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The State of California and YTB International Inc. (YTB; www.ytb.com
) have settled the state’s lawsuit against the multilevel marketing travel company for operating an illegal pyramid scheme and engaging in deceptive marketing.
In addition to paying $1 million in penalties and restitution, YTB now faces more challenges in selling its Web site to prospective sellers of travel. The earning potential of its recruiters has also been limited. Under terms of the settlement, YTB must also register with the state as a franchise business.
In a written statement, YTB CEO Scott Tomer said, “We believe the agreement with the State of California improves our business model and that as a result YTB will emerge a better company. This agreement will help to further secure the future for our valued sales force.”
The state sued YTB last August. The California Coalition of Travel Organizations (CCTO) played a major part in bringing YTB to the state attorney general’s attention after receiving multiple complaints about it.
“Consumers and travel professionals deserve to be protected when [a company] violates consumer or state laws. [The state] did a great job of protecting consumers and professionals of the travel industry,” said Susan Tanzman, CCTO vice president and president of Martin’s Travel & Tours in Los Angeles.
The judgment also requires YTB to provide prospective members with information “in a clear and conspicuous manner” about the typical income earned by its Web site owners, the typical costs of operations, the portion of investors who drop out and the numbers who have not earned any travel commissions.
YTB is currently facing similar litigation from the attorney general of Illinois.