A Restructured Herbalife

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When the FTC settles with – or sues – a company, we’re often trying to stop illegal behavior, return lost money to people as often as we can, and generally make unfair things fair and deceptive things true.

Today’s historic settlement with Herbalife goes one better: the FTC’s settlement significantly restructures Herbalife, changing – top to bottom – how it does business. And it makes the company pay $200 million back to people who lost the most money. This is a big win for anyone who paid lots of money to Herbalife, and people who might in the future.

You might know Herbalife through its extensive marketing in English and Spanish. Through print and video promotions, and glowing testimonials, Herbalife told people they could change their lives – quit their jobs or even get rich – by selling the company’s weight management and nutrition products:

“The days when I would earn a living cleaning houses are behind me…”

“When we worked in factories our earnings could only pay for basic needs, but now we can take our 12 grandkids on vacations.”

“When I got to ten thousand, I thought, well that wasn’t so hard after all, maybe I can get to fifteen, and I went from fifteen, to twenty, and then to thirty, and then even up to forty thousand dollars a month.”

Hundreds of thousands of people signed on for the Herbalife business “opportunity” – but most people made little or no money. In fact, the FTC’s complaint shows how half of Herbalife’s “sales leaders” earned less than $5 a month on average from selling the product. Instead, the incentives were to recruit more people who would then buy more product – whether or not there was a market to sell it. 

That’s why this settlement is so important for consumers. Now, anyone who tries to make money selling Herbalife will be paid based on what they sell, not how many people they recruit. The settlement also requires the company – from now on – to make only truthful claims about how much money people are likely to make. And they have to be able to back those claims up.

Watch this space to find out how the $200 million will be divided among the people who lost money to Herbalife. We’ll keep you posted.

Blog Topics: 
Jobs & Making Money

Comments

way to go!

Great job exposing this company which has been around for as long as I can remember! Just the beginning of the iceberg & avalanche of similar problematic companies!
Keep exposing! Wishing you more success in all endeavors! Go get them!

Great job!!

Can you clarify what you mean by sales? I know some MLM companies encourage selling almost exclusively to downline members, and discourage retail (non-member) sales wherever possible. Are you restructuring Herbalife to compensate their salespeople based on retail sales or any kind of sales (including internal sales)?

Under the new compensation structure, success in the Herbalife marketing program must depend on whether participants sell products, not on whether they can recruit additional distributors to buy products.

When Herbalife appeared in our community, I watched as the reps who signed on lost so much weight - especially the elderly - that they began to look ill (smiling, but ill). I looked into the ingredients in many of their products, then searched the internet for clues as to what the heck they were packing in their pills, drinks, and supplements. Wow! No Herbalife for me, thanks.

i would like to know more about your finding as i use this product

I would like to know more about your finding as well seeing as how half of it is FTA approved....

Within my first month of starting Herbalife I had an allergic/chemical reaction to it and I ended up with a rare autoimmune disease. I still to this day know that either those pills, shakes, juices or energy bars made me ill. The dumb part is that I continued to take them thinking I'd get over it but my symptoms got worse. The good thing is that I lost 40 pounds so it was hard for me to stop.

I have noticed the same thing over the last 2 years of people who are die hard herbalife consultants/distributors. Where they once looked happy and healthy, due to weightloss, but now look sick in the face..they just have a weak and exhausted look as if they are fighting off a disease or some kind of health problems..

The way you answered questions today at your press conference certainly leaves us to draw our own conclusions that Herbalife pushed very very hard to not be labeled a Pyramid Scheme in reaching this settlement.

The Herbalife short thesis has born no resemblance to reality on the ground since day dot. Instead it is that all these poor ill-educated Hispanics are stupid and that me, rich handsome New York hedge fund manager has come to rescue them.

With this settlement the FTC has become a tool of racist hedge fund managers.

You should be ashamed of yourself.

John H

What a sad ending for the fraud fighter from down under. The FTC just put paid to forty years as a captive regulator to the DSA and failing to deal with pyramid schemes. Without fighting over words (i.e. pyramid scheme) the Commission has, with surgical precision excised the pyramid elements, and created an opportunity for Herbalife to prove if its products area salable without lies and deception. If they are, fine, if they're not fine too. They'll have the same chance as any other business, and they'll save a lot of money on bribes, endorsements, and hiring former government officials.

The FTC is chaired by a woman of hispanic heritage. The fact that you think she can't identify racism but only you can, speaks volumes about you

You should be ashamed of yourself

I tried this scheme when unemployed and desperate for income. Not only did I lose money with start up cost but I had an allergic reaction to the product and they gave me the run around when I tried to get a refund. I ended up eating the cost and throwing their products away.
I want my money back like I've been requesting for years! How do I file a claim?

