Herbalife Lawsuit Dismissed – Why?
Herbalife has recently been sued by the Federal Trade Commission for their marketing strategy called a “Multi-Level Marketing” (MLM) program. This basically means that a distributor/buying agent receives commissions from selling the products of one or more distributors. Many people are surprised to find out that Herbalife does not have any products that are made in house; they are distributors and their own products. Their lawyers will try to get their suit dismissed if they can’t prove that Herbalife is a “rogue organization”. In fact, they actually encourage the suit against Herbalife because it helps their bottom line.
Herbalife marketing is very similar to what is known as “boiler room” sales.
In this case the company will tell you there is a huge demand for their product but you can’t prove it. They will offer great sales pitches and spend money on ad campaigns, even going so far as to hire professional public speaking firms to make sure you will be persuaded to buy. This is typical of a “pygmy corporation”, not a true direct sales company. These companies are only in business to make money on the claims of a strong product and a strong sales pitch.
Herbalife’s sales pitches are full of lies. The Herbalife compensation plan is based upon making up your own list of distributors so no one will know. You are told that you will make millions within a few weeks of beginning your program. But as I mentioned before, you have no products to sell. These claims are lies. In reality, most people will not make any money unless they actually start selling.
Herbalife’s business structure makes them immune to bankruptcy because they can keep on paying their distributors.
They also have a team of attorneys and accountants on their payroll who do all the work for the company. Herbalife has lawyers on their board of directors as well as board of marketing. Because of their multi-level marketing business model, there is very little control or accountability for Herbalife.
What is the most common complaint from distributors?
There are usually two answers to this question. One, it’s the “make money on demand” part of the marketing plan. The other complaint is the “buyer beware” aspect of Herbalife. I believe the latter is why a Herbalife lawsuit has been filed against them.
The original idea behind Herbalife was a network marketing company.
That’s why the founder, Mark Twiss, was arrested for running his own scam. The original plan was to create a product using the ideas and inventions of the founder and then pass it out to a distributor’s down line. If those down lines didn’t like it, they would not buy, promote or sell. Herbalife failed because instead of following this original idea, they changed their marketing structure and added commissions and fees to their products.
Herbalife has taken aim at their poor financial situation with one bold move after another.
They have changed their compensation plan, removed products, added other products and introduced new compensation plans. All while laying off hundreds of their distributors. While some people blame Herbalife for their woes, others point the finger at the company founder, Mark Twiss.
Herbalife’s stock price is falling, causing a negative cash flow. Their primary stock holders have taken a hit as well. It’s a pretty desperate situation. Herbalife could have solved this issue years ago if they had stuck to what made them a success in the first place, and that’s the company philosophy of providing a product that people want. Once they changed the philosophy, things got out of hand.