Should Switzerland welcome companies like Jeunesse?

Chinese sellers won their trip to Switzerland after surpassing targets. Dahai Shao, Swissinfo.ch

Some 12,000 Chinese tourists are enjoying the sights of Switzerland this month, but the company that sent them on the mass incentive trip has come under attack for its business methods. This begs the question: should Switzerland benefit from this PR exercise?

Tourist officials proactively broadcast news of the country’s largest-ever company incentive trip. This in turn promoted Jeunesse as a generous “employer” that could be rewarding to work for. Switzerland Tourism says it did not receive any payments from Jeunesse.

“As a national marketing organisation for the holiday and meetings destination Switzerland, we do not judge business models of companies that come to Switzerland for business trips,” Switzerland Tourism said in an emailed statement to swissinfo.ch.

“Switzerland Tourism is only responsible for the tourism marketing and does not do any business with companies that carry out their incentive trips in Switzerland. The touristic turnover for all leisure or meetings/incentive trips is generated by the tourism providers.”

So what’s the problem, if any?

Florida-based JeunesseExternal link, which last year generated record sales of $1.46 billionExternal link (CHF1.47 billion), operates a so-called Multi-Level Marketing (MLM) model. Its “direct sellers” are self-employed, buying health and beauty products at wholesale prices to sell to the public for a profit. They are encouraged to train up new sellers to create a sales network and take a slice of profits generated from people lower down the chain.

MLM is a legal business model in Switzerland provided it operates according to the rules (see box). Jeunesse says it operates in 150 markets worldwide, but not always without problems, it appears.

The State Secretariat for Economic AffairsExternal link (Seco) says it has received three complaints relating to Jeunesse since 2017. Seco would not give details of the complaints and said the courts are the only authority for settling such disputes.

At least four lawsuits have been lodged in the United States, although none have resulted in an adverse court ruling against Jeunesse. The Chinese authorities cracked down on MLM schemes following protests in 2017 against a local firm. The previous year, the Chinese state-run Xinhua News Agency identified Jeunesse as being an MLM-scheme but no action appears to have been taken against the company.

When asked by swissinfo.ch whether the negative headlines surrounding Jeunesse could present a reputational problem for Switzerland, the tourism authorities gave a one-word answer: “No”.

Jeunesse Global did not respond to questions.

MLM in Switzerland

MLM models are governed by regulations in Switzerland. They are allowed as long as the product that is being sold is the central source of revenues. Sellers are allowed to take a slice of profits from people lower down the chain as long as this is not their dominant source of income from the business.

This prevents the business becoming an illegal pyramid scheme that can only keep afloat as long as new sellers are found. A pyramid would simply collapse once the supply of new sellers dries up, taking everyone down with it.

Another warning sign is if sellers have no right to return unsold products to the underlying company that provides them.

“Seco generally advises people to be very cautious with such business models and not to participate if there are doubts about the legality of the business model or if they have a bad feeling. Participants in the system may themselves be held liable under civil or criminal law under certain circumstances,” Seco said in a statement.