On this thought-provoking Blog, Englishman, David Brear, guides us to the dark heart of a modern-day, totalitarian labyrinth and shines a piercing light on its manipulative rulers and manipulated inhabitants. First, he provides a spool of unbreakable thread so that we can all find our way safely home. Blog readers may contact David Brear via: axiombooks@wanadoo.fr
In this recent interview, Ted Braun calmly confirms that the kitsch 'Amway'-copy-cat 'American Dream' fairy story entitled: 'Herbalife,' didn't correspond to the nightmare reality that he and FTC investigators discovered. David Brear (copyright 2016)
Contrary to what the 'Herbalife' Ministry of Truth has pretended, John Fichthorn, co-founder and Portfolio Manager of Dialectic Capital Management, has declared that it was he, and not Bill Ackman, who commissioned, and financed, Ted Braun's documentary film, Betting on Zero. David Brear (copyright 2016)
Although it beggars belief, the narcissistic bosses of the 'Herbalife' racket still pretend that the accumulated losses of their countless victims do not exist. Yet they have already handed-over $200 millions to compensate what the US Federal Trade Commission describes as hundreds of thousands of US citizens who have been deceived.
Since its instigation in 1980, the 'Herbalife' racket has been sustained by dissimulating all key-information regarding its actual catastrophic results, whilst convincing a never-ending chain (now comprising tens of millions) of ill-informed victims of the structured, closed-logic ritual lies that:
'Herbalife' is a'Multi-Level Marketing /Direct Selling Company' - a shining example of a form of lawful enterprise which has been examined (and approved) by regulators around the world and has been self-regulated by 'Direct Selling Associations.'
participants made a completely free-choice to sign-up with 'Herbalife.'
they were 'Independent Business Owners/ Distributors / Members, etc.,' (not employees) and, therefore, responsible for their own actions.
anyone can earn income, and ultimately retire on a residual income, from participating in 'Herbalife.'
only persons who never quit and who develop 100% unquestioning belief in their own future success, can achieve success in 'Herbalife.'
failure to make any money was, therefore, entirely the fault of the individual 'Herbalife' participant (who didn't develop 100% unquestioning belief and quit) and not the fault of the organisation or its (lawful) 'MLM Business/ Income Opportunity.'
any financial losses could in no way be the legal responsibility of 'Herbalife.'
The latest, thought-stopping, jargon-laced chapter of the pernicious 'Herbalife' fairy story (as contained in the 75 page document linked above and partly-posted below) makes fascinating reading. Particularly, when you know that 90% of 'Herbalife's' claimed adherents (currently 4.1 millions world-wide) have been quietly abandoning the organisation each year to be replaced by a never-ending chain of new hopefuls. Only an insignificant % of 'Herbalife' adherents have been able to persist with their economically-suicidal activity for more than 5 years. Typically, the hidden overall churn / loss rate for participation in the 'Amway' copy-cat blame-the-victim 'MLM Income Opportunity / Prosperity Gospel' cultic racket, has been effectively 100%. For decades, no one who has signed a take-it-or-leave-it contract with 'Herbalife' has ever been made aware of this key-information, and consequently, no one who has become involved with 'Herbalife' has ever done so as a result of his/her fully-informed consent. Indeed, 'Herbalife's' latest reality-inverting 10-Q filing to the US Securities and Exchange Commission, itself seeks to dissimulate decades of mass-fraud and obstruction of justice world-wide and, thus, forms part of an overall pattern of ongoing major racketeering activity (as defined by the US federal Racketeer Influenced and Corrupt Organisations Act, 1970); for this tragicomic document should really have been introduced with the phrase: Once upon a time in the land of 'Herbalife...' David Brear (copyright 2016)
See discussion under Note 5, Contingencies , to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. RISK FACTORS
Risks Related to Us and Our Business
Our failure to establish and maintain Member and sales leader relationships for any reason could negatively impact sales of our products and harm our financial condition and operating results.
