Thread: Herbalife

I personally don't think the Amway ruling needs to be reexamined. It needs to be ENFORCED, much like the Omnitrition clarification.

AFAIK, NONE of the major MLM companies actually pay commission on retail. They actually pay on WHOLESALE (ie. purchases by the affiliate), not purchases made by the consumer i.e. retail. As a result, they are indistinguishable from product-based pyramid schemes. And enforcement of Amway Safeguard Rule subset: Ten Retail Customer Rule, as well as periodic audits (also established in Omnitrition case) would have clearly separated the two. But no, DSA and FTC basically pretended that Omnitrition decision never happened.

Just stumbled upon this dare I say shocking research.

Analysis Of IRS Statistics Suggests A 98.94% Financial Failure Rate For Herbalife Sales Leaders

Their analysis suggested that the combination of Herbalife, NuSkin, and Amway participants who netted less than a living income in 2012 was 99.6% of all participants. While MLM proponents have been quick to criticize Messrs. Taylor, FitzPatrick, Brooks and Craig's work, none have published any research that refutes their findings.


Summary

While Herbalife does not disclose the business expenses incurred by its distributors, IRS statistics provide a reasonable basis for estimating these expenses.
Analysis of the IRS statistics and Herbalife’s “Statement of Average Gross Compensation” suggests a financial failure rate of 98.94% for distributors Herbalife categorizes as “Leaders”.
This finding is consistent with other estimates of financial failure rates among Herbalife distributors using different methodologies.
The pending FTC and other governmental investigations of Herbalife should not be limited to whether Herbalife constitutes a pyramid scheme, but also whether Herbalife is deceptively representing its business opportunity.



Analysis Of IRS Statistics Suggests A 98.94% Financial Failure Rate For Herbalife Sales Leaders - Herbalife Ltd. (NYSE:HLF) | Seeking Alpha

Originally Posted by kschang

I personally don't think the Amway ruling needs to be reexamined. It needs to be ENFORCED, much like the Omnitrition clarification.

AFAIK, NONE of the major MLM companies actually pay commission on retail. They actually pay on WHOLESALE (ie. purchases by the affiliate), not purchases made by the consumer i.e. retail. As a result, they are indistinguishable from product-based pyramid schemes. And enforcement of Amway Safeguard Rule subset: Ten Retail Customer Rule, as well as periodic audits (also established in Omnitrition case) would have clearly separated the two. But no, DSA and FTC basically pretended that Omnitrition decision never happened.

There isn't much difference between Amway and Herbalife. While I doubt that the FTC will have the fortitude to shut down Herbalife, I hope justice prevails and the MLM industry gets cleaned up.

I'm not too well versed with how the FTC works but how long do investigations normally take? I hope they don't let Herbalife off the hook.

Originally Posted by ribshaw

Just stumbled upon this dare I say shocking research.

Analysis Of IRS Statistics Suggests A 98.94% Financial Failure Rate For Herbalife Sales Leaders

Their analysis suggested that the combination of Herbalife, NuSkin, and Amway participants who netted less than a living income in 2012 was 99.6% of all participants. While MLM proponents have been quick to criticize Messrs. Taylor, FitzPatrick, Brooks and Craig's work, none have published any research that refutes their findings.


Summary

While Herbalife does not disclose the business expenses incurred by its distributors, IRS statistics provide a reasonable basis for estimating these expenses.
Analysis of the IRS statistics and Herbalife’s “Statement of Average Gross Compensation” suggests a financial failure rate of 98.94% for distributors Herbalife categorizes as “Leaders”.
This finding is consistent with other estimates of financial failure rates among Herbalife distributors using different methodologies.
The pending FTC and other governmental investigations of Herbalife should not be limited to whether Herbalife constitutes a pyramid scheme, but also whether Herbalife is deceptively representing its business opportunity.



Analysis Of IRS Statistics Suggests A 98.94% Financial Failure Rate For Herbalife Sales Leaders - Herbalife Ltd. (NYSE:HLF) | Seeking Alpha

Without any spin doctoring, ifs, buts, rationalization or justification, from Herbalifes' own 2013 Statement of Average Gross Compensation



* 91.8% of Herbalife sales leaders with a downline received average GROSS payments from Herbalife of less than $2218

Some folks on seeking alpha seem to think that the FTC ruling Herbalife will be forthcoming by early April, based on some of the things they've observed, in particular, the way HLF is handling their available cash.

Originally Posted by littleroundman

Without any spin doctoring, ifs, buts, rationalization or justification, from Herbalifes' own 2013 Statement of Average Gross Compensation



* 91.8% of Herbalife sales leaders with a downline received average GROSS payments from Herbalife of less than $2218

I don't know about "no spin doctoring" LRM. The actual number of "distributors" is 434,125, using "sales leaders" makes any income much worse than the chart depicts.

The compensation chart below indicates that 434,125 Distributors (88%) received no payments from Herbalife
during 2012

The majority of Herbalife’s independent Distributors (71%) have not sponsored another Distributor and
are therefore “single-level” Distributors.

