It’s no longer business as usual at Herbalife: An inside look at the $200 million FTC settlement

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Multi-level marketer Herbalife will pay $200 million back to people who were taken in by what the FTC alleges were misleading moneymaking claims. But when it comes to protecting consumers, that may not be the most important part of the just-announced settlement. What could matter more than $200 million? An order that requires Herbalife to restructure its business from top to bottom – and to start complying with the law.

Advertising in English and Spanish, Herbalife pitched its business opportunity as a way for people to quit their jobs and make the big bucks. Other ads promoted Herbalife as a means for already hard-working people to provide a little more for their families: “When we worked in factories our earnings could only pay for basic needs, but now we can take our 12 grandkids on vacations.”

But don’t start packing the kids’ bags because according to the FTC, it’s virtually impossible to make money selling Herbalife products. As explained in the complaint, our analysis shows that half of Herbalife “Sales Leaders” earned on average less than $5 a month from product sales. For folks who invested the most to build an actual retail business – a brick-and-mortar store that Herbalife called a Nutrition Club – the majority made nothing or even lost money. 

Which brings us to the inconvenient little secret about Herbalife that the FTC’s complaint alleges: The small number of distributors who actually made money made it not by selling products to people who wanted the company’s powders, pills, and potions, but rather by recruiting others to serve as distributors – and encouraging them to buy Herbalife products.

The lawsuit alleges that Herbalife deceived consumers into believing they could earn substantial income from the business opportunity or big money from the retail sale of the company’s products. In addition, the complaint charges that one of the fundamental principles of Herbalife’s business model – incentivizing distributors to buy products and to recruit others to join and buy products so they could advance in the company’s marketing program, rather than in response to actual consumer demand – is an unfair practice in violation of the FTC Act.

Under the settlement, that all has to change. The order requires Herbalife to drop its current system of rewarding distributors primarily for recruiting a “downline” of people who will buy the product at wholesale, without regard to whether there are customers out there who really want the merchandise. 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.

You’ll want to read the order for the detailed dos and don’ts, but they’re all closely tied to the law violations alleged in the complaint. Here’s just one example: The order requires a clear differentiation between people who join just to buy discounted products for their own use and those who join the business opportunity. For people in the bizopp, 2/3 of rewards must be based on verifiable retail sales, with no more than 1/3 coming from product designated as “personal consumption.”

And it’s not a “we’ll take your word for it” thing. The order includes teeth that will put a financial bite on non-compliance. To make sure everyone at Herbalife is on board with the new set-up, 80% of the company’s net sales will have to be real sales to real buyers. If that doesn’t happen, the rewards that high-level distributors pocket will be cut. What’s more, for the next seven years, Herbalife has to hire an Independent Compliance Auditor to monitor what the company is doing to comply with the new compensation plan. The Auditor will report to the FTC, who will have the authority to replace that person should it become necessary.

We’re glad to be returning $200 million to consumers. (Details about the refund program will be available soon.) But another key goal is to dismantle the alleged deception and unfairness built into how Herbalife does business. As the company rewrites its advertising claims and restructures its compensation system, we’ll be watching. The Auditor will be watching. And consumers should be watching, too.

 

Comments

This is great news. I hope the same is applied to all the MLM industry.

What happens if the $200M is not fully utilized? How long will you hold it? Do you give it back after certain timeframe? Who audits your use of the funds? We will be watching

How about spending the excess money on a massive campaign to educate the public about MLM pyramid schemes?

I listened to the FTC press conference announcement and the questions from the press afterwards. It became clear that despite question after question asking for clarification of whether HL is a pyramid scheme, the FTC spokesperson would not admit it. She did however express disapproval of HL stating in its own press conference that it was found NOT to be a pyramid scheme. She confirmed that she did not agree with this statement and said that "HL has not been not found to be a pyramid scheme". If it swims like a duck, waddles like a duck, quacks like a duck, it's a duck (or in this example, a pyramid scheme).

