Herbalife International of America, Inc., Herbalife International, Inc., and Herbalife, Ltd. will restructure their U.S. multi-level marketing business operations and pay $200 million to compensate consumers to settle the FTC complaint that the Herbalife companies deceived consumers into believing they could earn substantial money selling their products.
The FTC complaint also charged that Herbalife’s compensation structure was unfair because its distributors were rewarded for recruiting others to join and purchase products in order to advance in the MLM program, as opposed to actual retail demand for the product, causing economic injury to many distributors.
According to the complaint, Herbalife claimed that people could earn thousands of dollars a month or even get rich in the program. But the complaint alleged that the majority of distributors earn little or no money, with more than half the distributors—known as “sales leaders”—receiving less than $300 in rewards for 2014. According to a survey by Herbalife itself, Nutrition Club owners spent an average of about $8,500 to open a club, and 57 percent of club owners reported making no profit or losing money.
A federal judge has granted the Food & Drug Administration’s request for a permanent injunction prohibiting BioAnue from making and distributing its dietary supplement products until they comply with FDA regulations.
While BioAnue sold the products as dietary supplements, the FDA maintained that they were “unapproved new drugs” because they were marketed without FDA approval as treatments for a variety of diseases, including cancer, HIV/AIDS, heart disease and diabetes. In addition, BioAnue failed to follow the FDA’s current good manufacturing practice regulations for dietary supplements.
The products covered by the order include TumoRx Cardio Clean, TumoRx Apoptosis Full Strength, TumoRx Formula CX, BioAnue Diabetic Mender, BioAnue Heart Mender, Stroke Mender, Cardiovascular Mender and Bovine Cartilage. According to the FDA, BioAnue made therapeutic claims for the supplements, thereby establishing them as drugs intended for treating disease.
Claims made for Tumor X Cardio Clean, for example, included “Cardio Clean can …. [C]lean out your arteries and eliminate high cholesterol and triglycerides.” and “Cardio Clean … transforms artery clogging cholesterol into disease fighting substances needed for proper function inside the body.” In addition, the FDA maintained that the product name itself is an implied drug claim.
The FDA first issued a warning letter to BioAnue in February, 2012. A follow-up FDA inspection the following August showed in addition to not taking action to correct the violations cited in the warning letter, the company also was not complying with the FDA’s current good manufacturing practice requirements for dietary supplements.