Some Distributors (29%) have decided to sponsor others to become Herbalife Distributors

51.0% of all sales leaders as of February 1st, 2011, requalified by February 1st, 2012


================================================== ===============

If 49% of sales leaders fail to requalify from 2011-2012 this be pitched as building residual income seems a tad misleading as well.

Originally Posted by kschang

I personally don't think the Amway ruling needs to be reexamined. It needs to be ENFORCED, much like the Omnitrition clarification.

AFAIK, NONE of the major MLM companies actually pay commission on retail. They actually pay on WHOLESALE (ie. purchases by the affiliate), not purchases made by the consumer i.e. retail. As a result, they are indistinguishable from product-based pyramid schemes. And enforcement of Amway Safeguard Rule subset: Ten Retail Customer Rule, as well as periodic audits (also established in Omnitrition case) would have clearly separated the two. But no, DSA and FTC basically pretended that Omnitrition decision never happened.

I agree with you. For some reason the FTC has no clear cut rules on certain issues. For this reason, I could see them allowing Herbalife to slide by without shutting them down. That would lead to hoards on MLMs copying Herbalife's comp plan and then bragging that the FTC endorses Herbalife or some bunk like that.

Originally Posted by kschang

I personally don't think the Amway ruling needs to be reexamined. It needs to be ENFORCED, much like the Omnitrition clarification.

AFAIK, NONE of the major MLM companies actually pay commission on retail. They actually pay on WHOLESALE (ie. purchases by the affiliate), not purchases made by the consumer i.e. retail. As a result, they are indistinguishable from product-based pyramid schemes. And enforcement of Amway Safeguard Rule subset: Ten Retail Customer Rule, as well as periodic audits (also established in Omnitrition case) would have clearly separated the two. But no, DSA and FTC basically pretended that Omnitrition decision never happened.

IMHO,

There is a caveat about enforcement of retail sales - the MLM system isn't set up that way. Herbalife doesn't do it because they can't!!!

MLMs snare people with their business owner spiel.

They don't get affiliates by telling them that half of their time, they are to be commission only sales people with no territories.

Anyone can join. There goes your retail customer and your retail markup income although a few might buy odds and ends. That's not enough to make a profit. Anyone buying larger amounts will/should join to save on the price; they are stupid if they don't.

MLM doesn't want retail because it ends the chain. The MLM sytem relies on word of mouth.

The fact that retail sales are practically non-existent only supports my above statements.

We were told to make up names and fake the ten customers in Amway. No way all IBOs have ten legitimate retail customers every month. Why? See above. The system isn't set up that way.

So, the shareholder's lawsuit against Herbalife was killed.

Supplement company Herbalife sees pyramid-scheme suit tossed


Stock went up, Headlines (most incorrectly sound as total victory) made a lot of people happy, and some even said that US prosecution of HLF is over.

Dumb, it was just a single lawsuit of several shareholders, judge threw it out and said HLF is not yet ruled as a pyramid and they have no grounds to demand compensation of stock price losses.

Originally Posted by NikSam

So, the shareholder's lawsuit against Herbalife was killed.

Supplement company Herbalife sees pyramid-scheme suit tossed


Stock went up, Headlines (most incorrectly sound as total victory) made a lot of people happy, and some even said that US prosecution of HLF is over.

Dumb, it was just a single lawsuit of several shareholders, judge threw it out and said HLF is not yet ruled as a pyramid and they have no grounds to demand compensation of stock price losses.

I hope the FTC shuts down this decades old scam.

such a damn shame! So just who paid off this judge eh????

Originally Posted by kath

such a damn shame! So just who paid off this judge eh????

That judge's ruling was nothing. What we want is the FTC to let down the hammer.

Originally Posted by Luzer

That judge's ruling was nothing. What we want is the FTC to let down the hammer.

one can only hope, problem is some have been hoping for an awfully long time!

Originally Posted by kath

one can only hope, problem is some have been hoping for an awfully long time!

http://finance.yahoo.com/news/top-he...8--sector.html

Law enforcement agencies are contacting top Herbalife reps. I hope this is the beginning of the end..........

good to hear and thanks for the link Luzer

Originally Posted by kath

good to hear and thanks for the link Luzer

I read some news today that Herbalife executives are getting lawyers. Bill Ackman thinks it's because one of them may turn and blow the whistle and the others might be preparing for criminal charges.

I wonder if the FTC will have the stones to shut down Herbalife?

Ackman: HLF execs hiring own lawyers an ominous sign

Originally Posted by Luzer

I read some news today that Herbalife executives are getting lawyers. Bill Ackman thinks it's because one of them may turn and blow the whistle and the others might be preparing for criminal charges.

I wonder if the FTC will have the stones to shut down Herbalife?

Ackman: HLF execs hiring own lawyers an ominous sign

Maybe the main reason is to defend him against fast food protesters who want $15 hour wage:

"The agitators walked around the stage with signs and shouted slogans demanding higher wages for workers at restaurants including McDonald's, Burger King and Darden-owned Olive Garden.

They called out well-known activist investors like Bill Ackman of Pershing Square Capital Management and Jeff Smith of Starboard Value, both slated to speak at the event later Monday, urging $15 an hour for low-level workers. "

Good read.


The siege of Herbalife - Fortune