Tex (in comment further up the comments list) makes a good point about the additional expenses incurred in belonging to an MLM business; the tapes, CD's, books, training sessions, website charges that have to be bought and paid for regularly. Then there's the events that have to be attended; hotel expenses, food and drinks, travel costs. It is an expensive business being in an MLM, not just HL.

You're exactly right about the overhead costs, and the Herbalife Nutrition Club costs (rent/lease, insurance, utilities, etc.) are the major reason people lose money. The FTC should pull the string on who is providing the facilities, I wouldn't be surprised if it were the upline. Also, it's not just the losses to the 99% who buy the tools, it's the massive profit made by the 1% providing the tools. In the case of Amway, 10 times or more is being made from the tools compared to Amway, by several claims of former Amway distributors/IBOs.

I was deceived. I was given false information about the business. How do I become a part of this settlement?

This is a 2-way street, not a highway and a bike path. Since I started using the products, compensation has always been based on purchased volume and not sold volume. Is this a good change for consumers? I believe so. How about for the "top" distributors? Not so much. The company knew all along at least since the CEO Michael O Johnson (MOJ) joined Herbalife that many top distributors were applying business practices that were borderline unlawful or unethical, but since those practices moved a lot of volume the company said nothing. Why? It could very well be because several of those top distributors are, or were at some point, also part of the board of directors. In essence, they are/were the CEO's boss.
The company expelled some of the little fish, but what about the big fish that got away? People like Susan Peterson and her deceased ex-husband John, Doran Andry, Leslie Stanford, Leon Weisbain, etc. and many of their top producers. They among many others are responsible for causing this mess, not just the company.

Seems HLF has retroactively edited their press releases and no longer claimed "not a pyramid scheme".

Which, of course, means any website with articles that claimed "FTC says HLF not pyramid scheme" merely copied the HLF press release, rather than FTC's. (Here's looking at you, CNNMoney... And whoever syndicated your content)

How do you know if you are part of this settlement? We were part of Herbalife and lost a lot of money with all their scams. Please let me know

I don't understand..... Your findings indicate that Herbalife was in fact running a pyramid scheme and they get off with a small on the wrist and declare themselves victorious. I thought the FTC was a consumer advocacy group. Why was Burnlounge treated so differently?

The truth of the matter is this. Herbalife is a great company. Unfortunately most of the people who join as Distributors just see dollar signs. They personally are not prepared to put in the work to create success for themselves. Nobody forces these people to part with their money. They do not have the skills to make the correct decisions. Do you think Warren Buffet would dive in and open a NC without first completely assessing all the pro's and cons sufficiently, I think not. Herbalife is a business just like any other business. The old saying is applicable here "fools rush in" and then they start playing the blame game when they can't cut it.

I took a job managing an office for 3 HL distributors. 2 weeks into my employment, listening to them pitching their products, I thought,"I can do this." I didn't need to lose weight, but I had a lot of overweight friends, my husband included. Besides, I needed to make enough $$$ to pay a phone bill. Couldn't get my husband on the product, but my best friend did agree to give it a try. She lost 17 lbs in 2 weeks. On my lunch breaks, we would parade through the local mall where I worked part time at a boutique and a bookkeeper for 2 other businesses. People were inquiring about her weight loss and I went on to retail $2000+ in product. Keep in mind, I was not a distributor at that time but because of my sales, I signed on with HL and became a supervisor. Within the next 2 weeks, we moved over $10,000 in product, I was able to leave my 3 part time jobs and devoted full time to HL. I had no idea how the HL compensation plan worked.. Here's what I knew: their products were working for my 235 retail customers. My initial investment: $100, hard work, and an investment of time. After a year with HL, I became a contender for the production bonus award given annually to the top 10 distributors in the country with sales of $47,000.. Income then: a supervisor, 50% discount on all products....25% from your down line sales who have not achieved senior consultant or supervisor status...10% from your down line senior consultants and when your down line become supervisors, you are paid 5% of their sales. Herbalife was a great company then... And although, I am no longer associated with them., due to personal reasons, ..they are a great company now.