We distribute our products exclusively to and through approximately 4.1 million independent Members, and we depend upon them directly for substantially all of our sales. Our Members, including our sales leaders, may voluntarily terminate their Member agreements with us at any time. To increase our revenue, we must increase the number of, or the productivity of, our Members. Accordingly, our success depends in significant part upon our ability to recruit, retain and motivate a large base of Members. The loss of a significant number of Members for any reason could negatively impact sales of our products and could impair our ability to attract new Members. In our efforts to attract and retain Members, we compete with other network marketing organizations, including those in the weight management, dietary and nutritional supplement and personal care and cosmetic product industries. Our operating results could be harmed if our existing and new business opportunities and products do not generate sufficient interest to retain existing Members and attract new Members.
Our Member organization has a high turnover rate, which is a common characteristic found in the direct selling industry. See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Quarterly Report on Form 10-Q for additional information regarding sales leader retention rates.
Because we cannot exert the same level of influence or control over our independent Members as we could were they our own employees, our Members could fail to comply with applicable law or our Member policies and procedures, which could result in claims against us that could harm our financial condition and operating results.
Our Members are independent contractors and, accordingly, we are not in a position to directly provide the same direction, motivation and oversight as we would if Members were our own employees. As a result, there can be no assurance that our Members will participate in our marketing strategies or plans, accept our introduction of new products, or comply with our Members policies and procedures.
Extensive federal, state and local laws regulate our business, products and network marketing program. Because we have expanded into foreign countries, our policies and procedures for our independent Members differ due to the different legal requirements of each country in which we do business. While we have implemented Member policies and procedures designed to govern Member conduct and to protect the goodwill associated with Herbalife trademarks and tradenames, it can be difficult to enforce these policies and procedures because of the large number of Members and their independent status. Violations by our independent Members of applicable law or of our policies and procedures in dealing with customers could reflect negatively on our products and operations and harm our business reputation. In addition, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions of our independent Members.
Adverse publicity associated with our products, ingredients or network marketing program, or those of similar companies, could harm our financial condition and operating results.
The size of our distribution force and the results of our operations may be significantly affected by the public’s perception of the Company and similar companies. This perception is dependent upon opinions concerning:
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the safety and quality of our products and ingredients;
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the safety and quality of similar products and ingredients distributed by other companies;
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our Members;
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our network marketing program; and
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the direct selling business generally.
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Adverse publicity concerning any actual or purported failure of our Company or our Members to comply with applicable laws and regulations regarding product claims and advertising, good manufacturing practices, the regulation of our network marketing program, the registration of our products for sale in our target m arkets or other aspects of our business, whether or not resulting in enforcement actions or the imposition of penalties, could have an adverse effect on the goodwill of our Company and could negatively affect our ability to attract, motivate and retain Mem bers, which would negatively impact our ability to generate revenue. We cannot ensure that all of our Members will comply with applicable legal requirements relating to the advertising, labeling, licensing or distribution of our products.
In addition, our Members’ and consumers’ perception of the safety and quality of our products and ingredients as well as similar products and ingredients distributed by other companies can be significantly influenced by media attention, publicized scientific research or findings, widespread product liability claims and other publicity concerning our products or ingredients or similar products and ingredients distributed by other companies. Adverse publicity, whether or not accurate or resulting from consumers’ use or misuse of our products, that associates consumption of our products or ingredients, or any similar products or ingredients with illness or other adverse effects, questions the benefits of our or similar products or claims that any such products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could lead to lawsuits or other legal challenges and could negatively impact our reputation, the market demand for our products, or our general business.
From time to time, we receive inquiries from government agencies and third parties requesting information concerning our products. We fully cooperate with these inquiries including, when requested, by the submission of detailed technical dossiers addressing product composition, manufacturing, process control, quality assurance, and contaminant testing. Further, we periodically respond to requests from regulators for additional information regarding product-specific adverse events. We are confident in the safety of our products when used as directed. However, there can be no assurance that regulators in these or other markets will not take actions that might delay or prevent the introduction of new products, or require the reformulation or the temporary or permanent withdrawal of certain of our existing products from their markets.
