas in 2000 so that MLMs are now generally exempt. This MLM-written law, which the DSA tried, but failed, to get into Congress, says that if payments and rewards are included in the price of products, the scheme is excluded from the laws definition of a pyramid scheme. This is a huge loophole for pyramid schemes disguised with products. Mannatech is a member of the DSA!
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