The Herbalife drama playing out on Wall Street among hedge-fund titans who are debating the legitimacy of its business model and therefore the worth of its stock continues to receive national attention, thanks to new information released by the Federal Trade Commission (FTC) just this month. The New York Times recently reported that there have been at least 100 complaints filed by individuals who paid money to organizations claiming to offer “work from home”-type opportunities, only to find out that they were cloaked efforts to recruit Herbalife distributors and sell their products.
Now, recruiting product distributors in and of itself is not necessarily a problem. However, since late last year, the debate about Herbalife has been about whether or not their recruitment efforts are emphasized over and above product selling as a means of generating income, oftentimes referred to as a pyramid scheme.
While this latest round of FTC complaints is not about Herbalife’s business model specifically, it is about refunds, all of which is keeping the debate about the company’s overall business practices very much in the spotlight. Lured by the opportunity to start an online or other work-from-home business, individuals who paid money to learn more and who were uninterested in pursuing things further once they found out what was involved have found it virtually impossible to get their money back. Said one claimant, “Rather than refunding my $9.95, the company charged me an additional $39.95,” echoing the experiences of many others.
Herbalife continues to assert that its business model is sound and legitimate. “For a company of our size,” wrote Herbalife spokesman Julian Cacchioli in response to these latest accusations, “we have had a relatively low number of complaints to the FTC.” He went on to assert that a number of the organizations cited in the complaints “do not work on behalf of Herbalife” and/or are not following practices that are “condoned or encouraged by Herbalife.”
HOT TOPIC! The whole concept of multi-level marketing (MLM) or network marketing oftentimes gets a bad wrap; and thanks to the Herbalife debate, the issue is once again very much in the national spotlight. Do you think the current scrutiny is warranted? Why or why not? Tell us what you think…