Adverse publicity relating to us, our products or our operations, including our network marketing program or the attractiveness or viability of the financial opportunities provided thereby, has had, and could again have, a negative effect on our ability to attract, motivate and retain Members, and it could also affect our share price. In the mid-1980’s, our products and marketing program became the subject of regulatory scrutiny in the United States, resulting in large part from claims and representations made about our products by our Members, including impermissible therapeutic claims. The resulting adverse publicity caused a rapid, substantial loss of Members in the United States and a corresponding reduction in sales beginning in 1985. In addition, in late 2012, a hedge fund manager publicly raised allegations regarding the legality of our network marketing program and announced that his fund had taken a significant short position regarding our common shares, leading to intense public scrutiny and governmental inquiries, and significant stock price volatility. We expect that negative publicity will, from time to time, continue to negatively impact our business in particular markets and may adversely affect our share price.
Our failure to appropriately respond to changing consumer preferences and demand for new products or product enhancements could significantly harm our Member and customer relationships and product sales and harm our financial condition and operating results.
Our business is subject to changing consumer trends and preferences, especially with respect to weight management products. Our continued success depends in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes. Furthermore, the nutritional supplement industry is characterized by rapid and frequent changes in demand for products and new product introductions and enhancements. Our failure to accurately predict these trends could negatively impact consumer opinion of our products, which in turn could harm our customer and Member relationships and cause the loss of sales. The success of our new product offerings and enhancements depends upon a number of factors, including our ability to:
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accurately anticipate customer needs;
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innovate and develop new products or product enhancements that meet these needs;
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successfully commercialize new products or product enhancements in a timely manner;
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price our products competitively;
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manufacture and deliver our products in sufficient volumes and in a timely manner; and
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differentiate our product offerings from those of our competitors.
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If we do not introduce new products or make enhancements to meet the changing needs of our customers in a timely manner, some of our products could be rendered obsolete, which could negatively impact our revenues, financial condition and operating results.
Due to the high level of competition in our industry, we might fail to retain our customers and Members, which would harm our financial condition and operating results.
The business of marketing weight management and nutrition products is highly competitive and sensitive to the introduction of new products or weight management plans, including various prescription drugs, which may rapidly capture a significant share of the market. These market segments include numerous manufacturers, distributors, marketers, retailers and physicians that actively compete for the business of consumers both in the United States and abroad. In addition, we anticipate that we will be subject to increasing competition in the future from sellers that utilize electronic commerce. Some of these competitors have longer operating histories, significantly greater financial, technical, product development, marketing and sales resources, greater name recognition, larger established customer bases and better-developed distribution channels than we do. Our present or future competitors may be able to develop products that are comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends and standards or customer requirements, or devote greater resources to the development, promotion and sale of their products than we do. For example, if our competitors develop other diet or weight management products that prove to be more effective than our products, demand for our products could be reduced. Accordingly, we may not be able to compete effectively in our markets and competition may intensify.
We are also subject to significant competition for the recruitment of Members from other network marketing organizations, including those that market weight management products, dietary and nutritional supplements and personal care products as well as other types of products. We compete for global customers and Members with regard to weight management, nutritional supplement and personal care products. Our competitors include both direct selling companies such as NuSkin Enterprises, Nature’s Sunshine, Alticor/Amway, Melaleuca, Avon Products, Oriflame, Omnilife, Tupperware and Mary Kay, as well as retail establishments such as Weight Watchers, Jenny Craig, General Nutrition Centers, Wal-Mart and retail pharmacies.
In addition, because the industry in which we operate is not particularly capital intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge who will compete with us for our Members and customers. In addition, the fact that our Members may easily enter and exit our network marketing program contributes to the level of competition that we face. For example, a Member can enter or exit our network marketing system with relative ease at any time without facing a significant investment or loss of capital because (1) we have a low upfront financial cost to become a Herbalife Member, (2) we do not require any specific amount of time to work as a Member, (3) we do not charge Members for any training that we might require and (4) we do not prohibit a new Member from working with another company. Our ability to remain competitive therefore depends, in significant part, on our success in recruiting and retaining Members through an attractive compensation plan, the maintenance of an attractive product portfolio and other incentives. We cannot ensure that our programs for recruitment and retention of Members will be successful and if they are not, our financial condition and operating results would be harmed.
We are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints both domestically and abroad, and our failure or our Members’ failure to comply with these constraints could lead to the imposition of significant penalties or claims, which could harm our financial condition and operating results.
