# Archive > Open content archive > MLM Industry Forum > [Question] 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? :Confused:

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## 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. :Headbutt:

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## 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.

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Didditmiself (23-Jan-13)

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## 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.....

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## 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. :Roll Eyes (Sarcastic):

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## Dave A

:Hmmm: 

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?

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## Blurock

> 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?


Also unethical as far as I am concerned, but he did refer to facts in his rants. Herbalife has been involved in a number of court cases alleging pyramid schemes, some of which were bought by its own members. http://en.wikipedia.org/wiki/Herbalife

West Virginia class action suit filed on July 16, 2003, Mey v. Herbalife International, Inc., et al
A 2004 settlement resolved a class action suit on behalf of 8,700 former and current distributors that accused the company and distributors of "essentially running a pyramid scheme." A total of $6 million was to be paid out, with defendants not admitting guilt.
In a California class action suit filed on February 17, 2005, Minton v. Herbalife International, et al., the plaintiff is "challenging the marketing practices of certain Herbalife International independent distributors and Herbalife International under various state laws prohibiting "endless chain schemes", insufficient disclosure in assisted marketing plans, unfair and deceptive business practices, and fraud and deceit".

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## Dave A

Don't confuse settlements with judgements - especially when it comes to settlements in the USA.

The hard truth is as long as the company is only paying out on *product sales* and not paying out for *signups*, it can't be a pyramid (ponzi) scheme.

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## Blurock

> Don't confuse settlements with judgements - especially when it comes to settlements in the USA.
> 
> The hard truth is as long as the company is only paying out on *product sales* and not paying out for *signups*, it can't be a pyramid (ponzi) scheme.


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



> The court states that Herbalife is in breach of articles 91, 4 and 99 of the Act regarding market practices and consumer protection because it has established, managed or promoted a pyramid scheme, whereby the consumer or a business stands to make money which is more likely the result of introducing new consumers or businesses into the scheme than from the sale or use of products.


The court papers also give details regarding the operation of the scheme which it has found to be a pyramid scheme.

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## Dave A

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


Ouch!

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## OnePilot

I am interested to find out if this *MLM Industry Forum* is for bashing MLM and the concept of Network Marketing or to debate and promote opportunities? and how many of the bashers have actually participated in the industry

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## Sharron

Hi
I dont belong to Herbal Life .. 
it is not a pyramid scheme as they sell products.
They recruit people in there group to also sell & then they earn a commision or higher discount structure.

Not exactly sure how Herbalife compensation plan works.

But pyramid scheme is when there is no stock 
you recruit & money from recruits subsidizes whatever they promise 

And then eventually it falls flat brcause the cannot keep up with the scam
Herbal Life has been around for many years.

Just my comment I work for Avon Justine as a Sales Manager which is also a MLM company over 150 years old
I am a salary employee .. but am very much trying to get my slimming product business going.

Regards
Sharron

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## 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. :Yes:

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## 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.

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Blurock (26-Mar-13)

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## Rafael

I have a friend that has joined Herbalife recently and basically contacts me every day asking me to go see him, as I can create more wealth for myself.

I've just started to ignore his calls

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## Blurock

> I have a friend that has joined Herbalife recently and basically contacts me every day asking me to go see him, as I can create more wealth for myself.
> 
> I've just started to ignore his calls


How not to influence people and lose friends... :Frown:

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## vieome

Walker says that Net Income Solutions has the following message on its website: “If you make a purchase from Net Income Solutions you are purchasing our products or services. You are NOT making any form of ‘investment’. Affiliates who present our products to others in a misleading manner or in a way that leads the buyer to believe he or she is making an investment will be terminated and all commissions and awards will be forfeited.”

This is a new way to run a scheme. Sell a bogus product. So people have wrongly thought they were investing when in essence they have bought points to attend as many EFT workshops as they like for life. He is not liable to the investors as he was not taking investments but instead he was selling points.

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## Didditmiself

Blu, I couldn't have said it better. :Applaud:

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## Dave A

> Walker says that Net Income Solutions has the following message on....


Posted in the wrong thread?  :Confused: 
If so, let me know and I'll move it for you.

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## vieome

> Posted in the wrong thread? 
> If so, let me know and I'll move it for you.


I guess you can move it, just thought it was revelant to both threads, meaning that in the past it was easier to spot a pyramid scheme, but now that they have evolved to selling some kind of bogus product they are finding away of being legal.

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## Dave A

Nah - In hindsight not paying close enough attention and forgetting your lateral thinking tendancies at the time threw me off.

