Thursday, 21 July 2016

Senior FTC attorney explains the dodgy FTC vs 'Herbalife (HLF)' deal.

The 'Herbalife' mob and countless other gangs of 'Amway' copy-cat, US-based, blame-the-victim 'MLM / Prosperity Gospel' cultic racketeers have been, and are still being, allowed to rob from tens of millions of people - not just in America, but also around the globe. Unfortunately, US law enforcement agents and prosecutors still don't fully-grasp the true nature of the historically-significant criminogenic phenomenon which has been eluding them since the 1940s.

Although it can appear to be accurate, the following jargon-laced article by FTC attorney Lesley Fair, ignores the wider picture. More than half a century of quantifiable evidence, proves beyond all reasonable doubt that what has become popularly known as 'Multi-Level Marketing' is nothing more than an absurd, cultic, economic pseudo-science, and that the impressive-sounding made-up term 'MLM,' is, therefore, part of an extensive, thought-stopping, non-traditional jargon which has been developed, and constantly-repeated, by the instigators, and associates, of various, copy-cat, major, and minor, ongoing organised crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim closed-market swindles or pyramid scams (dressed up as 'legitimate direct selling income opportunites'), and related advance-fee frauds (dressed up as 'legitimate training and motivation, self-betterment, programs, recruitment leads, lead generation systems,' etc.).

It is important to note that Lesley Fair was not one of the attorneys involved in the FTC investigation of, and settlement with, 'Herbalife,' she has merely tried to write a plain explanation of these matters, but from the point of view of the FTC.

David Brear (copyright 2016)


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It’s no longer business as usual at Herbalife: An inside look at the $200 million FTC settlement

Multi-level marketer Herbalife will pay $200 million back to people who were taken in by what the FTC alleges were misleading moneymaking claims. But when it comes to protecting consumers, that may not be the most important part of the just-announced settlement. What could matter more than $200 million? An order that requires Herbalife to restructure its business from top to bottom – and to start complying with the law.
Advertising in English and Spanish, Herbalife pitched its business opportunity as a way for people to quit their jobs and make the big bucks. Other ads promoted Herbalife as a means for already hard-working people to provide a little more for their families: “When we worked in factories our earnings could only pay for basic needs, but now we can take our 12 grandkids on vacations.”
But don’t start packing the kids’ bags because according to the FTC, it’s virtually impossible to make money selling Herbalife products. As explained in the complaint, our analysis shows that half of Herbalife “Sales Leaders” earned on average less than $5 a month from product sales. For folks who invested the most to build an actual retail business – a brick-and-mortar store that Herbalife called a Nutrition Club – the majority made nothing or even lost money. 
Which brings us to the inconvenient little secret about Herbalife that the FTC’s complaint alleges: The small number of distributors who actually made money made it not by selling products to people who wanted the company’s powders, pills, and potions, but rather by recruiting others to serve as distributors – and encouraging them to buy Herbalife products.
The lawsuit alleges that Herbalife deceived consumers into believing they could earn substantial income from the business opportunity or big money from the retail sale of the company’s products. In addition, the complaint charges that one of the fundamental principles of Herbalife’s business model – incentivizing distributors to buy products and to recruit others to join and buy products so they could advance in the company’s marketing program, rather than in response to actual consumer demand – is an unfair practice in violation of the FTC Act.
Under the settlement, that all has to change. The order requires Herbalife to drop its current system of rewarding distributors primarily for recruiting a “downline” of people who will buy the product at wholesale, without regard to whether there are customers out there who really want the merchandise. Under the new compensation structure, success in the Herbalife marketing program must depend on whether participants sell products, not on whether they can recruit additional distributors to buy products.
You’ll want to read the order for the detailed dos and don’ts, but they’re all closely tied to the law violations alleged in the complaint. Here’s just one example: The order requires a clear differentiation between people who join just to buy discounted products for their own use and those who join the business opportunity. For people in the bizopp, 2/3 of rewards must be based on verifiable retail sales, with no more than 1/3 coming from product designated as “personal consumption.”
And it’s not a “we’ll take your word for it” thing. The order includes teeth that will put a financial bite on non-compliance. To make sure everyone at Herbalife is on board with the new set-up, 80% of the company’s net sales will have to be real sales to real buyers. If that doesn’t happen, the rewards that high-level distributors pocket will be cut. What’s more, for the next seven years, Herbalife has to hire an Independent Compliance Auditor to monitor what the company is doing to comply with the new compensation plan. The Auditor will report to the FTC, who will have the authority to replace that person should it become necessary.
We’re glad to be returning $200 million to consumers. (Details about the refund program will be available soon.) But another key goal is to dismantle the alleged deception and unfairness built into how Herbalife does business. As the company rewrites its advertising claims and restructures its compensation system, we’ll be watching. The Auditor will be watching. And consumers should be watching, too.

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Lesley Fair

 Bureau of Consumer Protection


 Lesley Fair is a Senior Attorney with the Federal Trade Commission’s Bureau of Consumer Protection, where she has represented the Commission in numerous investigations of false advertising. A recipient of the Paul Rand Dixon Award for Law Enforcement and the FTC’s Award for Outstanding Scholarship, she now specializes in business compliance with the Bureau’s Division of Consumer & Business Education. Ms. Fair is a Vice-Chair of the Consumer Protection Committee of the American Bar Association’s Section of Antitrust Law and is co-editor of Consumer Protection Update. In addition to writing a monthly column for Electronic Retailer magazine, Ms. Fair is the author or co-author of FTC Regulation of Advertising in FOOD AND DRUG LAW AND REGULATION (2009); The FTC’s Approach to Health Claims in Advertising in REGULATION OF FUNCTIONAL FOODS AND NUTRACEUTICALS (2005); Regulation of Marketing Claims by the Federal Trade Commission and States in COSMETIC REGULATION IN A COMPETITIVE ENVIRONMENT (1999); and Infomercials in ENCYCLOPEDIA OF THE CONSUMER MOVEMENT (1997). Ms. Fair attended T.C. Williams High School in Alexandria, Virginia, during the time depicted in the movie Remember the Titans; graduated from the University of Notre Dame; and received a J.D. from the University of Texas School of Law. She was law clerk to United States District Judge Fred Shannon of the Western District of Texas and served as staff counsel to the United States Court of Appeals for the Fifth Circuit in New Orleans. Before coming to the FTC, she practiced criminal law with Georgetown University Law Center’s Appellate Litigation Clinical Program and appeared before the Supreme Court of the United States in Murray v. Carrier. On the adjunct faculty of the Catholic University School of Law since 1984, Ms. Fair holds the title of Distinguished Lecturer. The Student Bar Association named her Outstanding Adjunct Professor in 2007 and 2009. Ms. Fair recently joined the adjunct faculty of George Washington University Law School as a Professorial Lecturer, where she teaches Consumer Protection Law.


  1. Bill Ackman says Herbalife has already been shut down by the FTC, but doesn't it.

    1. Anonymous I presume you meant to say that Bill Ackman says Herbalife has already been shut down by the FTC, but doesn't realise it.

      In reality, it would be far more accurate for Bill Ackman to have said that the bosses of the 'Prosperity Gospel' cultic racket known has 'Herbalife' have been forbidden to continue to peddle their unoriginal Utopian fairy story, but they cannot acknowledge this self-evident truth.