Does Anybody Else Think Herbalife Is A Pyramid Scheme?
Herbalife is a direct-selling nutrition company that sells protein shakes, snacks and other products. They use a multi-level marketing model, but is it a pyramid scheme?
A pyramid scheme is described as a form of investment or business model in which a participant buys in to the business, then recruits two other participants, who then recruit more participants and everyone receives money contributed by later participants. Oh, and it's very illegal by the way. So let's take a look at Herbalife:
The healthy protein oriented company has been around for over 36 years and has over 8,000 employees worldwide according to their website. Now here's where it gets tricky, Herbalife members buy the products in bulk where they can either use them or become an employee and resell the products.
Bill Ackman, an American Investor Activist, and philanthropist spoke out why he thinks the nutrition company is a pyramid scheme:
After talking with someone who used to work for Herbalife, payment does come from the products they sell, but also employees receive bonuses from new members they recruit. Herbalife hasn't been proven to be a pyramid scheme, but they do ride that fine line. I've been asked numerous times to sign up and become a member, but I'm just not buying into it. Even people on Google are curious:
Last year Herbalife agreed to pay $200 million and change the way it does business to avoid being labeled as a pyramid scheme. Herbalife has been in constant battle with people about being a pyramid scheme and the FTC started diving in for more information in 2014. Which definitely makes me think they were in fact a pyramid scheme.
The company will now require rewards to distributors based on retail sales rather than recruiting new distributors. So I'm interested to see how the new arrangement works out. What do you think? Could Herbalife in fact be a pyramid scheme?