In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, advertising, importation, exportation, licensing, sale and storage of our products are affected by extensive laws, governmental regulations, administrative determinations, court decisions and other similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions. There can be no assurance that we or our Members are in compliance with all of these regulations. Our failure or our Members’ failure to comply with these regulations or new regulations could disrupt our Members’ sale of our products, or lead to the imposition of significant penalties or claims and could negatively impact our business. In addition, the adoption of new regulations or changes in the interpretations of existing regulations, such as those relating to genetically modified foods, may result in significant compliance costs or discontinuation of product sales and may negatively impact the marketing of our products, resulting in significant loss of sales revenues.
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The FTC revised its Guides Co ncerning the Use of Endorsements and Testimonials in Advertising, or Guides, which became effective on December 1, 2009. Although the Guides are not binding, they explain how the FTC interprets Section 5 of the FTC Act’s prohibition on unfair or deceptive acts or practices. Consequently, the FTC could bring a Section 5 enforcement action based on practices that are inconsistent with the Guides. Under the revised Guides, advertisements that feature a consumer and convey his or her atypical experience with a product or service are required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides, which allowed advertisers to describe atypical results in a testimonial as long as they included a disclaime r such as “results not typical”, the revised Guides no longer contain such a safe harbor. The revised Guides also add new examples to illustrate the long-standing principle that “material connections” between advertisers and endorsers (such as payments or free products), connections that consumers might not expect, must be disclosed. Herbalife has revised its marketing materials to be compliant with the revised Guides. However, it is possible that our use, and that of our Members, of testimonials in the adv ertising and promotion of our products, including but not limited to our weight management products and our income opportunity, will be significantly impacted and therefore might negatively impact our sales.
Governmental regulations in countries where we plan to commence or expand operations may prevent or delay entry into those markets. In addition, our ability to sustain satisfactory levels of sales in our markets is dependent in significant part on our ability to introduce additional products into such markets. However, governmental regulations in our markets, both domestic and international, can delay or prevent the introduction, or require the reformulation or withdrawal, of certain of our products. Any such regulatory action, whether or not it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of Members and, consequently, on sales.
We are subject to rules of the Food and Drug Administration, or FDA, for current good manufacturing practices, or cGMPs, for the manufacture, packing, labeling and holding of dietary supplements and over-the-counter drugs distributed in the United States. Herbalife has implemented a comprehensive quality assurance program that is designed to maintain compliance with the cGMPs products manufactured by or on behalf of Herbalife for distribution in the United States. However, if Herbalife should be found not to be in compliance with cGMPs for the products we self-manufacture, it could negatively impact our reputation and ability to sell our products even after any such situation had been rectified. Further, if contract manufacturers whose products bear Herbalife labels fail to comply with the cGMPs, this could negatively impact Herbalife’s reputation and ability to sell its products even though Herbalife is not directly liable under the cGMPs for such compliance. In complying with the dietary supplement cGMPs, we have experienced increases in production costs as a result of the necessary increase in testing of raw ingredients, work in process and finished products.
Since late 2012, a hedge fund manager has made and continues to make allegations regarding the Company and its network marketing program. We believe these allegations are without merit and are vigorously defending ourselves against such claims, including proactively reaching out to governmental authorities about what we believe is manipulative activity with respect to our securities. Because of these allegations, we and others have received and may receive additional regulatory and governmental inquiries. For example, we have previously disclosed inquiries from the FTC, SEC and other governmental authorities. In the future, these and other governmental authorities may determine to seek information from us and other persons relating to these same or other allegations. If we believe any governmental or regulatory inquiry or investigation is or becomes material, it will be disclosed individually. Consistent with our policies, we have cooperated and will continue to fully cooperate with any governmental or regulatory inquiries or investigations.
Our network marketing program could be found to be not in compliance with current or newly adopted laws or regulations in one or more markets, which could prevent us from conducting our business in these markets and harm our financial condition and operating results.