After 5 years in the HL business and being told to buy 2500 per month in product we had to go bankrupt. Sad but true I love the products but the company ruined us. I hope we are part of the reimbursement settlement

Will this FTC enforcement be able to reach beyond the US borders? The vast majority of HLF's business (and fraud) occurs overseas.

America,
We have nothing better else to do than LIE !
That product has been out for years and now that they have nothing else
to talk about. they need to make something up... LIKE COME ON what's Next!

I am another "distributor" who never made any money but was brainwashed at "success training seminars" into spending thousands of dollars to become a "supervisor" Thankfully, I wised up before I attempted to open a " nutrition club " !FTC Please contact me about the settlement .

Well there's your proplem Milo. You want the FTC to contact you so you can get some of the money. I suspect that's how you expected to get customers. Ha.

Someone should be watching the new giant Jeunesse! Aren't they a similar structured business? And what about Nuskin? I have been approached by both companies. I think it is disgusting! Shame on all of them!!!!

I'm constantly amazed by so many individuals who do not take responsibility for their lives.

A pastor will draw you to the Sunday worship on a promise of a better, happier life if you will come and listen to the sermon, drop a donation on the plate, and go home and practice what you learn. But on Tuesday you make a mess of your life by not following the salvation formula. Why do you blame the pastor, cheer the feds when they march in and shut down the church, and declare religion a scam?

THAT is disgusting. Shame on pastors and bishops and churches who don't deliver. Can I get my tithing back?

I am a Tab Team Member as we call it in Herbalife , we've been victims of downline distributors cashing out from dual distributorship since 15 years, although various complaints has been sent to Herbalife ethic department nothing has been done...as a consequence we are loosing an incredible amount of money every single month. we hope FTC rules will help to fix issues like that. People rigging the marketing plan are a plague but Herbalife employees allowing to do so so are much worse. and frankly Herbalife deserves the backlash

Herbalife is not only a MLM scheme but they are also going around claiming to be nutritionist and personal trainers. This is concerning because they are opening health clubs as distributors and calling themselves "coaches" but are not getting proper liscences and certifications to train people or give them nutritional advice. Many people are getting injured by attending classes by these untrained Herbalife coaches. I was not aware that Herbalife is now a certifying body for personal trainers and Nutrionist.

Today 07-05-18 all of the HL unethical practices, like the “coaching” still the same. Herbalife do nothing nor FTC. I report Herbalife about all or almost all the unethical practices. And FTC do nothing... and reading this article and comments from 2016 FTC settlement to HL, make me loss my faith completely on the FTC. How FTC permit this happening now? HOW? This is un respectful in all the ways! Unethical, health of people is involved. I really can’t believe this.

Despite the negative aspects of income exaggeration and other deceptive marketing practices, Herbalife produced valuable products in high demand and it indeed was possible to generate income but retailing product. Read the post by QBee88. Social Security is a far worse a "SCAM" than Herbalife. I challenge anyone to read the definition of Ponzi Scheme and explain how Social Security does not fit that definition to the letter.

I tried very hard to become a successful distributor. I flew to Dallas to a convention and I bought all the products to sell, I also called people every day who expressed an interested in becoming distributors, etc. Long story short, I could not make a go of it. It's too bad because one reason I got into HL is those shakes really do lead to weight loss--they taste good and they are filling. The good news is that yesterday I received a sizeable refund check in the mail from the settlement.

