Herbalife: Pyramid Scheme? The Dirty Little Secrets They're Hiding!
If you’ve been around for a while, I’m sure you heard mixed messages about Herbalife from their customers and distributors regarding their company products (ie, vitamin supplements) and their business model.
Maybe when you hear the word Herbalife, pyramid scheme comes to mind.
So, how do you figure out what’s really true?
I know you’re here because you’re looking for a way to make money online with Herbalife, or because you feel that Multi-Level Marketing is a great business model…
So Today, we’re going to talk about Herbalife.
My plan is to share information about the program and tell you how to make money with MLM.
But Before We Get Into That…
Let me save you some time, and share with you right now that Herbalife is neither the fastest nor the most guaranteed path to building wealth online.
So, if you’re serious about building a passive income online…
The biggest question about the company that most people ask is whether or not the company is a legit MLM or a pyramid scheme.
Does anyone actually make money with this weight loss company?
For as long as I can remember, whenever I would think of Herbalife, I would picture little stick figures, with stick figures under them, and stick figures under them… and so on, and so on.
If the company’s products are so good, why do their distributors spend so much time and energy recruiting other people?
Table of Contents
So What Is Herbalife?
Herbalife is a multilevel marketing company that specializes in nutrition products. It was founded back in 1980 and has grown to be one of the biggest companies in this industry.
The company’s global net sales amount to about 4.88 billion U.S dollars, which speaks volumes for their success rate as they have been around since the 80s!
You won’t find these protein shakes or nutritional supplements on any store shelves because you can only purchase them from an Herbalife distributor.
You can learn more about the products on the website but don’t expect to buy anything here!
That’s great for distributors though- with 3.7 million members all over 90 countries, there aren’t very many other companies that has the reach that Herbalife has.
How Does Herbalife Work?
It’s a company that sells nutrition and weight-loss products.
As a member or distributor, you’ll buy Herbalife products in bulk. Then you could sell them or use them yourself.
You can find a distributor on their website if you don’t know anyone!
How Do You Make Money?
This is where the rubber meets the road.
The way you get paid is through a multi-level marketing business model.
What is it exactly?
Basically, you make money by selling Herbalife products, but not just that, you also make money from the product sales of other members that you bring into the company.
The things is you still will need to sell a ton of Herbalife protein shakes to make any decent amount of money. Also, in order to sell these products, you still have to buy and inventory them.
That is the main issue.
The amount of money you make depends on how much you can buy.
On top of that…
You could also run into an issue where you can’t sell the products you purchased.
However, you do have 12 months to return any un-opened products.
How Does The Herbalife Compensation Plan Work?
Have you ever wondered why the Herbalife compensation plan is one of the most popular in network marketing?
Go ahead and have a look at the image below…
Some people think that it’s because distributors are making a lot from their product sales.
But this isn’t true.
Distributors don’t make much on the products they sell; and even if they do, it’s mainly for those at higher levels.
In fact, when you reach a certain number of volume points, your commission will go up to next level where you’ll earn more money from your downline – but not on retail sales themselves.
The reason for this is simple: every time someone orders or an order is placed by one of their downlines (known as upline), they accumulate volume points which help them progress to the next level.
What Kind Of Products Does Herbalife Sell?
Here’s a quick list of the products that you can buy from Herbalife…
Weight-loss and protein shakes
- Protein bars
- Sports drinks
- Energy drinks
- Personal care products
Of course, the company claims that the products change people lives.
Herbalife that the products target your body’s cognitive weaknesses.
But that is debatable.
The company also encourages their distributors to get together for what they like to call “nutrition clubs”. This is where members will sample new shakes and talk about how they will make you healthier.
But some believe that this is just a ruse for the company to get more business by suggesting that people all over the world have dramatically changed their lives for the better with these products.
The angle that Herbalife takes is that people who benefit the most from their products are the ones who would normally eat fast food or get snacks from a vending machine.
Can People Really Lose Weight With Herbalife?
Losing weight is never easy.
It’s even harder when you’re trying to weed through over-the-top product claims or find the right exercise plan or protein shakes that will work for you.
We all know how difficult it can be to stick with a strict regimen, and some of us are lucky if we can keep up with it long enough to see any results at all.
But what if there was an alternative?
The Herbalife company offers various weight loss products that help people lose weight by helping them feel fuller longer without having to cut calories drastically, providing protein in each serving as well as important vitamins and minerals.
Not only do these shakes provide benefits for those who need to lose weight but they also offer many other benefits including increased energy levels and improved moods.