Following your point then, I suggest there is a big difference between Herbalife's products and Walker's points that he was "selling". In Walker's case, those points are effectively a form of currency - no more and no less. The same challenge doesn't apply in the case of Herbalife.

You've got me thinking about timeshare now and the possible consequences of that observation  :Stick Out Tongue: 
Focus, Dave  :Slap:

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## vieome

> Nah - In hindsight not paying close enough attention and forgetting your lateral thinking tendancies at the time threw me off.
> 
> Following your point then, I suggest there is a big difference between Herbalife's products and Walker's points that he was "selling". In Walker's case, those points are effectively a form of currency - no more and no less. The same challenge doesn't apply in the case of Herbalife.
> 
> You've got me thinking about timeshare now and the possible consequences of that observation 
> Focus, Dave


Noted, there is a huge difference between the 2, but in essence they both point to the evolution of ponzi schemes, attaching themselves to some form of product. In walkers scheme his has winners essentially the first investors. In herbalife members pay for the privilage of selling over priced products with limited market potential. You pay joining fee and soon find you cant sell the product then lose joining fee. In walkers case what is interesting, can he pay his members back by running EFT workshops and forcing them to attend to use up the points they bought. Now that his investors are interesting in asking him questions I am sure they will attend any of his workshops, not knowing they paying for it with their so called investments.

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## vieome

Intersting read

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## 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

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## Blurock

I am more and more convinced that 90% of the earth's population are a bunch of dumb asses. That is why we can elect incompetent, corrupt governments and then keep on voting for them. That is also why people believe in witch doctors and that rhino horn can give you an erection.

That is also the reason why we will believe people who sell "snake oil" and tap water and make us believe it is a wonder cure for fat bums, heart disease, cancer and whatever. What a gullible lot we are! :Stupid:

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wynn (02-Apr-13)

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## Justloadit

> I am more and more convinced that 90% of the earth's population are a bunch of dumb asses. That is why we can elect incompetent, corrupt governments and then keep on voting for them. That is also why people believe in witch doctors and that rhino horn can give you an erection.
> 
> That is also the reason why we will believe people who sell "snake oil" and tap water and make us believe it is a wonder cure for fat bums, heart disease, cancer and whatever. What a gullible lot we are!


I'am with you on this one! :Yes:

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## Simimano

Well, Someone in my family used to do Herbalife, You have to be really serious about it and entirely dedicated if you want to succeed with Herbalife at all, In my opinion. Like you should be with every job and/or business opportunity but aside from that their products are real, as I have tried a couple of them myself..I will not, however, decide for you whether they work or not..totally unrelated though. This person in my family had an up-line and had heard that their permits to sell and trade the products had been taken away and they could no longer do Herbalife because of it being speculated as a pyramid scheme. 

Whether Herbalife is going down or not, I do not know. 

I wouldn't really say it is for sure a pyramid scheme though..But the people that are higher up in the business make countless times more money than those who just started out in the business, which is this case in most businesses I'd say, You start off small and work your way up, but this person in my family just didn't seem to really be making money with it at all..Selling products nor signing people up to join, therefore they are no longer with Herbalife and hasn't been for months now. Just as well too because if it definitely is a pyramid scheme..Everyone with them would have to find a new form of income, if it was bringing in any for that matter. There are teams you succeed to when you move up in the business as I remember you then get a percentage off the stock you buy in and you sell it for the full price, that was how you make your main income with it. It is hard in the beginning though, which is why most people just walk away from it.

Though that's just my opinion. It'll probably appear somewhere in the newspapers or internet at some point.

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## Blurock

@Simimano, For every MLM success story there must be at least 10 failures. The higher up you are in the food chain, the better you are off. This is not for the meek, only the predators survive.

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## Simimano

> This is not for the meek, only the predators survive.


I agree. That's pretty much how life is, If you don't keep pushing on and you give up as soon as things get tough, you will not survive. 

Not everything is easy and who doesn't like a good challenge! Personally though, I wouldn't do Herbalife or any other similar business and there are lots of them, Just a personal preference I suppose.

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## colinvan

Hi all, very interesting tales & speculations. www.dsasa.co.za have at least 17 companies registered with them that are using the mlm system. There are stringent requirements that have to be met prior to gaining membership. Herbalife happens to be one of them. 

Due to the level structure, you can earn more than the persom who introduced you (currently the case with you)

Although not affiliated with Amway, i use certain of their products which last incredibly long due to their concentrated nature.

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