Herbalife Fined $200 Million by FTC, Will Restructure US Business
Hot off the presses this morning comes news that the Federal Trade Commission has fined multi-level marketing business Herbalife $200 million. Furthermore, the company will restructure its US business to “tie distributor rewards to verifiable retail product sales and stop misleading consumers about potential earnings.”
Key points from the article include:
- Discount buyers will not be able to sell product or earn rewards. They will be classified differently from participants in the business opportunity.
- Two thirds of the profit sharing will be derived from retail sales that will be tracked and verified. No more than one third will come from personal consumption (the buy from yourself and teach others to do the same method that a number of MLMs have abused).
- At least 80% of product sales must be delivered to end-users.
- Herbalife is prohibited from claiming members have “quit” their jobs and now live an extravagant lifestyle due to the business opportunity.
This is great news for those who have long criticized companies that operated under the guise of selling products but were essentially recruiting-based schemes with little to no retailing. We can only hope that the FTC will continue to investigate, fine, and punish other companies that use similar tactics.
Read more about the restructured Herbalife on the FTC website here.