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Herbalife FTC Investigation Outcome

Herbalife Documentary Video

Hedge fund manager William Ackman released a controversial documentary video about the multilevel marketing giant Herbalife Ltd (HLF). It is compelling viewing, especially given the subsequent settlement of a $200 million fine in FTC vs Herbalife – see details below

Ackman alleged that Herbalife was operating an illegal pyramid scheme.  The screening was followed by an eye-opening question and answer session. Former distributors speak about their personal experiences with the company.

The documentary video (including the Q & A session at the end) is useful for learning what to look out for when considering any MLM business.  Multi-level marketing can be a legitimate business model but only when structured legally.  Unfortunately too many bad apples operate in the industry.   It’s old news in 2018, but the documentary provides a deep insight into what happens when a company operating a multi-level marketing scheme gets it wrong.

Many questions and answers raised in the documentary are relevant to multi-level marketing or network marketing programs in general.  Anyone considering a multilevel marketing business can benefit from understanding the information presented in the documentary screening.

Click here to watch the Herbalife documentary video.  You will remain on this site.  I’ve placed the video on a new page to reduce page load speed.

Ulterior Motive Or Genuine Fight For Justice

The background to this story is worth noting.  Herbalife has been selling lifestyle, weight-loss, nutrition and skin care products since 1980. It is available in ninety-one countries through a multilevel marketing network of around 2.5 million distributors.

It is alleged that Ackman was out to get Herbalife, reportedly after making a $1 billion hedge fund bet that the value of the company stock price would plunge and cause the company’s collapse.

Herbalife claims that the film is a biased and revengeful tactic to inflict injury on the company to drive down its stock value. Herbalife supporters say that Ackman was hell bent on destroying the company to justify his now lost hedge fund gamble.

Illegal Pyramid Or Bad Business Practices

Some commentators believe that Ackman is fighting for the American dream against what Robert Fitzpatrick quotes in the doco as the “hijacking of entrepreneurship“. Others claim that Ackman is using corporate money to influence the political processes and his initiating motivation for lobbying the government was to stack the odds in his favor to win his hedge fund bet. See article: NY Times

In my view, Ackman’s motivation is irrelevant to the question about the legality of Herbalife’s business model. It either is a pyramid scheme or it is not a pyramid scheme under the legal definition of the term. The company may have bad business practices, poor training and be guilty of false advertising or misrepresenting the income opportunity, but that does not make the entire business structure illegal.

The allegation that the company was operating an illegal pyramid scheme would have been difficult to prove from the outset.

herbalife product range
© Herbalife Product Image

After all, they sell tangible consumer products, including retail sales to the public. Many people buy and enjoy their products. The quality and price of those products are not relevant to the business structure of the company.

I have a friend who loves Herbalife weight loss products and swears by them.  She lost a lot of weight!   She has no involvement with the business.  She buys the product from her neighbor, who is a distributor.

If the allegation is proved that the company and its distributors are making false and misleading statements and are using dishonest advertising tactics, they should be held accountable. The distributors in so-called nutrition clubs are called Health and Wellness Coaches, which begs the question: just how qualified are they?  But only facts and evidence are relevant.

Bill Ackman may have instigated the lobby and should be answerable if he is using corporate money to influence the corridors of power to swing his way, but his motivation is counterproductive to the real question:  Does Herbalife Ltd operate a legal business model?

I don’t think for one moment that the distributors spoke out in the documentary because of the agenda of an obsessed billionaire.  They had their own story to tell, in their own words.

A Fair Or Biased Documentary

myth-factThe documentary, in my opinion, is utterly biased. It is clearly anti-Herbalife and many viewers will interpret it to be anti-MLM generally.

Robert Fitzpatrick who leads the panel is well known as a strong anti-MLM  industry critic.  The panel members are former distributors speaking about their negative experiences and financial loss. No one can blame them for their views, and kudos to them for telling their story.

The problem is that we do not hear the Herbalife Ltd side of the legal issue.  So, without doubt, it is a biased documentary. But that does not mean it should be ignored or discounted.