Hello;
I have been a Herbalife distributor since 2009 and still serving as a distributor, because I love the product and my customers love it. It has made a difference in my life personally, and for that of my customers. However, due to the new re-structuring of HL's model, I will be forced to purchase product at a 25% discount or give HL my customer list to prove that I purchase product not only for personal consumption but also retail. Let me explain. I only recently found out, about the new re-structuring of HL's model about 2-weeks ago. I too was put in a position to purchase large amounts of product in order to reach a certain level (supervisor- $4,000 within a 12-month period in order to purchase product at a 50% discount) Any business salesperson knows the larger your discount the larger your commission. I purchase HL products for personal consumption and retail since day 1. I am a hard worker and was willing to take the risk as any business person knows, there will be risk. However, HL restricted how I market /sale my product, such as at the flea market, which was my other avenue of distribution that I could never take advantage of. HL representative told me that flea market distribution is still NOT an option for distribution and I know it's in Policy and I knew it was when I started. However, HL also, told me at the time I signed up, that they DO NOT or WOULD NOT, have commercials for the same reason, I could not sell their product at the flea market. The reason why I could not utilize this method of selling product at the flea market was because this method would not be fair to the other distributors, per HL.. Did I know of this Policy when I signed up with HL, Yes, I did. However, after being in HL for some time, I saw a commercial about HL on TV, and I was shocked. I called them immediately and was told that it must be a third party company, but it was not them. This was about 2yrs ago. Recently, 2016, I saw another commercial advertising HL, which this was becoming very disturbing, but nothing I could do about it. I continued to sale HL, again because I like the product. I mentioned earlier that, I recently spoke with HL rep to place an order and was informed that I needed to split my order between personal consumption and retail, I knew this new model had begun, after placing recent orders on line, but had no idea why. After speaking with the rep, she also informed me that I would also have to begin sending them copies of my customer list to confirm that I was retailing product. When I asked why, she began to explain the new model under way, but never mentioned the full reason behind this new model, only that many distributors were purchasing for personal consumption but not retailing. Rewards and discounts were never based on retailing but purchases. I have always retailed HL products but never have I heard of any mlm, or wholesale company asking for my customer list; name, address and phone #. I do not trust them, in that, they may begin contacting my customers and offering them discounts / 25% which is now also a part of their new model. I mentioned earlier that I have purchased thousands of dollars of product so as to be able to receive the 50% discount on my purchases. Where I feel that HL has done me an injustice, is to limit how I distribute my product, when they themselves have gone against their own Policy (as long as it's legal and honest what difference should it make) which caused me to be left with a lot of product that has now expired and no good for retail. I only served as supervisor for about a year and a half, since I couldn't maintain the $4,000 purchases within the 12-month period, I dropped in position from supervisor to senior consultant / distributor 35% level. HL is making commercials (a HL rep finally told that they are making commercials) to obtain new business, which I strongly feel is unfair to the little person at the bottom, since we are restricted or, as Policy puts it, if found that we are selling product at the flea market, we could lose our membership and can no longer be a HL distributor. When I asked who receives the new business as a result of their commercials, I was told that it goes to the distributors that purchase a list. How unfair is that, after restricting those that perhaps aren't in a position to purchase a list, but find other ways to obtain new business, like at the flea markets. I have been honest in my business practice and now will be soon forced to either give up my customer list to HL or drop off as being a distributor to purchasing product as a general consumer and receive 25% discount which any body can now do. To force me into such a position, is also unfair, and unethical since my contract does not warrant this practice. The other thing I discovered, and you can check your invoices, is that the 35% discount level (whatever level you are at), which I am now at after dropping from the 50% discount level, is the discount is not based on the retail price difference (35% below retail). I was told that the discount is based on your commissions earned (something to this effect) This didn't make since to me. When you do the math, you will find that you are short by a dollar or two Each order. With the thousands /millions of distributors, this dollar or two times each order a distributor places, equals out to be millions to HL. I was told that this process changed and has been in effect for about 2yrs now. Due to personal reasons, I had not followed my invoices as I should have and always did, until recently. This is how I found out about the change, never notified by HL. I know that operating a business can be hard work, and I don't mind putting in the work, but when you SCAM honest hard workers that have been loyal and honest with HL, then I feel they deserve to pay. My question is how do we find out who exactly is entitled to a portion of the $2M, and is there any action on our part that needs to be done? It's really sad that some have allowed "money" and "greed", to affect the reputation of a Great Company and people to lose out on the benefits of Great products. I now have to research and find another product just as good if not better for my family and customers, which I believe I already have, but wanted to remain in a position that I could continue with HL, without conflict of interest. My customers do not want their personal profile information given out. Well, I'll see where this goes, Please inform me if I am a part of this settlement, since I too have lost thousands due to HL's unfair practices.

