Things heat up against Herbalife with a call to look into their business practices.
Herbalife, the nutritional supplements company that has long been in the cross hairs of a powerful hedge fund manager, is coming under increased scrutiny in Washington.
Senator Edward J. Markey, Democrat of Massachusetts, sent letters on Thursday to the Securities and Exchange Commission and the Federal Trade Commission urging those agencies to look into the business practices of Herbalife. The senator also wrote to Herbalife’s chief executive, seeking more information about the company.
The Senator notes he has had complaints about the company being a pushy, multi-level marketing scheme. This is doubly interesting issue since they may be selling potentially worthless stuff and targeting disadvantaged people to pull them into a MLM network.
“There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families,” Mr. Markey said in a statement on Thursday. “I have serious questions about the business practices of Herbalife and their impact on my constituents, and I look forward to receiving responses to my inquiries.”
The Verge wrote this about Herbalife:
Simply put, if you signed up for Herbalife today — and please don’t — you wouldn’t interact with the company at all. You’d interact with the person who recruited you: your “upline.” (And if you started recruiting distributors yourself, they would be your “downline.”) Since you’re restocking through your upline, it’s the person who recruited you in the first place who receives a commission from any sale that you make. Or any sale you fail to make, as long as you keep placing orders.
In a letter asking Herbalife distributors to send letters to Congress for Herbalife, CEO Michael Johnson tells the distributors that its in their interests for basic facts about the company to remain hidden from them! The letter begins, “I have an urgent request for you to email your Member of Congress.”
Which facts? The ones that determine whether it is possible for any distributors except a tiny few recruiters at the top of the recruiting chain to ever make a dime as Herbalife distributors. Herbalife solicits millions of Americans each year to invest in its “business opportunity” as Herbalife distributors. Over 500,000 are under contract each year in the USA. The vast majority quit within a year, after they lose money. Few know why they lost and most are told it is their “own fault.”
That’s what it seems like. Allegedly, 99% of Herbalife distributors do not make a profit. A half a million people, many Latino, were recruited per year to invest in Herbalife’s business opportunity but they were not given information about how they would (not) make money selling the products. Herbalife was ruled to be an illegal pyramid scheme in Belgium. But is it? A pyramid scheme is when participants profit off of recruiting others rather than the sale of actual products.
Herbalife is a very “sciencey” company, pushing that their weight loss and supplement products are tested and the best in the world. Source-PDF Are people actually buying and using these products? There is SO much to be dubious about with Herbalife, a call for an inquiry is very justified.