Redress checks and compliance checks: Lessons from the FTC’s Herbalife and Vemma cases

As part of the FTC’s historic $200 million settlement with Herbalife, about 350,000 Herbalife distributors should be watching their mail for a partial refund check. The FTC has more information about the refunds and advice for people thinking about investing in a multilevel marketing opportunity. But it’s also a good time for some straight talk with members of the MLM industry.

The FTC has a more than 40-year history challenging unfair and deceptive MLM practices, including recent law enforcement actions against Herbalife and Vemma. The specific terms of those orders – which require the companies to restructure their operations from top to bottom – apply just to Herbalife and Vemma. But industry members can learn a lot by reviewing the conduct the FTC says violated the law and understanding the principles underlying those orders.

Here are some lessons MLMs can take from those lawsuits.

False or unsubstantiated earnings claims violate the FTC Act. Established truth-in-advertising standards apply to all companies within the FTC’s jurisdiction, and that includes MLMs. Every MLM case the FTC has brought to date has alleged – among other things – misleading money-making representations. Some MLMs use limos, luxury, and lavish lifestyles as the bait to lure consumers, but their pie-in-the-sky promises turn out to be half-baked. Others try a subtler approach, appealing to consumers’ desire to be their own boss, spend more time with their children, or secure their families’ financial future. Regardless of whether it’s hard sell or soft soap, deception is deception. And let’s face it: The facts bear out that very few MLM participants earn more than a small amount of supplemental income. That’s why it’s unwise for MLMs to make earnings claims – expressly or by implication – that don’t reflect what typical participants achieve.

Monitor the claims your distributors are making. Some industry members may respond, “We never make earnings claims!” Maybe not, but what are your distributors saying? Even a truthful income testimonial can be misleading if typical distributors are unlikely to achieve those results. And if your distributors are making misleading claims, you could be liable. MLMs should have an effective monitoring program to ensure that distributors comply with the law and aren’t conveying misleading claims. In addition, MLMs should provide sufficient information and training so that prospective recruits have a realistic picture of the business.

At the heart of a legitimate MLM are real sales to real customers. For companies acting within the law, the business is driven by selling products to real customers. Who do we mean by “real customers”? People unaffiliated with the company who actually buy and use the product the MLM sells – real retail sales, in other words. And by “real sales,” we mean sales that are both profitable and verifiable – retail sales that can be confirmed. Contrast that with MLMs built primarily on bringing in more and more recruits and racking up sales to other insiders. Very few people are going to make money and most participants will be left in the lurch.

Make sure compensation and other incentives are tied to real sales to real customers. The FTC complaints against Herbalife and Vemma challenged compensation structures that rewarded distributors without regard to retail sales. The court-enforceable orders in those cases require the companies to dismantle those systems. In their place, Herbalife and Vemma must implement systems that incentivize participants to sell products to people outside the network. Is it time to take a closer look at your MLM’s compensation structure?

For more information see this response to a letter from the Direct Selling Association.

Comments

We now have four connected dots: 1) Vemma case, 2) Herbalife Settlement, 3) Chairwoman Ramirez's comments in her invited talk to the DSA, and 4) this blog clearly highlighting the industry-wide concerns. Well done, FTC!

The Vemma and Herbalife agreements also prohibit omission of material facts. I assume this issue is included as a part of the above bullets. A significant material fact always omitted, for the MLMs having a tool scam, is the money made from the tool scams, which can significantly exceed the profit being made from the MLM products and services. Tool scams are the various meeting tickets, books, CDs, voice mail, website access, etc., usually sold by the upline, and sometimes the MLM itself, to the downline.

Is there a list of people who get refunds that is available to the public?

That's what I'm trying to figure out. See if my self or any other of my downlines would be receiving a check

Hi just want to know if Some of my friends and me will receive a check whe had a different address and now she change her address and we where in herbalife 2009 .please if you can let us known [personal information deleted]

I'm wanting to know the same thing as above?

is there a list of people who get refunda

i lost my check what can i do

In the case of losing over $40,000 in products, purchase of potential leads, and supplies, will I get compensated for William T. and Dolores B. Barry as Herbalife Distributors?

My late husband William T Barry was the original owner of our business when we started in September 2011, He passed away in March 2013, I took over as Dolores B Barry, Our credit cards reached over $80,000 for products and leads we bought to recruit distributors. How will I be compensated for that business loss? I received $600 for me as Dolores B Barry. I stopped as a distributor in 2015. I know Herbalife did not submit anything for William T Barry. His records are still in Herbalife's systems archived,. Please answer my inquiry. Thank you.