Is Herbalife Legit?
The question that so many people have is whether or not people would actually buy the Herbalife products if there wasn’t a “business opportunity” behind them.
This is why MLM companies have such a bad wrap, so even more so than others.
Some appear to be legit… While others teeter on being an illegal pyramid scheme.
Now, when it comes to Herbalife, the question of whether it’s a legit or a pyramid scheme seems to linger.
So, let’s look at why Herbalife has been the center of MLM drama over the years.
Back in 2012, Des Walsh (Herbalife President) was asked by David Einhorn (a hedge-fund manager) exactly how many product sales were made outside of the company’s network.
Mr. Walsh replied:
“We don’t track this number and don’t feel like it’s relevant.”
And as you might guess, David Einhorn was a bit miffed.
Then shortly after that, Bill Ackman (head of the hedge fund Pershing Square) bet $1 Billion AGAINST Herbalife, claiming it was a pyramid scheme, which ended up shorting their stock in late 2012.
Herbalife CEO, Michael Johnson, fought back saying that Ackman’s claims were false and misleading.
At that point, Carl Icahn decided to jump into the fray to say that Ackman is a liar.
Then The New York Times ran an front-page story about Ackman in which it was revealed that he was giving money to an anti-Herbalife group. Unfortunately for Herbalife, 2 days later the Federal Trade Commission (FTC) decided to open an investigation.
Ackman even went so far to claim that Herbalife was not only a pyramid scheme, but also a “criminal operation”.
Next, John DeSimone (Herbalife CFO) jumped into the mix by saying…
“I am 100 percent convinced Bill Ackman is wrong. I think he has gone beyond the legitimate role short sellers play and crossed an ethical boundary.”
Four years later after a two-year investigation, Herbalife was then ordered to pay $200 Million for ‘unfair and deceptive practices’ leading to a restructure of their operation in the US.
But the drama doesn’t end there…
The Herbalife Controversy
The Herbalife controversy is a never ending story.
The company has had to fight off many accusations, including being a pyramid scheme and scamming people by exaggerating their claims to become rich peddling vitamin supplements.. It also faced trouble with the FTC and was forced to restructure its operations in the United States.
Eventually, Carl Ichan sold all of his stocks back to them for $600 million dollars after having a big showdown with Bill Ackman years ago over whether or not Herbalife was an incredible investment opportunity.
Why would he do this if he thought it was such an amazing company?
Who is Bill Ackman?
Bill Ackman is an American businessman, hedge fund manager, and philanthropist. He has been the head of Pershing Square for over a decade now.
Bill started his career in 1985 when he co-founded Gotham Partners, which was later renamed Pershing Square Capital Management LP. In 2012, Forbes ranked him as the 30th richest person in America with a net worth of $1 billion dollars.
He has also been involved in some very high profile lawsuits that have made headlines across the world.
One example would be his involvement with Herbalife International Inc., where he took on one of their products and claimed it to be fraudulent – accusing them of being a pyramid scheme designed to prey on people who are struggling financially.
Billionaire Bill Ackman’s hedge fund, Pershing Square Capital, exited Herbalife (HLF), ending an epic five-year, $1 billion bet its stock price would crash to zero.
Ackman told CNBC Wednesday that he had dumped Herbalife, a company he once slammed as a crooked pyramid scheme. (See also: What Is a Pyramid Scheme?)
The nutritional supplement maker’s stock soared 6.3% to $92.10 a share on the news, on monster volume of 6.38 million shares. Average daily trading volume is about 1 million.
The activist investor launched his crusade against Herbalife in 2012, when he placed a massive bet against it. At the time, Herbalife stock plunged 20% in three days before eventually rebounding.
Did The U.S. Ban Herbalife?
Did the US ban Herbalife?
The answer is yes, and this is why.
In 2016, the FTC (Federal Trade Commission) charged Herbalife with operating a pyramid scheme and required that they pay $200 million to their distributors as part of a settlement agreement. They also forced them to change how they do business in order to avoid future problems with regulators.
In early 2017, the FTC filed a lawsuit against Herbalife. The trial ended in April 2018 with the company being found not liable of running a pyramid scheme and Ackman admitting to have made $1 billion on his short position.
The company’s stock has since increased by more than 40%.
Herbalife Scam: The Harsh Reality of an MLM
Herbalife is a company that has been considered borderline Pyramid by the FTC for years. And there are a few people at the center of controversy over this company.
