How Does Herbalife Not Get Shutdown As A Pyramid Scheme?
There is a question that many people who understand the business that Herbalife is running ask: How does Herbalife not get shutdown as a pyramid scheme? I would like to look at one current court case to give you an idea how they continue to in my opinion scam people out of their money and not get shutdown.
In April last year, Dana Bostick, a former salesman, filed a lawsuit against Herbalife. Dana said that he and hundreds of thousands of other distributors have failed to make money as promised by trying to sell the products. He alleged that the company was running a pyramid scheme.
Here is the introduction to the case.
Herbalife told Dana Bostick that if he “put in the time, effort, and commitment,” he could make money from retail sales and, by recruiting others to become Herbalife distributors, he could make money off them. Bostick paid Herbalife $95.95 and became a distributor. He ordered Herbalife products – enough products that he jumped up the chain and qualified for additional discounts and commissions from potential recruits’ purchases.
Bostick did not make money as promised. Like the hundreds of thousands of Herbalife distributors before and after him, Bostick failed. He failed even though he was committed and put in the time and effort. He failed because he was doomed from the start. He was doomed from the start by an Herbalife marketing plan that systematically rewards recruiting over retail sales. A marketing plan that for every dollar that Bostick and other distributors pay for Herbalife products Herbalife pays $0.46 to $0.64 cents in recruiting rewards, regardless of distributors’ retail sales. A marketing plan that pays millions to those few at the top in recruiting rewards at the expense of the many at the bottom. – Source Dana Bostick Class Action Suit Against Herbalife
This introduction is a prefect breakdown of how the Herbalife scam functions. Herbalife has no choice but to settle this case, and that is just what they are doing.
To settle the case Herbalife will pay $15 million cash, plus up to $2.5 million for product returns. The settlement also says the company has to make numerous changes to its business model for at least three years after the settlement receives final approval.
Herbalife said the settlement did not contain an admission of liability or wrongdoing.
Herbalife must also make a number of changes to its corporate policies, including how it defines its distributors, paying shipping charges for products that are legitimately returned by members and making clarifications in its membership agreement to make them less confusing. The settlement also says that the product return fund would be available to distributors who file valid claims for the return of unused and unopened products.
In my opinion, the way Herbalife is able to continue to run their pyramid scheme is they pay people that sue them with the money that they have taken from their victims. The above court case is a perfect example of this. No mater how much money they continue to pay out, it does not change what they are. They are a scam that takes advantage of hundreds of thousands of distributors worldwide.