This morning, I received an email regarding a class action lawsuit against MonaVie in the state of Arkansas. The lawsuit can be filed below. There are no pyramid allegations. Instead, the attorneys are focusing on various health claims made by distributors. The lawyers in Arkansas better have some serious cash because they’ve just signed up for some ridiculously expensive litigation. Proving that there’s a pattern of misconduct amongst tens of thousands of distributors will be a challenging task and require some substantial discovery. Plus, MonaVie takes health claims very seriously with its compliance department. If they can demonstrate a long history of disciplining distributors making inappropriate health claims, they’ll argue that the facts referenced by the Arkansas lawyers are isolated incidents. Plus, as we’ve seen with other class action cases against network marketing companies, one of the best tools to use is the media. Where was the media attention to this one? Either I’ve been sleeping under a rock or nobody knew about this. It was filed in December of 2010! If this case is being litigated in a vacuum, MonaVie can fight this one all day everyday.
Rick Gutman, MonaVie Black Diamond, moves to Visalus Sciences
In a video post, MonaVie Black Diamond, Rick Gutman, announces his new alliance with ViSalus Sciences. ViSalus has been making a lot of noise lately given their recent surge in growth. ViSalus is trying to mold itself as MLM 2.0 for the younger generations…and it seems to be working. Their recent score of Rick Gutman will certainly put them in the cross-hairs of one of the industry’s largest companies. After watching Rick’s announcement, the lawyer in me wondered if there was going to be an issue with MonaVie’s noncompete clause. As I was referencing their policies, I learned that their noncompete does NOT extend beyond termination of the agreement. The language can be found below.
2.3.4 Sale of Competing Goods or Services. While a Distributor, you shall not sell, or attempt to sell, any programs, products, or services to MonaVie Customers or Distributors that compete with our Products. Any program, product, service, or Network Marketing opportunity in the same generic categories as our Product is deemed to be competing, regardless of differences in cost, quality or other distinguishing factors.. . .
Rick Gutman, unless he’s wildly soliciting everyone in his database, appears to be in the clear.
One thing about MonaVie, love ‘em or hate ‘em, is that when the distributors leave, there’s not much litigation. This is surprising given their itchy trigger finger when they made a legal threat at Ted Nuyten. In August of 2010, they threatened Ted with litigation after reporting on their decline in revenue in 2010. Specifically, they accused him of knowingly publishing false information with an intent to defame and disparage. In August of 2010, Ted projected a 25% decline in 2010 revenue from 2009 numbers. They demanded that he retract his statements and write “that such statements and figures were and are false and unsupported by fact.” Ted put the legal threat on his site here. In the original article that got him trouble, he literally provided two numbers: $785 million in 2009 and he projected $600 million in 2010. MonaVie alleged that a $600 million projection was “defamatory” and harmful to their reputation. In this month’s Direct Selling News magazine, they publish MonaVie’s revenue for 2009 and 2010: $785 million for 2009 and $600 million for 2010. The man was spot on the money…to the digit. ”False and unsupported by fact…” Really?
Amway Settles Multiple Disputes
The weather is cooler, the leaves are falling, the holidays are drawing near….peace is in the air. In the span of a few days, Amway has made two HUGE announcements about the settlements of pending lawsuits between itself and multiple parties. First, they announced the settlement between themselves and MonaVie, which was anticipated to be an epic battle between the MLM giants. Click Amway v. MonaVie to read the original complaint. In the lawsuit, Amway alleged MonaVie was using unfair marketing practices while raiding Amway’s downline.
In the same announcement, Amway announced a settlement with Orrin Woodward and TEAM. The Amway / Woodward / Team litigation has been insanely intense since August of 2007. I was there for the start and I’m certain there’s much relief on both sides as a result of the settlement. The Amway / Woodward litigation produced a cutting edge court opinion about the limits of First Amendment protection for anonymous bloggers that disparage a company. Click here for the opinion.
Second, Amway announced today of its settlement of the Pokorny class action lawsuit. News of this settlement is not really surprising given Amway’s loss over its arbitration provision back in April of 2010. This was a very contentious case and Amway’s exposure was substantial. Due to the size of this settlement, I anticipate more lawsuits like Pokorny will be filed against other MLMs that rely heavily on tool companies. It’s ok to work with tool companies; however, when the tail starts wagging the dog, it can lead to HUGE, Pokorny-like problems.