As with most MLMs, Herbalife is structured to make money off of you signing up as a distributor. But their system borders being scam because they present themselves like a pyramid scheme, make promises that can’t be fulfilled and have an unrealistic commission structure.
You won’t make any worthwhile amount of money selling their products either, so it’s not even worth it if you’re looking to just get started in business.
The harsh reality of an MLM Company is that they are not a sustainable way to make money. Sharon Shea, a former Herbalife distributor had this to say…
“You don’t make money from selling product. You make a little. Not much. Not enough to pay the bills that are racking up.”
The compensation plan isn’t designed to make money, but rather the business is designed to keep you motivated to buy more products because it’s easier than finding new members who might be able to sell your company’s products.
They keep making money, while you keep losing it!
And even if you’re dead set on becoming a Multi Level Marketer, you’ve got way better options than Herbalife.
Keep in mind, I don’t get paid to promote any of the programs I review. I personally think Multi Level Marketing is a great business model (so long as the products they sell are good), but you could end up leaving way too much money on the table.
Pyramid Schemes: Growth Opportunities or False Expectations?
Pyramid schemes are all around us. They take many forms: from chain letters to multi-level marketing companies.
The scheme is simple: get a group of people together, convincing them to invest their money in order to make more money with little or no effort on the part of the investor.
It sounds great and for a while it can be… but eventually there’s a point where this type of investment will dry up because not enough new investors come into the picture and everyone at the bottom starts losing out.
That’s when pyramid schemes fail–either they collapse or they transform themselves into something else to keep going (like Herbalife). This blog post discusses how pyramids work, why they’re designed that way, what
Is Herbalife a Pyramid Scheme?
In an article on Newsweek.com, John Oliver spoke out about Herbalife saying…
“I would like to talk to you about an exciting opportunity,” John Oliver teases at the top of Last Week Tonight’s most recent feature segment. “I just need 30 minutes of your time to explain it, but it has the potential to transform your life.”
Oliver is mocking the type of pitch multilevel marketing companies (MLMs) like Herbalife, Mary Kay and Amway use to court distributors. MLMs promise untold financial success for those who sign up to sell their products—which never appear on shelves—while working from home, according to their own schedules. These people’s lives will be transformed, the MLMs promise—and, as Oliver explains, that is true. Unfortunately, it’s usually not for the better, as Oliver says MLMs are, in fact, pyramid schemes.
And he isn’t wrong.
What if I told you that there was a company out there with an incentive structure so bad, that 89% of the distributors won’t make any money?
Well, it’s not just one company.
Herbalife is just one example of a pyramid scheme in disguise. There are many other companies like this and sometimes they’re hard to identify because they use big names to endorse them.
Yes, you can make money as an Herbalife MLM’er. But there’s a lot that comes along with multi level marketing that many people struggle with.
The truth is that most MLM companies are actually pyramid schemes and you need to know what signs to look for before investing your time or money into them.
Herbalife, a multi-level marketing company that sells weight loss shakes and supplements, has been at the center of controversy for years.
The FTC even filed a lawsuit against Herbalife in 2016 for making false claims about their products’ ability to help people lose weight.
Herbalife International of America, Inc., Herbalife International, Inc., and Herbalife, Ltd. have agreed to fully restructure their U.S. business operations and pay $200 million to compensate consumers to settle Federal Trade Commission charges that the companies deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.
In its complaint against Herbalife, the FTC also charged that the multi-level marketing company’s compensation structure was unfair because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product, causing substantial economic injury to many of its distributors.
“This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” FTC Chairwoman Ramirez said. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices.”
The most recent accusation comes from Belgium’s Commercial Court which deemed Herbalife an illegal pyramid scheme because it was unable to show its retail customer base. This is big news considering how many loyal customers they have worldwide!
MLM companies are a dime a dozen these days. Herbalife’s multi-level marketing structure guarantees compensation from both retail and independent sales.
But does it qualify as pyramid scheme?
The company Herbalife is being accused of deceiving recruits. Some members have received unrealistic promotional materials from top distributors in the past and it’s all because of a video that surfaced on YouTube.
The video features a member named Doran Andry who is seen driving a red Ferrari, talks about how he’s making close to $100K per month selling Herbalife products.
This was just an embellishment that turned out to be false when the company disclosed their financials after this video started circulating and showed only 704 U.S. members made more than $100,000 A YEAR not per month like what was shown in the video.
Remember when we covered the “nutrition clubs” that are used to draw in recruits by letting them sample the Herbalife products?
Unfortunately, they are designed to recruit low-income distributors.
