Class Action: Young Living ‘Nothing More Than an Unlawful Pyramid Scheme’
by Erin Shaak
According to a proposed class action lawsuit filed this week, Young Living Essential Oils, LC sells not just essential oils, but a “convincing lie” that has deceived recruits into believing they could transform their financial futures by signing up with the company as distributors.
Filed in California federal court, the 33-page lawsuit claims Young Living’s promises of financial gain are “nothing more than a pipe dream” and that the company is actually an illegal pyramid scheme that thrives at the expense of its members.
Young Living’s Structure Based on Recruitment, Case Says
Founded in 1993 by D. Gary Young, Utah-based Young Living is set up as a multilevel marketing (MLM) operation whose flagship product is essential oils, the case explains. Though not all MLM businesses are illegitimate, the lawsuit argues Young Living exhibits the “defining characteristic” of an illegal pyramid scheme—that the financial success of its members is “overwhelmingly dependent” on their recruitment of new members rather than the sale of products.
The lawsuit describes Young Living as having a “complex and intentionally hard-to-understand multi-layer compensation/participation structure,” which, according to the complaint, is largely focused on recruiting new members. When a recruit signs up to be a Young Living distributor, he or she must purchase a “starter kit” that ranges in price from $35 (the “basic” kit) to $165 (the “premium” kit) and can be even more expensive depending on the options selected, the case says. After joining, the new member allegedly pays a cash bonus to the “upline” member who recruited him or her and is then given the opportunity to earn commissions and certain bonuses by building a “downline” made up of new distributors recruited by the member and his or her recruits. To reach the level at which a member can earn the “riches” represented by Young Living is “near impossible,” according to the complaint, and would involve building a downline of “thousands” of recruits.
“In short,” the complaint reads, “this is not a system designed to sell product to those outside the pyramid. Rather, the entire system is designed for one purpose: to recruit new Members to grow the illegal pyramid, which only benefits Defendant and those very few Members at the top.”
Lawsuit Claims Members Buy More Than They Sell
The suit argues that despite Young Living’s promises that members can “take control of [their] future” and “achieve [their] dream of independence and security,” most members end up losing money instead of making it—the tell-tale mark of a pyramid scheme, the case says.
According to the lawsuit, Young Living fails to track and enforce what the complaint calls the “70/30 rule.” The rule stems from a 1979 Federal Trade Commission ruling that aimed to prevent MLM companies from encouraging their representatives to “inventory load.” Under the “rule,” representatives must sell at least 70 percent of their inventory before purchasing more, the suit explains. Despite being “well aware” of the 70/30 rule, Young Living, the case argues, encourages members to violate the rule and continuously purchase more products without having to provide proof that any sales have been made.
Faced with the reality that their “only opportunity” to earn enough income is through recruitment, most Young Living members find that they must spend hundreds of dollars every month on the company’s products in order to remain eligible to receive commissions from their downline, the case alleges.
Rather than offering the ability to “create abundance,” Young Living has allegedly provided most of its members with nothing but an opportunity to lose money while lining the company’s pockets.
Case Claims Most Young Living Members Lose Money
According to the lawsuit, the median monthly income of 94 percent of Young Living’s members in 2016 was $0, with the average monthly income amounting to a “dismal” $1. Fast forward to 2018 and nearly 89 percent of members earned an average yearly income of $4, the case alleges. In both 2016 and 2018, the complaint states, over 96 percent of Young Living’s members lost money working for the company, with many totaling a loss of hundreds or even thousands of dollars.
This is not to mention the “significant additional outlays” of time and money that Young Living members must pay in order to maintain their businesses, the case says. Because they are classified as independent contractors rather than employees, members must shoulder the cost of traveling to Young Living conferences, organizing sales events, and paying for employment taxes and health insurance, the suit explains.
“This is not ‘abundance,’” the complaint scathes. “Rather, this is the very definition of an illegal pyramid scheme. And Defendant’s misleading and deceptive representations concerning a consumer’s ability to earn income does not only violate Defendant’s self-professed values—it’s unlawful.”
Wouldn’t Be the First Time…
According to the lawsuit, this isn’t the first time Young Living has come under fire for potentially shady business practices.
In 2014, the company received a warning letter from the U.S. Food and Drug Administration in which the agency accused Young Living of promoting some of its essential oil products as unapproved new drugs for the treatment of all kinds of diseases, including Ebola, Parkinson’s disease, autism, diabetes, hypertension, cancer, multiple sclerosis, and dementia.
In 2017, Young Living reportedly paid $760,000 after pleading guilty to the illegal trafficking of rosewood and spikenard oil in violation of the Lacey Act and Endangered Species Act.
And in 2018, the company was ordered to pay $1.8 million in a lawsuit against a competitor that the judge determined was filed by Young Living in “bad faith.”
Young Living is not a stranger to class actions either. The company was named as the defendant in another proposed class action lawsuit filed in April 2019 over similar allegations as in the one detailed here.
The case further alleges that company founder Gary Young has also been the subject of some controversy, noting that he was prosecuted for practicing medicine without a license and once ran a now-shuttered “Young Living Research Clinic” in Utah where he allegedly employed a “quack physician” convicted of manslaughter.
Not mentioned in the complaint are allegations that Young ran another clinic in Tijuana, Mexico where an undercover reporter was told he was suffering from cancer after he submitted fake blood samples taken from “a healthy 7-year-old, 20-pound tabby cat” and a chicken.
“But most pernicious of all,” the lawsuit says, “is that Defendant’s immense wealth is derived from a vast, illegal pyramid scheme that has caused countless unwitting victims to lose substantial sums of money.”
According to the case, while the plaintiff claims to have lost nearly $2,000 participating in the defendant’s alleged scheme, Young Living, by contrast, racked in over $1.5 billion in sales in 2017.
Who Is the Lawsuit Looking to Cover?
The case seeks to cover anyone in the United States who, “within the relevant statute of limitations periods,” was a Young Living distributor.
Can I Join the Lawsuit?
Typically, you don’t need to do anything to join a class action lawsuit. If the case settles, anyone affected should receive notice (usually by mail) with instructions on what to do next. You can find out more about the process here.
Keep in mind that it could take months or years for this lawsuit to reach resolution. Like always, we’ll do our best to keep you updated when the time comes.
The full complaint can be read below.
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