It means we need to hear the company’s reply and see evidence that the company is not operating an illegal pyramid scheme and adheres to ethical business practices contrary to the allegations.

I am not saying don’t join this company or any MLM.  Maybe Herbalife just needs to fix its business practices. I have never been a part of it and have not seen the evidence.  You may be someone who believes that you can succeed as a Herbalife distributor while the majority of others have not done so, and that’s fine.

I agree with Bill Ackman and Robert Fitzpatrick about one thing:  It is time for the federal regulators to draw the line in the sand between legal and illegal MLM business and compensation models.

The Multilevel Marketing Debate Continues

Apparently, 88{b836676211964b66ddb1a94012779accd2cb69eec60a63bc16d10fd7c8344bc8} of Herbalife distributors make little or no money. Advocates for the company argue that the success rate is not relevant to the legitimacy of the company’s business structure. They say it is widely known that 90{b836676211964b66ddb1a94012779accd2cb69eec60a63bc16d10fd7c8344bc8} of brick and mortar businesses and 95{b836676211964b66ddb1a94012779accd2cb69eec60a63bc16d10fd7c8344bc8} of online businesses fail and that does not make them illegal.

MLM supporters assert that the majority of distributors are victims of their own inability to manage their business or to market their products. The fault, they say, is with the distributor, not with the company or business model.

When you listen to what distributors have to say about the training provided by Herbalife, it begs the question: why does the company not train people in traditional sales and marketing methods. Instead, they teach recruits to read from pre-written scripts that contain misleading and false statements.  That is wrong on every level.

Press Release – January 10, 2017

The Federal Trade Commission is sending checks to some 350,000 victims of the Herbalife Multi-Level Marketing Scheme. Let us hope that the $200 million Herbalife court settlement serves as a lesson for compliance in the industry

FTC $200 million Herbalife refunds

Click here to find out more about the terms of the FTC settlement

Do Legal MLM Companies Exist

Legal MLM companies exist and thrive in the marketplace. They have real consumer products and services.  There is nothing wrong with leveraging or benefiting from the efforts of others – all employers do this but with different compensation structures.

In my experience with MLM businesses, those that focus on the requirement to recruit new people into the system are skating on thin ice.  Distributors should not feel obligated to buy leads or be part of a particular marketing system owned by an entity that is not legally connected to or an accountable part of the company. Compensation should be based on actual sales of products to the public.

I am skeptical about marketing campaigns that lead with an emphasis on the money-making proposition rather than extol the virtue of the products or services. Clearly there are consumers in the market that choose to buy Herbalife products.

Advertising should not be primarily about recruiting new people into the business or selling products internally to distributors who end up being more like customers than truly independent business contractors. Because on the company’s part that would indeed be a deceptive way to build a customer base.

If you would like to share your experiences with Herbalife, or multilevel marketing, we would love to hear from you in the comments section.

You may also be interested in these similar topics:

Digital Altitude – Court Order Shutdown

Lawsuits Cause The Demise of Wake Up Now (WUN)

Top 5 Internet Home Business Mistakes To Avoid

Comments 10

  • Dear Jude,

    Hello. I just wanted to say that I really enjoyed your website. You have great useful information that many people benefit from. I especially enjoyed your Herbalife articles because I am a past distributor. My Herbalife experience:

    THE GOOD:

    I absolutely loved some of the products. I tried them myself. It would be just wrong to distribute something I haven’t tried myself. While I was a distributor I had customers that used products in the past and customers that never tried the products before. Nine times out of ten they returned to reorder. I had come to learn that Herbalife products benefited many people for different reasons other than just fitness & nutrition. They benefited people with medical issues as well. That was one of the reasons I used some of the products myself. It helped with my fibromyalgia. I did not continue with Herbalife do to a life change that was a poor choice but wouldn’t mind one day using the 3 products once again that did help.