While I do love Herbalife products, I too fell victim to the scam of "owning your own life". I opened a nutrition club, I followed the plan from my leaders, I put in the time, effort, went to the seminars, went to all the trainings I could possibly go to....and closed my nutrition club after 3 years. I lived at that club hosting workouts, trainings and so on (as I was told would help "build the business") I cashed in my old 401K to help get things going and listened to President Team members "guide" me with do's and don'ts of the club business....sign my up for my refund!

I sold my car to invest into this business and put all the money towards this so called business opportunity of a life time. Before this investment I had tried other businesses very similar to this except that I opted out right away because of the time and money that these businesses were straight forward and upfront about with the money and time that would be spent in getting involved in the business. My first interview with the distribution leader of Herbal Life that set me up and got me to spend all my money lied, lied and lied about what it would take to sell the product. My biggest and most repeated question to her (Ruth) was if I would have to spend time and money on traveling to attend seminars and marketing and she repeatedly said NO, NO, NO, and sounded irritated to have to repeat that I would NOT have to do this and that it was not required. Once I invested my money her attitude and personality was night and day difference. She repeatedly lectured me on how I needed to invest on going to these extraviganyt seminars and purchase these names to give me business so that it would benefit my business that I had yet to make any money on and was so arrogant, pushy, snooty and a snake ass BITCH about how it would benefit me to spend more money on advertising and going to these seminars (made me feel stupid if I didn't). I so could have pulled this off and treated other people this way that I was trying to sell to if I could have played the game like her, but it felt wrong in every way, and I was supposed to sell something by reading a script from a book word for word and that is what they feed your head with when you attend those so called phone meetings. It is nothing but being brain washed into brainwashing and misleading other people. It basically is a cult that helps people rip other people off that have no soul or passion about what they are really selling. When it comes down to it your NOT selling the product, your selling your soul to the devil in order to make a buck that is going to cost other people that really do want to work hard and believe that there is a way to make money that would be not only for themselves, but the people that they think they are serving, until they find out after the money is all spent that they were set up to not serve, but to deceive other individuals to bring themselves to be as low and deceitful to others as to what was done to them. So unless you are HEARTLESS AND SHAMELESS than this business is for you! Good LUCK and Good-rittence!

I not only tried to sell HL once, but twice. I got out early enough the first time, but I really got hosed the second time. One of the things that was pushed by the up line was "ad lists" these were media generated lists that you could purchase to generate on line sales, but most of all to get people to buy into the largest distributor list, which cost $4000. I barely sold any products, but I ended up spending $9000, by the time I was done, buying other products and advertising lists. I just feel sorry also for the people that I talked into buying the top of the line distributorship. I just got a check and had to log on to see if it was real. I am really glad to get something back. Thanks for the class action. The only people who really make the money is the top up line who have gotten enough distributors under them. I used to stay up till 3 am in the morning calling people who were not in my time zone.
I spent months trying to build the business and work full time. I was set up for failure. I'm so glad this happened. Thanks again FTC.

Me and my husband join Herbalife on 2001 and yes we continue with the company for 3 years because we were misleaded that we were going to get rich. My husband quit his job so he can put 100% on the business and then learn that he was taking advantage of by 2 other distributors that were not even on our line, they were from Venezuela and didn't know anyone so they stuck next to us for about a year and took advadvantage of us by taking our customers as we were getting them. After 3 years trying to make the business work we went bankrupt and lost everything including foreclosure of our home. We got a ckeck of $300 last week and that's not even close to what all we lost because of it. Here we are over 10 years later and still don't have our own home since.

I think. I qualify for one of those checks.
But I moved to a different address
What can I do to claim my money??

In addition to encouraging me to buy a ton of products I couldn't sell, they also encouraged me to buy leads to do cold calling. The ad said there would be no cold calling. But you have to have a ton of family and friends to sell to or make cold calls using their lead system. They are crooks!