Watch this space to find out how the $200 million will be divided among the people who lost money to Herbalife. We’ll keep you posted.

Great work!

My only concern is the spin Herbalife has put on this and how that could affect the interpretation of the settlement. The main headline I see is FTC declares Herbalife not a Pyramid Scheme.

Mislead about income, as well as the settlement over misleading income claims.

it would be nice to see Mary Kay investigated also!

Mary Kay consultants make 50% commission and their income isn't based on generating an income by simply sponsoring people into the company. Mary Kay isn't like Herbalife at all.

My friend had to buy $500 worth of Mary Kay when she first became part of this company. She has a whole lot of product that expired and wasnt able to sale or return. How is that not a scam? You need to buy into the products yourself, making parties for friends and family so that at the end buy from you from pitty. Why dont people just start their own real business instead of buying into these scams?

My husband and I lost over100,000.00 to Herbalife.
The real kicker was my husband suffered a catastrophic injury when I emailed the person who was his advisor I got no response, thought that was funny as when they want you to buy leads they are right there. It was six weeks later when he called and said he was going thru his email, they could not send a card or do anything. I hope I can get something from this. Herbalife is a scam and only a few people make any money

how do we get involved in this settlement?

Watch this space to find out how the $200 million will be divided among the people who lost money to Herbalife. We’ll keep you posted.

You should look into Dynamaxx next, same deal.

How were they paying before? Was it not based on the sales of those below them? Most direct sales companies require reps to meet a sales threshold to earn on those below them.

Under the new compensation structure, success in the Herbalife marketing program must depend on whether participants sell products, not on whether they can recruit additional distributors to buy products.

Whoa! You fined them .037 percent of their annual revenue. Kudos to a job well done. What a toothless punishment. Shameful. It is, without a doubt, a pyramid scheme. guess they were too big to fail...

I tried this product long time ago, ended having terrible stomach pains. Almost as if someone was twisting my insides. Returned the product to the person that was selling it. Warn people about the ingredients that are harmful instead of trying to pass it off as the greatest thing for weight loss.

Herbalife will pay 203 million for wrong doing and none has been arrested?
I don't think this is the right message to all the con artist out there.

Herbalife has no shame.

Although I did like many of their products, their marketing structure always bothered me. As disillusioned people below you drop out, so does your bottom line with them.

Let's get this straight. You found that Herbalife is essentially an illegal business and have allowed it to continue? That's like telling a murderer to not kill people in the future, pay a fine and be monitored by some dude who is going to hang around to ensure polite behavior! What a joke. Shut this business down. Btw, I think you are only accepting comments complimentary of the ftc action.

Of course they are not accepting comments that do not correspond to the narrative Zack. This was a Kangaroo courtBut believe, me, the facts and logic presented by BillAckman and the FTC could scarcely be called facts at all. I would love the opportunity to debate these facts and shed a bright light on all of this. You have no idea....

How is any "multi-level marketing" not really a pyramid? That is exactly how Herbalife & Waiora & Rexall & all of the others send money to the top. It is about time at least one of these is shaped up and stops the misleading advertisements and recruiting.

I hope the restructuring including protections for scenarios such as this:

I knew of a couple who sold Herbalife for about 5 years and they proved to me that earnings are possible based on sales of products which they stocked in one room of their home. There is another warning for anyone deciding on a multi-level business opportunity and it has to do with those who recruit you, read on:
The husband and wife both had day jobs and on weekends and three times per week were devoted to the Herbalife business while they were both conventionally employed. By the 5th year, they were earning an extra $3000 per month from their regular customer base, many of whom they delivered to or had come to their home and they were earning an extra $4000 or so per month from their recruits at which point, the wife of the pair and they decided she would do the Herbalife business on a more full time basis.
Fast forward to 6 or so months into her doing this on a full time basis while her husband was working and the wife of the couple who recruited them offers 'a new multi-level business opportunity' this time involving a new nutritional product with greater opportunity than the one they were successful with. They signed on with the wife of the couple who recruited them and, guess what happened next? The couple 'lost' their Herbalife distributorship because Herbalife at that time forbade any distributor from having other distributorships and ALL of their recruits and business was automatically transferred to their upline. Because the upline's distributorship was in the ownership of the husband who recruited this productive couple and not the wife who recruited them to the new business opportunity (which was in her name only) the obvious benefit in terms of knowing the downline's Herbalife business would automatically flow to them resulted in a lawsuit and she had to go back to full time employment that her prior employer graciously took her back. I do not think they won the suit because the distributor agreement for Herbalife at that time clearly stated their policy on the requirement that distributors were/are only allowed to be associated with Herbalife and to be found out as signing onto and operating a distributorship with any other company selling nutritional/products similar and competitive to theirs was grounds for loss of distributorship.
In closing, yes, money can be made if you can consistently sell product, but MLM businesses carry additional risks for those who do not carefully read and understand the legal document known as a distributorship agreement!