Our network marketing program is subject to a number of federal and state regulations administered by the FTC and various federal and state agencies in the United States as well as regulations on direct selling in foreign markets administered by foreign agencies. We are subject to the risk that, in one or more markets, our network marketing program could be found by federal, state or foreign regulators not to be in compliance with applicable law or regulations. As previously disclosed, we entered into a consent order with the FTC to settle the FTC’s multi-year investigation into our business for compliance with these regulations. Another example is the 1986 permanent injunction entered in California in proceedings initiated by the California Attorney General. There can be no assurances other federal, state attorneys general or foreign regulators will not take similar action.
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Regulations appli cable to network marketing organizations generally are directed at preventing fraudulent or deceptive schemes, often referred to as “pyramid” or “chain sales” schemes, by ensuring that product sales ultimately are made to consumers and that advancement wit hin an organization is based on sales of the organization’s products rather than investments in the organization or other non-retail sales-related criteria. The regulatory requirements concerning network marketing programs do not include “bright line” rule s and are inherently fact-based and, thus, we are subject to the risk that these laws or regulations or the enforcement or interpretation of these laws and regulations by governmental agencies or courts can change. While we believe we are in compliance wit h these regulations, including those enforced by the FTC and the permanent injunction in California, and are compliant with those provisions of the FTC consent order that are currently applicable and expect to fully comply with all other aspects of the FTC consent order as and when they go into effect, there is no assurance any federal, state or foreign courts or agencies or the independent compliance auditor under the FTC consent order would agree, including a federal court or the FTC in respect of the FTC consent order or a court or the California Attorney General in respect to the permanent injunction.
The ambiguity surrounding these laws can also affect the public perception of the Company. Specifically, in late 2012, a hedge fund manager publicly raised allegations regarding the legality of our network marketing program and announced that his fund had taken a significant short position regarding our common shares, leading to intense public scrutiny and significant stock price volatility. The failure of our network marketing program to comply with current or newly adopted regulations, the FTC consent order or California injunction or any allegations or charges to that effect brought by federal, state, or foreign regulators could negatively impact our business in a particular market or in general and may adversely affect our share price.
We are also subject to the risk of private party challenges to the legality of our network marketing program, whether as a result of the FTC consent order or otherwise. Some network marketing programs of other companies have been successfully challenged in the past, while other challenges to network marketing programs of other companies have been defeated. Adverse judicial determinations with respect to our network marketing program, or in proceedings not involving us directly but which challenge the legality of network marketing systems, in any other market in which we operate, could negatively impact our business.
We are subject to a consent order with the FTC, the effects of which, or any failure to comply therewith, could harm our financial condition and operating results.
As previously disclosed, on July 15, 2016, we reached a consensual resolution with the FTC regarding its multi-year investigation of our business resulting in the entry into a Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment in the U.S. District Court for the Central District of California, or the Consent Order. The Consent Order became effective on July 25, 2016 upon final approval by the Court. As part of the Consent Order, we agreed to make a payment of $200 million and to implement certain new procedures and enhance certain existing procedures in the United States. We also agreed to be subject to certain audits by an independent compliance auditor, or the ICA, for a period of seven years; requirements regarding compliance certification and record creation and maintenance; and a prohibition on misrepresentations and misleading claims regarding, among other things, income and lavish lifestyles. The FTC and ICA will also have the right to inspect Company records and request additional compliance reports for purposes of conducting audits pursuant to the Consent Order. The terms of the Consent are described in greater detail in our Current Report on Form 8-K filed on July 15, 2016.
The Consent Order includes a number of restrictions and requirements and therefore creates compliance risks, and there is no guarantee that we will be able to fully comply with the Consent Order. While we do not believe the Consent Order changes our business model as a direct selling company, compliance with the Consent Order requires us to implement new and enhanced procedures regarding, among other things, no later than May 2017, tracking retail sales and internal consumption by distributors. We have already instituted certain controls and procedures and developed technology solutions that we believe address certain of the Consent Order requirements and are in the process of designing, implementing and updating others. However, there can be no assurances that we will be successful in implementing all of the necessary controls and procedures and technology solutions in a timely manner, and some or all of these controls and procedures and technology solutions may not operate as expected. Any failure of these systems to operate as designed could cause us to fail to maintain the records required under, or otherwise violate terms of, the Consent Order. Full compliance with the Consent Order will require the cooperation of Members and, while we are in the process of updating and will further update our training programs and policies to address the Consent Order and expect our Members to comply, we do not have the same level of influence or control over our Members as we could were they our own employees. Any failure by our Members to comply with the relevant aspects of the Consent Order could be a violation of the Consent Order and impact our ability to comply. While we may believe we are fully compliant with the Consent Order , there can be no assurances that the FTC or ICA will agree. In the event we are found to be in violation of the Consent Order, the FTC could, among other things, take corrective actions such as initiating further enforcement actions, seeking an injunction or other restrictive orders and imposing civil monetary penalties against us and our officers and directors.
