Is Herbalife a Pyramid Scheme?

[Blurock]

Hedge fund manager Bill Ackman says Herbalife is a pyramid scheme that preys on the working poor. He has taken a $ 1 billion negative bet against the company.

Ackman argues that Herbalife’s business model is a pyramid scheme as defined by the Federal Trade Commission which states that participants make money primarily by recruiting others, rather than through the sale of goods and services.

http://en.wikipedia.org/wiki/Herbalife


The Wall Street Journal reported that the U.S. Securities and Exchange Commission’s enforcement division opened an investigation into Herbalife Ltd.
Following a number of investigations and a class action paid out in USA in 2004, the Commercial Court in Brussels, Belgium in Nov 2011 ruled that Herbalife was an illegal pyramid scheme. Is this not how all MLM companies operate?

[Didditmiself]

I think whichever way you look at it, if it depends mainly on how many 'mugs' you manage to recruit, then it is a Pyramid scheme. The products are there to disguise the deception that takes place. Two other companies spring to mind: Golden Life Products (now called Golden Life Neo Dyamite (not Dynamite) and Amway. The products are hellishly expensive and the emphasis on day-one is recruitment, recruitment. Sell, sell is less important. The ones who really 'cream it' are the ones at the bottom of the Pyramid and until you've reached that level by selling new 'memberships' you earn commission on the products you sell and very little from the few members you have recruited i.e. if they sell only a bit, you earn only a bit, insofar as both new member sales' and product sales' are concerned. And don't forget the startup costs (which typically cost around R1500) are for your account as well. And if I remember correctly, tickets for any conferences or conventions they have, are for your account also. So yes, in my opinion, Blu, Herbalife is a Pyramid scheme with hellishly expensive products.

[Blurock]

I've attended an MLM recruitment presentation where I quickly realised that all is not so kosher. I was firstly not informed about the purpose of the meeting (you never are) and I had to be interviewed by one of the senior members. The recruiter was not allowed to tell me about the organisation.

The more I wanted to know about the products and their benefits, the more I was told about how I can benefit from having people below me and the different levels in the organisation. I had to buy an information and training pack and was also invited to a convention at Sun City (at a cost of course) where more motivation would be provided.

Needless to say I declined. If you are not on top of the pyramid yourself, you only end up funding the guys on top.

[Blurock]

@Sharron & OnePilot, I suggest you read the thread again.

On 23 Nov 2011 the Belgian Commercial court ruled that Herbalife is a pyramid scheme (case no A.R.2004/7787)

This is a comment on a recorded fact. It is not thumb sucking or bashing any one. Do not expect to find the answers in life if you are not prepared to ask the important questions. The truth will always prevail.

[vieome]

Fact herbalife does sell products. Fact there is a huge drive to recruit new members, who on joining must pay a fee. The real scam here is in the joining fee, because they are essentially selling over priced , I mean way over priced vitamins. So one pays to join and soon finds out that they cant sell the product. So you leave the scheme and lose your joining fee. It may not be a clear cut pyramid scheme, but a more evolved pyramid scheme, and I am sure that these type of companies will soon be the new type of pyramid scheme. It would appear that more pyramid scheme runners are doing this, attaching themselves to weak or expensive un-proven products. We had defence x attaching itself to EFT. In herbalife case it is strange that people pay for membership to sell the product hoping to make loads only to discover, that their potential clients can get the product from herbalife website for the same price wholesale price.

[Sharron]

In Herbal Life the joining fee is stock..
R850 , you get a range of products with a Bag .
You can sell the products or use it.
Amay more hectic with conferences costs true
and yes very expensive but there you also get products and training material for your joining fee.

Membership fees is if you want to belong to the training programme.

I don’t belong to either ! And yes the Herbal Life and Amway recruiters unscrupulous and never ending on your tail if you show interest .
Amway is more into just recruiting
Herbal Life .. if you don’t sell products you won’t earn money because your discount level depends on your sales
Commission on team sales depends on how much they sell .. no sales no commission

Direct selling fundamentals Staff gets customers gives orders gives commission

[Didditmiself]

Blu, I couldn't have said it better.

[Didditmiself]

Blu, I forgot to mention something else yesterday; as far as I remember, there is also an annual "membership fee" which is payable at the beginning of the year. It makes no difference how much you sold or whether you sold f/a, it is part of the t & c's when you sign up to sell their stuff. So even if you sell virtually nothing, if they have say 1000 members X R250 per year, they get to collect R250K in any case. I rest my case.....

[Blurock]

Blu, I forgot to mention something else yesterday; as far as I remember, there is also an annual "membership fee" which is payable at the beginning of the year. It makes no difference how much you sold or whether you sold f/a, it is part of the t & c's when you sign up to sell their stuff. So even if you sell virtually nothing, if they have say 1000 members X R250 per year, they get to collect R250K in any case. I rest my case.....

Yes, membership fees will depend on the level you are operating on. If you pay a higher amount, you automatically have more people below you and you can then potentially earn more. You also have to buy promotional videos and training material for which you pay. You pay to attend conferences. These are held quarterly at different venues all over the country, so you have to travel to get there and sleep over as well. All at your expense. You have to pay to attend meetings once a week. If you have a guest to introduce (that's what the meetings are all about) you end up paying for them too - and buying the coffee.

The way I see it, it's like gambling; you hear all about the winnings, but never about how many times they have lost. People that are in the system will not admit that they are actually losing money to the guys on top. They believe that they are doing something wrong and are not working hard enough. They believe that they only have to recruit more people so that they can earn more. Product sales are not so important and commission will be generated by new recruits.

[Dave A]

A speculator places a bet that the share price of Herbalife is going to fall, then proceeds to very publicly slate the company....

Who's the real shyster here?