    THE BAD:

    When I decided to become a Herbalife distributor I learned fast that in order to make good commission off the bat you had to purchase one of the packages which was not cheap and then instantly I would be making a good percentage of what I sold. I had the opportunity at that time to borrow the money from a friend and can’t believe I actually asked to borrow the money but I wanted that status to get more money so that’s what I did. That’s not me. I walked around proud feeling like I achieved something and honestly I didn’t and all I did was buy my way up the latter. Yay I got to go to conventions but big whoop I couldn’t brag how I made it there with success but I did testify it had changed and helped my medical condition. I also didn’t like how I was promised training that I didn’t receive. Well some might be able to turn to their coach but I was left on my own once I did purchase that kit.

    WHERE I AM NOW:

    Would I return to distribute Herbalife? I never thought so but now it would be a possibility only because I know where to get training when it comes to promoting something you love. I once again looked online to start my own business. Everything I tried in the past was not even a thought in my mind. I am glad because I found something even better. A place where you can bring your current business and expand or you can just start something different with one of their programs. That’s what I ended up doing and I could never be happier and still till this day I don’t have a single regret. One of the best things about our community is that what you accomplish is everything you did on your own and trust me your work there does not go unnoticed. When you accomplish something that you did on your own you feel amazing All the best for everyone!

    Sincerely,
    Roseann

    • Roseann,

      Thank you so much for telling us your experience with Herbalife. I’m glad to hear that the products help you. My guess is that Herbalife will be around for a long time and the FTC investigation into its “deceptive practices” may not amount to much more than a reprimand to clean up its act in certain areas of its business. As I alluded to in my post, the verdict is still out. We should hear about the findings in early 2017.

      Certainly the lack of success of its distributors is not by itself unusual in multilevel companies, but it should have been a wake-up call for the company to deliver appropriate sales and marketing training.

      Bill Ackman is no innocent in all of this and his motivations are suspect too. But the distributors in the documentary I believe are simply telling their genuine and all too common story in the multi-level marketing industry.

      I’m thrilled that you found another valuable resource for your education and development in building your online business.

      Again, Roseanne, thank you for your contribution here. It is what makes blogging and online networking so interesting and rewarding.

      ~Jude

  • A most interesting website and content, will definitely look at the video, was once a distributor many years ago!
    It will be interesting to hear comments alongside my own intuitive misgivings about MLM’s over the time I have explored this.
    I am also very interested in the absolute vast shark infested water that is the internet with its plethora of offers and millionaire mentors luring the unsuspecting with their knowledge , in particular leveraging “OPM” or; other people’s money. It is time to make sure that it’s not our own hard earned cash.

    • Averil, glad you found the content interesting. Do return to watch the video. There are many lessons to be learned, especially the panel discussion and Q & A segment.

      I’ve been around a long time and picked up a few things I didn’t know or appreciate until I heard it on the video.

      I appreciate your visit and comments and will check out your site too.

      ~Jude

  • Hello

    Averil and I have recently started up Fingertips Fortunes as a way of learning about this fascinating business. Between us we have been in most of the top 1980s and 90s companies, and are still looking for direction.

    I concentrate on the blog and talking to people, whilst Averil handles the clicking and emailing. Great team we are!

    There are some good people out there as well as not-so-good. We are very careful that anything we offer or advise is not going to backfire in peoples’ faces. I really like your approach and will follow what you are doing with interest. I too had some time in Herbalife, and still have one or two of their shakes mixers in a cupboard somewhere.

    Best Wishes – Richard

    • Richard, you and Averil do indeed make a great team. I’m sure you’ve put your Herbalife experience in the cupboard along with those shake mixers, and moved on. I agree with your viewpoint about needing to be careful about what we offer or advise people.

      It is great that you are talking to people, whether through social media, chat, forums or blog comments. Relationship building is a big part of building any business, and especially an online business.

      I greatly appreciate your visit and feedback. I have bookmarked your website and will visit from time to time to catch up on your progress. I read that you made a big decision recently, and I wish you both a successful outcome. ~ Jude

  • Jude,

    Hello, I am an Herbalife distributor and I just don’t have this experience. I also didn’t go into Herbalife thinking I was going to make a billion dollars overnight; maybe I hoped for it, everything in life requires hard work and unfortunately you need money for start up costs no matter which direction you decide to go, virtual or in-person.

