Breaking Herbalife News: NOT Found To Be Pyramid Scheme!

Herbalife Will Restructure Its Multi-level Marketing Operations

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.

“This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” FTC Chairwoman Ramirez said. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices.”

For example:

  • The company will now differentiate between participants who join simply to buy products at a discount and those who join the business opportunity. “Discount buyers” will not be eligible to sell product or earn rewards.
  • Multi-level compensation that business opportunity participants earn will be driven by retail sales. At least two-thirds of rewards paid by Herbalife to distributors must be based on retail sales of Herbalife products that are tracked and verified. No more than one-third of rewards can be based on other distributors’ limited personal consumption.
  • Companywide, in order to pay compensation to distributors at current levels, at least 80 percent of Herbalife’s product sales must be comprised of sales to legitimate end-users. Otherwise, rewards to distributors must be reduced.
  • Herbalife is prohibited from allowing participants to incur the expenses associated with leasing or purchasing premises for “Nutrition Clubs” or other business locations before completing their first year as a distributor and completing a business training program.

The Real Reason Bill Ackman Is Grandstanding And Calling Herbalife A Pyramid

Terry Keenen over at the NY Post wrote an interesting article on Ackman’s real reason for shorting Herbalife and grandstanding on his knowledge of why Herbalife is a pyramid. Well this is sure different from the consumer protection reason Ackman has claimed. To see all MLM Help Desk has written on this subject click here.




Ackman’s got his Johnson shorts in a bunch


In the mind-numbing battle between hedge-fund superstarsBill Ackman and Dan Loeb over the future of the multilevel-marketing health-supplement company Herbalife (Ackman is shorting the stock; Loeb is going long), there is one constant: The bull market in hubris is alive and well on Wall Street in 2013.

Bets on whether Ackman’s confidence is justified, or pure arrogance, determine the direction of Herbalife shares these days and define the script for Wall Street’s newest and most compelling soap opera.

Although both the Herbalife longs and shorts can make a thoughtful case as to whether the 32-year-old company is a pyramid scheme or not, those who are betting against Ackman’s death-star scenario (including Loeb and veteran investor Carl Icahn) by buying its shares no doubt have Ackman’s ego in mind.

Here’s the quick 411 on Ackman and why he generates so much ink.

In 2011, his fund was down a bit (after fees). Were it not for the paper gains from his 11th-hour grandstanding that he was shorting $1 billion worth of Herbalife shares, Ackman’s 2012 returns would have been significantly below par.

More embarrassing still, Ackman’s embrace of JCPenney stock and company chiefRon Johnson have left egg on his face and red ink in his fund.

Perhaps not surprisingly, Penney shares continue their slide in 2013, pulling Ackman’s returns down along with them. So far, the stock is down 7 percent this year; Ackman’s Pershing fund owns about 39 million shares. Meanwhile, Herbalife shares are up 21 percent on the year — ouch!

Right now, the smart money on Wall Street and in the hedge-fund world is rooting for Loeb.

Indeed, as last week played out, it appeared that Ackman has sided with the wrong CEO named Johnson. While Ron Johnson’s JCPenney continued to crater, Michael Johnson’s Herbalife shares rallied. Could it be that Ackman, who fashions himself as a sort of retailing savant, ended up shorting the wrong stock? All of Wall Street will be watching.