How Dallas multilevel marketer Neora beat the government’s pyramid scheme charges

After a yearslong legal fight and roughly $23 million in legal fees, a Dallas-area-based beauty and wellness multilevel marketing company has come out victorious against allegations of operating a pyramid scheme from the Federal Trade Commission. The regulatory agency sued Neora and its co-chief executive officer, Jeff Olson, in 2019, alleging the global company’s brand partners, or independent contractors, receive greater compensation from recruiting new brand partners than they earn from retail sales. The win attracted attention from across the industry, as it was the first time since the 1970s that a direct-selling company defeated the FTC’s pyramid scheme claims in a court trial. In Texas, independent contractor sales like Neora’s make up a $4.3 billion sector, according to the Direct Selling Association. The ruling emphasizes the importance of protecting the rights of legitimate direct-selling companies, Olson’s co-chief executive officer, Deborah Heisz, said.

“This is a David versus Goliath thing,” Olson said of the legal battle between Neora and the FTC. “They have unlimited resources, and they have no consequences.” Neora, which is based in Farmer’s Branch, sells skin care creams, supplements and other wellness products through representatives they call brand partners. Its structure is not unlike the beauty company Mary Kay, where independent contractors get discounts on beauty products and can also sell the items to earn a commission. The brand partners can also recruit, train and mentor other brand partners to earn commissions based on their sales. That model comes into question when “Your income would be based mostly on how many people you recruit, not how much product you sell,” according to the FTC. Government crackdowns and pyramid-scheme investigations have ended multilevel marketing companies such as Carrollton-based United Sciences of America and Fortune Hi-Tech Marketing while major industry forces such as LulaRoe Fashions have taken major hits from government lawsuits.