The past few years have been busy for Amway as they’ve made some efforts to clean up their house. They’ve lowered prices, implemented quality control standards for the tool companies, invested more in IBO training and….settled their lawsuits.
The real losers as a result of these settlements…..THE LAWYERS.
What do you think about this news of the settlements?
MLM Training and the Importance of Competency
TRAINING…
it’s simultaneously the most important AND least talked about aspect in the direct selling industry. The relationships that develop between participants while building their businesses is the most important component that makes our industry special. And those relationships are solidified via training. It’s unique to the direct sales industry where sponsors are obligated to train and mentor their recruits about selling and team building. It’s through these deep relationships between participants that cultures and brands are built.
Some companies allow high level distributors to create training programs for their downlines. These are referred to as “tool companies.” I was baptized in the industry representing Orrin Woodward’s tool company, Team, when he was affiliated with Amway and subsequently MonaVie. These training programs are designed to offer plug-and-play solutions for new distributors…distributors are given the choice of plugging into the training program and receiving the tools necessary to build profitable businesses.
Standards
When companies allow distributors to create tool companies (not all of them do), there’s usually a qualification that needs to be met before they can begin promoting their program. The qualification is one that usually separates the professionals from the amateurs and it ensures that the best networkers, the networkers with real results (not theoretical), are the ones influencing the next generation of leaders. It makes sense to have high standards. When the value of a company’s brand lies in the hands of its distributors, they have a significant interest in ensuring their trainers are actually competent.
I’ve beaten up on MonaVie recently. When they led with a hand gun instead of a handshake and threatened a friend with a lawsuit, I was not impressed. Setting it aside, I want to highlight something they do really well: they only let highly qualified networkers run tool companies.
When Orrin Woodward transitioned over to MonaVie, we were never allowed to sell a single CD until after he reached the Black Diamond status. The bar was set, it was the same for everyone, and he had to jump over it like everyone else.
Lately, I’ve seen multiple tool companies pop up from distributors with minimal experience and small organizations….and their MLM companies allow it. These tool companies (which I will not reference by name) make the rookie mistakes of promising easy money. The pitch is always the same: “We’re going to use more social media….We don’t sell products….We just host conference calls….Just enroll three people and your business explodes….We just drive traffic to websites.” The end result is predictable: an inactive sales culture where the participants enroll with a lottery mentality and sit and wait for others to lead. True professionals in the space never make this mistake. They’re up front with the work requirements and they create duplicatable patterns that can be copied by anyone. When the rookies tell everyone “this is easy,” at some point boots need to hit the ground and when it’s time, they’re shocked that nothing happens.
Message for executives
When the value of your brand rests in the hand of your representatives, I would advise you only pass the megaphone to your most experienced sales reps. Simply because I’ve seen surgery on TV does not make me qualified to do the real thing. If you allow amateurs to create programs and hold themselves out as ambassadors of your company, you might develop a cancerous sales culture that could, and probably will, lead to hype, inappropriate product and income claims and trouble.
Negative Lies vs. Negative Truths…
Negative truths hurt more. On Troy Dooly’s blog, Dallin published his official response to dispel the rumors of a “death dive” in revenue. There’s one small detail missing from the statement: a denial of the rumor! While we’re questioning the wisdom of Rod Cook and Ted Nuyten’s reports about the decline, we’re failing to address the very issue that started this conversation: the veracity of the data on Ted’s site (link here). When given an opportunity to address the report, Dallin punted. After sending Ted Nuyten a threat laced with several allegations against his character, MonaVie failed to do two important things: they failed to apologize and they failed to deny the report. I want to talk about the report.
Recap
I want to quickly recap some events over the past few weeks. It starting with Rod Cook’s report about MonaVie’s decline in web traffic. Rod put out a video titled “MonaVie’s Death Dive.” He gave his opinion about MonaVie’s 60% drop in web traffic over the past year.
Fast forward to last week. Ted Nuyten publishes a report “from an anonymous source” stating that MonaVie was experiencing a dramatic decline of over 20% in revenue in 2010. He made a mistake when failed to provide the source of the information: Tracey Coenen’s site. Tracey is a forensic CPA, she’s accomplished (she worked for Arthur Anderson) and she’s a known anti-MLM person.