    The “group” I belong to for Herbalife are pretty amazing, there is no pressure, I joined Herbalife for myself, and made that clear. I am not going to plea with people on why this product is so amazing; bottom line, with Herbalife’s program I have totally transformed myself, I think and believe it is an amazing product!

    Just because something works for you doesn’t mean it will work the same way for anyone else. Due to my joy over Herbalife I went back to school and obtained my Master Personal Trainer, so now if I want, my whole life can be dedicated to teaching and helping people with health and wellness.

    I am not saying that people aren’t mean and don’t scam others, that happens so frequently, don’t let people take advantage of you, READ THE FINE PRINT, research on your own, knowledge is power!

    • Well stated, Monica. I wholeheartedly agree about the importance of doing our own due diligence. The main thing is that you are enjoying Herbalife and are having a positive experience with the products and your membership. Congratulations on obtaining your Master Personal Trainer qualification. That is a wonderful achievement!

      Your story will give my visitors and readers another perspective. Thanks so much for stopping by and giving us your valuable feedback.

      Best wishes to your continued success,
      ~Jude

  • Hey Jude

    Great article, I like how diplomatic you are being!

    I don’t like to admit this to many people because I’m embarrassed by my poor choice as a youth, but I was a Herbalife Distributor for a period.

    While on the bus, I saw an ad inside for a new opportunity and followed up, then went through their Work From Home Video they send you, then it’s revealed by the Sponsor that calls you it’s Herbalife. Now I wasn’t looking to lose weight as I had just lost a fair bit, but that it was the business hinges on. Use the products, get results, and the business sells itself.

    I gave it a shot, as I hate starting things and not finishing them. But it was REALLY expensive. And if you goto Scamwatch and enter ‘pyramid scheme’ they define what a Pyramid Scheme is, it word for word describes my experience with Herbalife.- expensive investment, recruiting new people is a priority, products of average or little appeal.

    My sponsor was considered royalty in the sector I was apart of, and whenever I mentioned her name, people would tell me how lucky I was. It was a bit like a cult, with the chanting and constant self-appraisal.

    Many other distributors who had some success selling the business idea onto others, gave empowering speeches about how the products changed their lives and helped with long-term illnesses or injuries they had suffered. I can’t attest to whether these were true or just tall-tales, but they seemed overjoyed and totally happy, which is something I can’t begrudge them of. They believed in it, and it was working, so good for them.

    The products are mainly pills, some snacks and shakes. I kind of think this is a terrible way to lose weight. What about real food? Powder is terrible for your kidneys on a regular intake. Any gym junkie will tell you that. Some of the pills were okay, and are based on Chinese Medicine, so I don’t entirely disagree with some of those, but not the shakes and not all the time. You are right, they shouldn’t be calling themselves Health & Wellbeing coach. I guess that was part of my problem, I didn’t feel equipped to be advising others on their health.

    The business part of it, entailed going to some events where sometimes more profound Herbalife distributors would speak and reinforce products. There was also one event where I went to one business and advertising and it was a guy (I forget his name right now), told his success story on selling a t-shirt brand and how he made it big. It all seemed kind of shady, the tactics they were talking about and all played around deception and making targets feel insecure in some way to entice interest in a product.

    Sure we buy products to benefit us in some way, and perhaps insecurity sometimes factors into the buying process, but I do not think or agree with the amount of pressure get-rich-quick schemes or MLM’s use to take advantage of people who are vulnerable. It might not be illegal as such, but it’s definitely a business model that operates under a lot of legal scrutiny which isn’t comforting.

    There are other opportunities online that present much low risk, and I think affiliate marketing is one of those, no?

    Jen x

    • Jen, thank you for your well considered and thoughtful comments, and for sharing your experience with Herbalife. I enjoyed reading your response.

      There are many different business models online, including MLM and affiliate marketing. We can find both good and bad opportunities in all types of online programs, just as there are good quality, mediocre, poor quality and scam products around in the marketplace. That’s why it is important to do as much due diligence as possible, weigh the facts and risks and not be pressured by marketing gimmicks and tactics that try to push our emotional buttons. Easier said than done!

      Again, I appreciate your contribution to this discussion. I look forward to visiting your website too. All the best. ~Jude

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