I too spent a lot of time of what was to be part time and didn't get anywhere. The sad part is there are all kinds of health and nutrition companies / vitamin / essential oil / and so forth that are a basic MLM that are the same type of thing. I was not lazy -- just absolutely didn't work as a business for me - loved the product though..

I did not receive any money from herbalife and I haven't received any of these checks? What's the qualifications

How can I get my money back if I pay the Herbalife from local store?. I do have. Receipts from local store.

I was a distributor during 2009-2015. How can I verify if I am one of the 350 thousand people who were given a refund?

I didnt get no check and invested more than 3000 dollars in 2013 ?how do i know if i m getting any checks or anything ,because i m hearing that it is sent to the all address

when will I know if I will be receiving a check for my loss in herbalife?

I have moved and have a new address how can I receive my check? or provide address change? I have called several times and been placed on hold for over an hour. Is there a link?

DId you found a list or something to verify if you're going to receive a check. We are in the same situation, we moved from house and now we don't know nothing about that check.

A distributor under me got a check but I have not. How do I know if I will recieve one?

How do I know if I qualify for a refund from herbalife

I did not receive any money from herbalife and I haven't received any of these checks? My Name is Ismael Viera and my ID #[personal information deleted] My address changed; I call to Herbalife on 1-17-17 to actualize my Data; Please let me Know the Status of my Refund. [personal information deleted] ThANKS

How I can get my refund from Herbalife? If I'm moved and they don't have my new address?

Can you please advise if there a list of people who get refunds? if yes, is that available to the public? pls advise link/web?
Thanks,
Jose

I have not received my refund from Herbalife. I have called twice and left voice messages with my information. I moved and would like to actualize my address. Please let me know how I can do it. Thank you.

How can i know if im receiving a check. Because most of my downline have recieve a check and i havent.

I change my address and i didn't updated with herbalife because I not active anymore how can I know if they mail a check to me? And if the check was mailed it was returned because the apartment where I used to be is vacant and they said they send all the mail back to the senders. How can I update my address in case I was qualify to received the check?

My address has changed since i was a distributor for Herbalife. What can i do in this case. Pleasse email me at [deleted].

is there a list to check to find out if I am to receive a refund check?

I did the herbalife business from 2009 to 2015 and i have not received a check. when can I expect my check in the mail? who can i speak with regarding this? I have tried calling and no one answers.

How do I find out who gets check?

I did the herbalife business from 2009 to 2015 I have not received a check who can I speak whit regarding this I call but one answers what can I do?

I SEPND MORE THAT 8 THOUSAND DOLLARS WITH THE COPANY BECAUSE THEY TOLD ME FOR ME TO MAINTAIN MY SUPERVISOR STATUS. WHEN I ENTER THEY TOLD ME IF ANY OF THE PRODUCTS EXPIRED I COULD EXCHANGE THEM-BIG LIE. A PUT MY DAUGHTER UNDER ME AND SHE RECEIVED 3 WEEKS A GO A CHECK FOR $ 800 . I WOULD LIKE TO KNOW WHERE IS MY CHECK , REGARDS.

I have not received my refund from Herbalife. I have called twice and left voice messages with my information. I moved and would like to actualize my address. Please let me know how I can do it. Thank you.

Hello, I was calling the number you have listed on your page for the Herbalife settlement money at 844-322-8146 and I've been waiting in line for over 38 minutes and no one is picking up the call. I was a representative of Herbalife back in 2010 and I spend over $1,000.00 and decided to stop, because I didn't sell the product. The person who enrolled me back then told me about the issue and I was wondering if I appear in the list of the beneficiaries to collect the money that I lost back in 2010. I tried to press #8 at the number you have and it only keeps in on hold to speak to the next representative and I'm not able to leave a voicemessage. There no way for me to leave my current information. I moved and I have a different phone number. What can I do? Please help!

The bank - Bank of America is not accepting the checks- says they are not going through- rejected- Advise please

I've submitted a claim through the FTC over a month ago. I have not received a reply or anything. I've spent thousands of dollars with Herbalife and have not received any compensation for money lost. How will we receive feedback? How soon can we can expect an answer?

Were can i see if im on the list?

Here are answers to some of the questions people are asking about the Herbalife settlement.  I hope this is helpful: "If you were an Herbalife distributor between 2009 and 2015, paid at least $1,000 to Herbalife but got little or nothing back from the company, and you think you should have gotten a check, please call the refund administrator at 844-322-8146."

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