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House of Fuller’s Mexican business has misrepresented autoship sales orders.
In an August 2021 SEC filing, Tupperware’s parent company exposed the fraud. In response, the SEC initiated an inquiry.
In 2005, Tupperware bought House of Fuller. House of Fuller is mentioned on Tupperware’s website as Fuller Cosmetics.
In Mexico, the business is known as Fuller Mexico.
Unsettlingly, Fuller Mexico’s regular practice is to add goods to distributor autoship orders without approval.
The SEC refers to autoship orders from Fuller as “Non-PO Sales.” The term for distributors is “Fullerettes.”
Fuller Mexico’s Non-PO Sales consisted of numerous shipments each year of new or promotional products, such as a new lipstick hue.
Typically, Fuller Mexico included the products to the orders of Fullerettes at a discount or special pricing, with the opportunity to return them.
If a distributor did not want things they did not order, they were required to return them to Fuller.
Since around 2017, Fuller Mexico has been declining.
As Fuller Mexico’s sales fell short of projections between 2017 and 2019, Tupperware management at the Worldwide and Latin America regional levels increased the pressure on Fuller Mexico to fulfill unrealistic sales goals.
To the detriment of distributors, Fuller Mexico’s compulsory uninvited autoship program went into overdrive.
Fuller Mexico boosted its usage of and reliance on Non-PO Sales by increasing the frequency, kind, and quantity of sent items.
At least by 2018, the number of Non-PO Sales began to expand and shift toward items with a greater profit margin, such as perfume, and away from their original goal of delivering new or promotional products at a discount.
The management of Fuller Mexico implemented “aggressive methods” to guarantee that distributors remained engaged.
One example of these aggressive strategies was a “reactivation order” or “suggested order,” in which Fullerette supervisors identified Fullerettes who were close to becoming inactive in Fuller Mexico’s system and used unsolicited “reactivation orders” to reengage those Fullerettes in the business and prevent them from becoming inactive in the system.
Once a Fullerette became inactive, Fuller Mexico’s policy required a larger rate of bad debt to be retained for that Fullerette’s sales.
First, you are sending unsolicited orders, which is bad enough. Then, distributors are penalized for failing to pay for things they never ordered.
This is by far the worst example I’ve seen in recent memory of an MLM firm intentionally damaging people.
And it gets worse…
In addition to management intentionally damaging customers, Fuller Mexico established mechanisms that enable top distributors to exploit them.
Another approach known as “director sampling” or the “red button” allowed Fuller Mexico divisional directors who were at risk of not reaching sales goals to add Non-PO Sales to the orders of Fullerettes.
Non-Purchase Order Sales comprised items that were not discounted.
This procedure was adopted by Fuller Mexico in 2018 as part of an IT update.
Top Fuller distributors pressed a button, which caused their downlines to receive unsolicited product orders. And they were charged the full retail amount as opposed to the autoship pricing.
All to maintain the appearance of companywide sales revenue objectives established by higher management.
In 2019, Tupperware’s internal audit team discovered illicit activity by Fuller Mexico.
Tupperware increased its reserves by $10 million in the third quarter of 2019, as stated in the company’s quarterly report filed with the Commission in November 2019.
Initially, Tupperware ascribed the change in accounting estimate determination for determining Fuller Mexico’s returns reserve and other associated reserves, such as accounts receivable and inventory, to current trends and external considerations, such as reduced consumer purchasing.
Tupperware argued that the adjustment was based on fresh information and did not constitute an accounting mistake.
However, a subsequent investigation revealed unrealistic sales expectations from Tupperware’s Latin America regional leadership, (ii) sales strategies designed by Fuller management to help meet sales targets, as well as promotions or incentives to make the product more appealing to Fullerettes, and (iii) Fullerettes received more product than they could realistically sell.
Tupperware terminated “many members of Fuller Mexico and regional management for ‘loss of trust” as part of an internal probe.
Late in 2019, Tupperware discontinued the practice of “director sampling” and oversaw the early 2020 phase-out of Non-PO Sales at Fuller Mexico.
A $9 million adjustment was made to Tupperware’s books for the fourth quarter of 2019. Approximately $31 million in unsolicited goods orders were believed to have been submitted to Fuller distributors in Mexico at the time.
However, the more Tupperware probed into Fuller Mexico, the worse the situation became.
In 2021, Tupperware performed more research and discovered that it had not accounted for all kinds of Non-PO Sales at Fuller Mexico and that some sums connected to Non-PO Sales were accounting mistakes, as opposed to simple adjustments in estimations.
Tupperware filed an updated annual report for 2020 in August 2021, confirming the existence of a Commission inquiry and restating its report on ICFR to disclose a new major weakness linked to Fuller Mexico management’s overriding of internal accounting controls.
Tupperware admitted that, historically, it has been unable to measure the amount of Fuller Mexico’s Non-PO Sales in sufficient depth and, as a result, was unable to oversee the usage of this sort of sale, which should have been limited in nature.
Fuller Mexico’s information systems were not adequately set to identify, summarize, and report Non-PO Sales.
I believe Fuller Mexico did not track its unlawful uninvited autoship orders on purpose.
The SEC asserts
Red signs should have alerted Tupperware to Fuller Mexico’s abuse of Non-PO Sales and failure to properly account for them.
The SEC’s inquiry concluded that Tupperware violated Section 21C of the Exchange Act.
A cease ruling dated September 29 requires Tupperware to pay a $900,000 civil penalty.
excluding securities fraud, I’m uncertain who has control over blatantly criminal behavior in Mexico.
Tupperware is a Delaware-incorporated, Florida-based American corporation.
Fuller Mexico is owned by Tupperware and operates exclusively in Mexico.
Consequently, we have an American MLM corporation that controls another MLM company that cheated Mexican clients out of millions of dollars through clearly hostile activities.
I believe there is conduct upon which both the FTC and its Mexican counterpart may rely.
Fuller Mexico is a pyramid scam if they are forced to rely on unsolicited autoship orders to maintain their company.
The procedures of Fuller may have altered, but the fundamental problem of negligible retail sales is likely the same.