The Consent Order may also impact our business operations, including our net sales and profitability. For example, the Consent Order imposes certain requirements regarding the verification and receipting of sales and there can be no assurances that these or other
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requirements of the Consent Order, our compliance therewith and the new and enhanced business procedures i mplemented as a result thereof , will not cause us to lose sales. The Consent Order also imposes restrictions on distributors’ ability to open Nutrition Clubs in the United States. Additionally, the development activities described above to implement new and enhanced procedures, and any other actions taken in respect of compliance with the Consent Order, could be costly. These extensive costs or any amounts in excess of our cost estimates could have a material adverse effect on our financial condition and results of operations .Our Members may also disagree with our decision to enter into the Consent Order, whether because they disagree with certain terms thereof, they believe it will negatively impac t their personal business or they would not have settled the investigation on any terms. The Consent Order also provides that if the total eligible U.S. retail sales on which compensation may be paid falls below 80% of the Company’s total U.S. sales for a given year, compensation payable to distributors on eligible U.S. retail sales will be capped at 10% above the current compensation levels. Because our business is dependent on our Members, our business operations and net sales could be adversely affected if U.S. distributor compensation is restricted or if any meaningful number of Members are dissatisfied, choose to reduce activity levels or leave our business altogether. Member dissatisfaction may also negatively impact the willingness of new Members to j oin Herbalife as a distributor. Further, management and the board of directors may be required to focus a substantial amount of time on compliance activities, which could divert their attention from running and growing our business. We may also be required to suspend or defer many or all of our current or anticipated business development, capital deployment and other projects unrelated to compliance with the Consent Order to allow resources to be focused on our compliance efforts, which could cause us to fa ll short of our guidance or analyst or investor expectations. In addition, while we believe the Consent Order will set a new standard within the industry, our competitors are not required to comply with the Consent Order and may not be subject to similar a ctions, which could limit our ability to effectively compete for members, customers and ultimately net sales.
The Consent Order also creates additional third-party risks. Although the Consent Order resolves the FTC’s multi-year investigation into the Company, it does not prevent other third-parties from bringing actions against us, whether in the form of other state, federal or foreign regulatory investigations or proceedings, or private litigation, any of which could lead to, among other things, monetary settlements, fines, penalties or injunctions. Although we neither admitted nor denied the allegations in the FTC’s complaint in agreeing to the terms of the Consent Order ( except as to the Court having jurisdiction over the matter), third-parties may use specific statements or other matters addressed in the Consent Order as the basis for their action. The Consent Order or any subsequent legal or regulatory claim may also lead to negative publicity, whether because some view it as a condemnation of the Company or our direct selling business model or because other third parties use it as justification to make unfounded and baseless assertions against us, our business model or our Members . An increase in the number, severity or scope of third-party claims, actions or public assertions may result in substantial costs and harm to our reputation. The Consent Order may also impact third parties willingness to work with us as a company.
The impact of the Consent Order on our business, including our ability to implement the necessary controls, procedures and technology solutions to comply therewith, and on our business and our member base, could be significant. If our business is adversely impacted, it is uncertain as to whether, or how quickly, we would be able to rebuild, irrespective of market conditions. Our financial condition and results of operations could be harmed if we are not able to comply with the Consent Order, if costs related to compliance exceed our estimates, if it has a negative impact on net sales, or if it leads to further legal, regulatory, or compliance claims, proceedings, or investigations or litigation.
