Herbalife Fined $200 Million by FTC, Will Restructure US Business
July 15, 2016
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.
3 Comments
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AMTHRAX 
We don’t understand how people can look others in the eye and promise them that if they work hard enough promoting the ‘products’ they will one day find financial freedom. It is morally wrong to make these promises when the income disclosure statement shows that the greatest percentage of money ends up at the very top of the pyramid. We pray this is just the beginning of exposing these scams and cleaning house in the multi level marketing world. Heads up, scammers!!!
The 200 million is a lot but what will cause Herbalife to bleed to death will be the injunctions that prevent false claims in recruiting and having to document and prove they have customers who are not a Herbalife distributor. Watch and see, Herbalife will fade into the sunset like Vemma.
Joe, don’t count on it. Most likely Icahn’s lawyers have already found loopholes.