Fast forward a few days. MonaVie sends Ted Nuyten a threat of legal action. Ted responded and I chimed in. I’ll be honest: I get angry when I see big guys pick on little guys. MonaVie’s threat was unfair. But despite the threat, people are still teeing off on Ted questioning his decision to publish the data, which MonaVie has yet to deny as false. I’m not sure if most of you readers have ever been threatened with litigation by an enormous company. It’s not fun!
Dallin’s response
Update: I originally and accidentally included commentary from Troy Dooly as Dallin’s quote. This has been corrected.
Fast forward to today. Dallin Larsen published his official response. After Troy asked him a specific question about the rumors of a decline, Dallin responded as follows:
-Start quote-
“Troy, with our webcast in October, we will unveil the next phase for MonaVie. Let me simply say that in the words of Mark Twain,” the reports of my death are greatly exaggerated.
We are a private company and don’t release our numbers but let me simply say that I just returned from 10 countries over the last 90 days and we are growing. Up in some markets and down in others. There’s a cycle in business and there’s a cycle in this industry. . .
Since MonaVie began operations in January of 2005, we’ve paid commissions accurately and on time, each and every week, and we will continue doing so.”
-end quote-
I’m not doubting in Dallin’s ability to take charge of his business and reposition it to win. I’ve met Dallin. I like him. That’s not the point. There’s a decline in traffic. There’s a plateau. So what? Companies cycle up and down. And when people opine on those cycles, it’s inappropriate to threaten them with litigation, especially when there’s a kernel of truth. Instead of commenting about the successes of prior years or the natural cycles of business, the focus of Dallin’s response should have been placed squarely on the issue that started this controversy: the reports of a serious decline in revenue.
If we, as a community, cannot discuss obvious facts about challenges faced by various companies, how can we improve? Ted’s article sparked a great debate. Now people will be watching MonaVie in October to see how they re-tool their business for the future.
This is very simple sequence of events: Rod Cook posted a video about a decline in web traffic. Ted posted an article about MonaVie’s decline in revenue. Ted was dubbed “irresponsible,” accused of publishing “half truths” (without any facts to shed insight about the half that was not true) and threatened with a lawsuit. MonaVie via Dallin Larsen did nothing to dispel the rumors. And yet, we’re beating up on the guys that reported on this in the first place…Does anyone else see a problem?
Rod and Ted
Rod Cook’s report was confirmed by Dallin. He’s off the hook. There’s nothing wrong in publishing a decline in web traffic. When compared to other companies, the web data is important and lines on a graph that go down are not as good as lines that go up. Pointing out the obvious should not cause widespread panic. Ted’s decision to comment on MonaVie’s plateau was not inappropriate. The issue really lies in whether those stats are accurate. This leads me to a special request.
Second chance
Troy Dooly, I know you have the golden phone to Dallin Larsen. If you see fit to do it, please send him a message or give him a call and ask him if MonaVie is experiencing a 20% decline in revenue in North America as stated on Ted’s site (give or take a few percentage points). If the answer is yes, ask him why they threatened Ted with a lawsuit. I think those are fair questions and they get at the very heart of the issue.
If we are to remain in the dark about the specific figures (MonaVie is under no obligation to provide this info; however, after accusing Ted of publishing malicious lies, I think they’ve opened the door and it would be appropriate) and if MonaVie reports a 20% decline in North America at the end of the year, I think a lot of people will owe Ted Nuyten an apology. What do you think?
MonaVie threatens Ted Nuyten
Ted Nuyten regularly publishes articles about the MLM industry at BusinessForHome.org. He recently published an article about MonaVie’s purported 20% decline in revenue. MonaVie responded by threatening Ted Nuyten with legal action. Ted Nuyten wrote a response (it’s well worth the read). This is really bizarre. MonaVie is quickly becoming the company that it once condemned. We all know Ted! Ted is a prolific contributor to the direct sales space. I’ve known him for two years and I still have no idea if he’s a distributor in a particular company…so the allegation that he’s trying to harm MonaVie for personal gain is confusing. Instead of recognizing Ted as one of many industry commentators and privately reaching out in a respectful manner, MonaVie chose to lead with a hand gun. In my opinion, all they had to do was call up Ted and say, “Come on, man. This is crazy…and here’s why.” They’re leading with law, not grace, which is inconsistent with their character.