Since its instigation in 1980, the 'Herbalife' racket has been sustained by dissimulating all key-information regarding its actual, ever-shifting catastrophic results, whilst deceiving a never-ending chain (now comprising tens of millions) of ill-informed victims into believing that the following, closed-logic, fictional narrative is fact:
'Herbalife' is a'Multi-Level Marketing /Direct Selling Company' - a shining example of a form of lawful enterprise which has been examined (and approved) by regulators around the world and has been self-regulated by 'Direct Selling Associations.'
Participants made a completely free-choice to sign-up with 'Herbalife.'
They were 'Independent Business Owners/ Distributors / Members, etc.,' (not employees) and, therefore, responsible for their own actions.
Anyone can earn income, and ultimately retire on a residual income, from participating in the 'Herbalife Business Opportunity'
Only persons who never quit and who develop 100% unquestioning belief in their own future success, can achieve success in 'Herbalife.'
Failure to make any money was, therefore, entirely the fault of the individual 'Herbalife' participant (who didn't develop 100% unquestioning belief and quit) and not the fault of the organisation or its (lawful) 'MLM Business/ Income Opportunity.'
Any financial losses sustained by 'Herbalife' participants could in no way be the legal responsibility of 'Herbalife.'
Whilst watching this reality-inverting 'Herbalife' recruitment video, Blog readers should bear in mind that, apart from an insignificant minority of exemplary shills, the overall net-loss/churn rate for participation in so-called 'Multi-Level Marketing, Direct Selling Income Opportunities' has been effectively 100%. In other words, the chances of earning an overall net-income from participation in a so-called 'MLM' have been effectively-zero. For obvious reasons, this key-information has been hidden from all new 'MLM' recruits.
'The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc, but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all and Oldspeak forgotten, a heretical thought - that is, a thought diverging from the principles of Ingsoc - should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary was so constructed as to give exact and often very subtle expression to every meaning that a Party member could properly wish to express, while excluding all other meanings and also the possibility of arriving at them by indirect methods. This was done partly by the invention of new words, but chiefly by eliminating undesirable words and by stripping such words as remained of unorthodox meanings, and so far as possible of all secondary meanings whatever.'
Georges Orwell (Appendix to 'Nineteen Eighty-Four')
The purpose of 'MLM Income Opportunity' jargon is not only to provide a medium of expression for the unquestioningworld-view and mental habits proper to the core-adherents of 'MLM' groups,but to make all othercritical and evaluative modes of thought impossible. It is intended that when 'MLM Income Opportunity' jargon has been adopted once and for all and traditional language forgotten, a heretical thought - that is, a thought diverging from the 'positive' principles of 'MLM' - should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary is so constructed as to give exact and often very subtle expression to every'positive' meaning that an 'MLM Distributor'can properly wish to express, while excluding all other 'negative' meanings and also the possibility of arriving at them by indirect methods. This is done partly by the invention of new 'positive' words and phrases ('Herbalife', 'Amway', 'NuSkin', 'Xango','Multi-Level Marketing', 'Distributor' , Independent Business Owner,'), but chiefly by eliminating undesirable'negative' words and phrases ('cult', 'totalitarian', 'fraud', 'deception', 'brainwashing', 'victims', 'exploitation' , 'de facto slaves') and by stripping such words and phrases as remain of unorthodox meanings, and so far as possible of all secondary meanings whatever.
This document (linked below) contains a point by point comparison of the actual contents of the recent FTC vs 'Herbalife'ruling with the reality-inverting propaganda broadcast by the 'Herbalife' Ministry of Truth.
Laughably, rather than 40-odd pages of text, the latest painfully-predictable 'positive' chapter of the 'Herbalife' fairy story could have been perfectly summed up in just one Orwellian slogan:
DEFEAT IS VICTORY
Seeing as these carefully-worded distortions of the truth were fed to the media, and led to a temporary rise in the market price of effectively-valueless 'Herbalife' shares, presumably, Bill Ackman and his associates have filed further criminal complaints against the authors of the 'Herbalife' fairy story with the Securities and Exchange Commission. Hopefully, they will have also pointed out to the Federal Trade Commission that this stream comic-book drivel is not only in flagrant breach of the settlement which 'Herbalife's' Big Brothers have signed, but also demonstrative of their utter contempt for their victims' suffering and for the rule of law.
