Direct Sellers Update: Regulation, Law & Policy

The direct-selling industry is paying close attention to the Orage lawsuit because if Amway’s IBOs are deemed employees under either standard, many other MLMs will likely see challenges to their independent-contractor classifications.

Last month, the District Court of Utah dismissed all but one claim filed against LifeVantage Corporation in a pending class action lawsuit. LifeVantage is a direct-sales company that distributes dietary supplements, including Protandim—a supplement consisting of a blend of five herbal ingredients.

A recent Memorandum Opinion and Order from the Northern District of Texas in Ranieri v. AdvoCare illustrates the challenges plaintiffs may face in alleging a RICO claim against a direct selling or multi-level marketing (MLM) company. In that Order, the Court dismissed the plaintiffs’ RICO claim against AdvoCare for failure to state a claim based on the argument in AdvoCare’s motion to dismiss—filed by Winston attorneys on behalf of AdvoCare—that the plaintiffs had failed to properly plead a RICO “enterprise.” 

On October 2, 2019, the FTC announced a settlement with AdvoCare International, L.P., in which AdvoCare, without admitting or denying the allegations in the order, agreed to abandon its multi-level compensation plan.[1] Under the order, AdvoCare must pay the FTC $150,000,000, which will be deposited into a fund for equitable relief.