These recruiting venues for Herbalife are all over the world. Herbalife reports that they have a substantial increase in product sales from these nutrition clubs.
And they have been thought to be drug laundering in Mexico and Venezuela back in 2013 by third-party investigators. However, no truth came from these claims.
Is Herbalife Currently Being Sued?
Herbalife is being sued for the third time in just four years. This most recent lawsuit was filed by a couple who alleges fraud and false advertising. The suit is seeking $5 million in damages, but it’s unlikely they will get anywhere near that amount.
The company has been accused of many things, including bribing Chinese officials to stay open-even after their products were found dangerous-and using fake endorsements from celebrities like Bill Cosby and Kobe Bryant to promote their product.
Despite this latest scandal, Herbalife continues to deny any wrongdoing and claims they are committed to protecting consumers and complying with all laws governing its business practices.
In a recent lawsuit, it was revealed that Herbalife is being sued for knowingly violating the Foreign Corrupt Practices Act. This came after CEO Rich Goudis’s audio recording was revealed where he advised an employee to ignore expense account limits in China.
Herbalife Pros & Cons
Meal replacement shakes are easy and convenient.
The Herbalife diet is designed for busy people who want to lose weight without worrying about what to make for dinner.
It’s quick and easy to make the shake. All you have to do is mix 2 scoops of powder with 8 ounces of nonfat milk or put it in the blender with ice and fruit to make a smoothie.
Soy-based shakes may be good for your heart
Soy protein isolate is the main ingredient in most of the Herbalife meal replacement shakes.
This does limit who is able to take this product.
Research suggests that consuming 50 grams of soy protein per day helps to lower cholesterol levels and reduces your risk of heart disease.
Drinking two Herbalife meal replacement shakes a day will only give you 18 grams.
A soy-free, dairy-free formula is available
Many people have allergies to soy, so Herbalife offers a soy-free and dairy-free alternative.
These shakes are made from pea, rice, and sesame proteins. And they are GMO-free.
There’s no real way to make money
This company has been in trouble multiple times because they make big promises that they are unable to deliver on. No matter how many sales members make the only way to earn an income is by recruiting people.
If you’re looking for a healthy alternative these shakes are not it
Herbalife meal replacement shakes contain highly processed ingredients.
Just look at some of these ingredients protein isolates, sugars, gums, fibers, synthetic vitamins, artificial flavors, and emulsifiers.
The sugar content alone makes this an unhealthy choice. With only two servings of a Herbalife shake, you’ll have 18 grams of added sugar.
The goal of a healthy diet is to eat less processed foods, and more high-quality proteins, fruits, vegetables, whole grains, and healthy fats.
Could make you hungry
Herbalife shakes are marketed as meal replacement shakes. But they lack the right amount of calories to be a meal.
So you’re left feeling hungry throughout the day.
You can add fruits, protein, and fat to help increase the calorie, fiber, and protein to help keep you satisfied.
It can get expensive
Herbalife isn’t cheap. You’ll pay $40 for 30 servings of Herbalife meal replacement mix.
And they recommended that you drink two shakes per day.
So you’ll need to buy two containers which ends up costing you $80 per month for just the shakes.
This isn’t including the supplements that they want you to take.
They justify this by saying that you’ll save money on groceries because it’s replacing your meals.
But if you need to add additional things to keep you full how much are you really saving?
Herbal supplements are said to cause liver damage
Several supplements contain a bunch of ingredients that aren’t regulated by the government.
So the effectiveness and quality is unknown.
There have been a bunch of reports that suggest Herbalife supplements have been the cause of liver damage.
Some Herbalife products have been said to be contaminated with an overgrowth of the bacteria B. subtilis.
This bacteria is also linked to liver damage.
Herbalife isn’t the only supplement that contains these ingredients. You can find them with many over-the-counter medications and supplements.
Herbalife MLM company borderlines as a scam. Their main goal is to get their distributors to continue purchasing products and getting new recruits.
This company has been into some shady things in its 40 years as a company.
They are structured to look like an MLM, but as with many MLM companies they teeter on the pyramid side working in the gray area where it’s difficult to classify them as one or the other.
However, a majority of people, members, distributors and organizations have come out to speak against Herbalife company.
But even giving Herbalife the benefit of the doubt for past mistakes, and being forced to change the way that they word their promises just this year they got themselves into trouble with the FTC.
There are plenty of MLM’s out there, and plenty of business opportunities that you can join that will offer you the freedom and income that you desire.
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