In Ted’s post, he links to the source of the stats about MonaVie’s revenue decline. Here it is. As Troy Dooly pointed out in the comment section of Ted’s response, the source of the info is not a MLM friendly source. Nonetheless, Ted made a Disclaimer Sandwich by starting the article with a disclaimer and ending it with a disclaimer. When was the last time you’ve read an article with TWO disclaimers;)? Maybe the information is inaccurate, maybe it’s not. But to lead with the litigation hammer and levy such strong allegations is really sad. In my dealings with Ted, he’s a nice guy. As far as anyone can tell, he’s not out to harm MonaVie no more than Rod Cook is out to harm MonaVie by talking about their 60% reduction in web traffic over the past year (Note: MonaVie has since lost another 20,000 visitors per month since Rod’s report). It’s simple: MonaVie is a large company and the rumblings about a decline is newsworthy. People are standing by to see how they respond. What new products will they offer? How will they tweak their pay plan? Companies with binary pay plans are especially paying close attention.
In my opinion, it would simply be a lot more productive for MonaVie to address their problems instead of dealing with the symptoms. What do you think? Did MonaVie overreact and draw more attention to their issues or should they turn the dogs loose on Ted?.
MonaVie and the Push for “Proprietary”
Click the image to see original article
Rod Cook, MLM Consultant and editor of the MLM Watchdog site, referenced some of MoanVie’s struggles in a video and cited a few reasons for the decline: expensive monthly autoship requirements, lawsuits against distributors after publicizing their “Open Door Campaign” and changes in their compensation plan.
Experience is the best teacher
There’s a lot to be learned by watching companies work their way through struggles. There’s a saying that says: “The best teacher is experience and the best experience is someone else’s.” In 2007, Amway went through a bad regulatory experience in England and made subsequent changes that literally saved their business. There’s a lot to be learned from their adjustments in England and in the United States.
So how is MonaVie responding? They’re dropping their prices, increasing their PV and rolling out a free shipping program for distributors on AutoShip. In short, the story of the acai berry no longer supports the hefty margins from the early days. They’re also doing something a little more subtle: they’re locking down intellectual property rights to give their product a clear point of difference from other comparable items in the marketplace. I’m calling this a “Push for Proprietary.”
The “Acai berry” is an amazing product with incredible health benefits; however, it’s no longer a strong selling point to say “we have the acai berry” because the berry is EVERYWHERE. It’s in shampoo, countless juices, ice creams, smoothies, coffees and energy drinks. It’s even in vodka, which is just weird!
In the past, I’ve written about the importance for companies to commit to innovation to keep their distributors armed with relevant products. It’s a challenge for companies because the speed of innovation across the world has accelerated. Companies can either innovate fast or lock down the proprietary rights to their products via patents.
Since the Acai berry is not proprietary and MonaVie is not able to lock it down, they’ve recently patented a “brand” of acai (dubbed “AcaVie”), which I’m guessing includes a unique extraction method. The “AcaVie” logo will now appear on the MonaVie bottles in their effort to build up the value of the mark “AcaVie,” which they own. So when a prospect says “Why would I pay $X for a bottle of monavie when I can get the same thing for $Y at Walgreens?”, distributors now have a stronger point of difference by saying “We have the exclusive rights to AcaVie, which offers the most health benefits associated with the acai berry.” It gives distributors another point of difference to justify the price of the product.
Leveraging Proprietary
Understand, this is not MonaVie’s first patent but it’s an example of leveraging “Proprietary” to protect a product from price erosion. “Proprietary” is an important word in the direct sales industry. If a product is proprietary, it serves as an assurance for the distributors that they’re not building up the brand awareness of a product that will eventually devolve into a commodity once it gets duplicated. “Proprietary” insures the sales force that their sales efforts will stick. Right now, brands hanging their hat on the Maqui berry or any other hot ingredient should learn from MonaVie and think of ways to at least patent the process by which the ingredient is extracted or used.
What do you think about this? Is MonaVie making good changes to protect their margins? What can other companies learn?