When I signed up, I came in at the "supervisor" level. I had a huge problem with how, when recruiting new members, the training material specifically tell you that if someone asked a lot of questions they are not the type of consultants we want....? That was the start for me. My fault for not asking the same questions but I just couldn't deceive, dodge or avoid questions asked. And the training courses were so out dated I had a very hard time getting help from anyone! I went so far up the chain and when I finally got a call back from someone, I had already decided to cut my losses and move on. When HL hit me with a collection because the one commitment I hooked decided not to move forward and I had no idea how to return her money, I told HL to go ahead and put me into collections. By the time I died, I was pretty sure that they wouldn't be in business any more. I noticed about a year ago that collection has mysteriously been removed from my credit report. I got no support at any time from them, the training material was no longer relevant and I was so happy to get that check this week. Good luck to those who remain.

I didn't receive my check how do I was included in the lawsuit?

My mom used to work at Herbalife in Mongolia as GET.After couple years hard work she got bankruptcy , couldn't work anymore. How can she get her Settlement?

If I moved since being an Herbal Life member how can I find out if I have a refund ?

Me and my husband were also victimized by this people. My husband quit his fulltime job to attend our nutrition club full time first few months made enough to pay the rent after it was coming out of our pocket. Our upper line did not helped us at all. Kept it for 6 months and had to close our doors. My husband was unemployed for 6 months and finally was able to find another employment partime. I was very disappointed.

How can I go about getting my refund I spent over 1000 to just get 35% as a distributor

i see everybody getting checks i did stop herbalife 2015 is not really good i did lost money and guess what i did not received a check

My friend (Al Myska) and I got into herbalife about 15 years ago and they took us for $5,000.00. I put ads in newspapers over a 200 mile radius but as hard as we tried, we never made a dime. Are we eligible for a refund?

I just found out from my mom that I have a check for 200 hundred dollars from herbal life but I spent 2,000 plus on orders. So my question is,what is this check for. I am living in new Zealand now but mom is living in Pago Pago American Samoa.I was living in American Samoa when I joined. Please help direct me to right people to talk about this claim please.

Melaleuca does the same thing..... this isn't the first company doing this and won't be the last. tired of seeing people sucked into false dreams by greedy people trying to make money off of guliable people. This is just one out of multiple companies out there with Melaluca being one of them scamming people.

Better take a look into Lularoe, ItWorks!, Amway, Arbonne, etc, etc, etc

Herbal Life has been a pyramid in sheeps clothing since tne 70's. I live in long beach where they had thier West coast regional convention 70,000 people flocked here to drink the cool-aide. I do know of someone who actual quit their job and it was in the medical field. And thei were making a ton of money on a top tier. I think to recognize a pyramid right away you would have lived in that time when pyramids were everywhere.

This company is a rip off. The crazy thing is Carl Icahn is now an advisor to Trump. he advises on the elimination 0f regulations. he has billions worth of stock in companies that will, and already have benefitted from his position.
A refinery and Herbalife are examples. my guess, the FTC ruling will not be enforced!!!
all about Money. The 1% takes advantage of all of us to make Billions more, while we fight to have transportation and Food on the Table.
So CORRUPT!!!!!!!!!!!!!!!!!!!!

I LOST $5000 with Herbalife. Is there a way I can get it back now??

I was pulled in to become distributor a few years back and when the original distributor did a three way call with another distributor they both were so excited that I would join. I was more interested in the product and they kept talking about getting more distributors under me. No mention of the product.

I backed out quick. I knew that it was a pyramid scheme right off.

Why don't they use some of the money to inform their users of the dangers of soy, artificial colors and flavors, sucralose, as well as other substandard ingredients in their products?

I see they're in my country, Ghana. I bought the products from one distributor and honestly it works. But then he kept on bothering me with "become a distributor " talks and I realized their business aspect was quite ugly. A lot of my friends wasting their lives, I feel sorry for them. Hopefully they make money and exit

Perhaps I am mistaken but Doterra appears to run in the same way.

Same same but different, they made a billion dollar world wide scam and only paid out 200 million in chump change.....life goes on...Herba Scam goes on too...

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