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Notice:
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.
Key Facts about Usana:
-- 70% of all Usana commissions go to just 3% (at the top) of the sales chain.
-- Usana fails the FTC-developed test for legitimacy of multi-level marketing companies, using retail-sales as the main criteria for legality
-- Usana has almost no retail customers. 14% of its revenue comes from "Preferred Customers" who cannot resell or recruit, but they buy at distributor cost, not retail pricing
-- No less than 85% of current Usana distributors are losing money and no less than 74% of distributors fail within the first year
-- The mean average payment to the bottom 99% of Usana salespeople was $5.66 a week, before product purchases, taxes and all other business expenses
-- Out of each 10,000 Usana recruits, 6,320 will not earn even one penny in commissions.
-- Some of Usana's main products are greatly overpriced compared to similar products available in stores.
--Usana's "binary" compensation plan requires each salesperson to recruit at least two others in order to receive commissions. This model would saturate the earth in just 32 cycles if continued. It therefore causes a massive loss rate among each year's new recruits in order to continue.
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Letter from Pyramid Scheme Alert
to All State Attorneys General
Individual letter was sent directly to each Attorney General
May 2, 2007
Dear Attorney General:
We respectfully alert your office to recent information about the multi-level marketing company, Usana Health Sciences.
The United States Securities & Exchange Commission is now conducting an investigation into Usana Health Sciences. (“SEC Probe Into Usana Is Under Way” by Keith J. Winstein, The Wall Street Journal, March 20, 2007; Page C7)
Other facts reported in Wall Street Journal on March 15, 2007:
1. Harm to consumers: 37% of all Usana distributors receive no commissions at all and of those who did, 87% didn't earn enough to cover the $116 they have to purchase or refer each month to qualify for commissions.
2. Non-retail, product-based pyramid scheme – The Wall Street Journal staff applied Usana’s sales and financial data in a test used by the Federal Trade Commission in previous prosecutions to determine if a multi-level marketing company is a direct selling company or a pyramid scheme. It found that 63% of all Usana sales to distributors would need to be retailed to consumers for Usana to pass the test of legality. Currently only 14% of reported sales are made on a retail basis. All other sales go only to distributors. Few are ever retailed.
3. Closed selling system – Prices of Usana products are extraordinarily higher than comparable products, (e.g. Usana's price for its vitamins is more than 20 times that of mass-market brands like Wyeth's Centrum). From our analysis, this indicates Usana products are not sold in the competitive market but to a closed network. Monthly quotas of purchases serve as the “consideration” to join and participate in the network and “endless chain” rewards induce purchases.
4. Tax Avoidance – Usana’s chairman, Myron Wentz, renounced his U.S. citizenship and now claims citizenship in the Caribbean tax haven of St. Kitts and Nevis; Wentz controls a 45% stake in Usana held by a company in the Isle of Man, in the Irish Sea, which in turn, is controlled by an entity registered in Liechtensteinl
Schemes in which consumers are lured into signing up as “distributors” but must recruit others to recoup their investments and earn profits violate anti-pyramid scheme statutes in many states. They harm consumers, due to inherent deception and huge, pre-determined loss rates.
Thank you for your attention and service.
Sincerely,
Robert L. FitzPatrick, Pres.
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Key Questions about Usana:
- Is Usana operating as a pyramid scheme?
- Can Usana distributors actually retail Usana products?
- Has Usana already reached market saturation in the USA?
- Why are Usana products priced so high?
- What percentage of Usana distributors ever earn a profit?
- And much more.
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