I too got caught up in this herbalife business I lost over a 100,000 with no profit all lost how can I get some compensation where do I make a claim a bit more info would be useful.

Watch this space to find out how the $200 million will be divided among the people who lost money to Herbalife. We’ll keep you posted.

According to Herbalife Press Release dated July 15, 2016 ""The terms of the settlement in no way change our business model."

But this FTC release says: "the FTC’s settlement significantly restructures Herbalife, changing – top to bottom – how it does business."

These can't both be correct? So which is it?!

Simple, Herbalife lied.

There are so many places where consumers need greater protection, outside of the MLM space and even within the MLM space. Going after Herbalife, which on the balance is doing a lot of good fighting the obesity epidemic, and is a best of breed MLM, at the behest of a hedge fund manager is patently ridiculous.

What a travesty.

'The obesity fighting product' was not the issue. It was the system, the deception, and harm it caused consumers.

You said, Herbalife is "'the best of breed MLM". They've just been ruled a pyramid scheme in so many words. Your own statement sure does say a lot about MLM.

MLM has stolen billions of dollars from consumers, and some have committed suicide. It's about time action has been taken to protect us.

Louis - are you certain that once these changes are made to herbalife practices that the company will definitively not be a pyramid scheme and will then be a legitimate business?

I was selling Herbalife as a distributor and moved out of state and before I knew it I had a $10,000. credit card debt. how do I recoop some of that money

Watch this space to find out how the $200 million will be divided among the people who lost money to Herbalife. We’ll keep you posted.

Money out the window. It was too good to be true. I hope they pay me back.

Fantastic news. After all the garbage I've been reading on facebook from uninformed, ignorant people regarding this whole election thing, this is the bright spot in my day. Thank you so much for your efforts and all the work you do to prevent fraud and dishonesty from completely devouring this country because with all the misguided, uneducated people out there right now we are going to go down bite, by bite. They actually believe all the lies that are being told and it is just getting too much. It is refreshing just to know you are HERE FOR ME TO KEEP ME UP TO DATE AND INFORMED ON OTHER ISSUES OF IMPORTANCE. THANK YOU AGAIN.

Is there anything I can do about a school that offers false hopes by asking you if you would like to make 40,000 a year. I told them I had make a mistake in the past, (8 years ago), and that I had a mark on my record. They said it did not matter. Now I owe 20,000 in student loans and no one will even take a second look at my resume. They signed me up knowing full well that I didn't have any clerical experience and that wouldn't be able to pass a background check. It is my hope that you all can prevent from happening to others that give there all to try and make a better life for themselves. Thanks.

If you took federal direct student loans, you may be eligible for a borrower defense to repayment discharge of the federal Direct Loans you took out, if a school committed fraud by:

  • doing something or failing to do something,
  • misrepresented its services,
  • or otherwise violated applicable state law related to your loans or the educational services you paid for.

Read more about federal student aid on the U.S. Department of Education website.

I hope that many others MLM scam companies, like Worldventures the one who scammed me, will be settle to refuse money stolen and pay damages to people who believe in those false dreams !!!
Good job FTC, thank you!!!

How will this be rolled out to other MLMs specifically Amway? Amway operates similar to Herbalife. IBOs are expected to buy the minimum 100pv from themselves instead of selling to others. It is virtually impossible to sell the Amway products because they are over priced and often marginal to other products in the stores. Amway's ficus is on the IBO to recruit others to buy from themselves and buy all of the motivational "system tools" go CORE, attend motivational seminars and meetings that provide no business training, sign up for a useless Communikate system, subscribe to a standing order of BS motivational cds and books. As long as Amway can brainwash the IBOs to recruit to duplicate what they do, there is no recommendation,no pushbor anything to sell their overpriced marginal products. When is the FTC going to protect the public from being scammed by ScAmway?

Are there any updates on how the $200 million settlement is going to be distributed? It's been over a month and we have not been given any details or any kind of timeline to this distribution. I purchased a nutrition club in 2012 and just about broke even for almost 4 years before luckily being able to recoup my start up fee. I worked 80 hours a week on average after my up line told me they would help me after I opened up and I would purchase my first home in cash. After I opened up they disappeared and I was forced to move back in with my parents. I still think Herbalife is a good business opportunity if done correctly (including rewarding distributors more for sales and not signing up new members), but they deserved the $200 million fine because their high level distributors will tell every person they encounter that they are going to be rich.

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