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Herbalife product brochure Cover
TU Turkey Turkiye (Photo credit: www.goherb.eu) |
Starting in December 2012,
Herbalife is in a fight of its life when Bill Ackman, fund manager, publicly denounced it as a pyramid scheme, stating that it should be closed, and made a 300+ page presentation . Since then, a lot of famous people have come out, both for and against that view. People against MLM lauded Ackman, while people
for MLM accused Ackman of running a
"short and distort" campaign against Herbalife.
The truth is somewhere in between.
Herbalife itself does NOT know whether it is a pyramid scheme or not. It says it's not, but it cannot prove its claim. Herbalife ran its MLM without regard whether it had slipped over the edge into a pyramid scheme. Even it does not know how many "retail" customers it has. It could only "confirm" some 30% of customers are retail. The rest seems to be distributors, but some are no doubt "self-consumers", i.e. They just join for the discount on the merchandise. But how many? What percentage? Herbalife claimed to be conducting a survey and may have some results soon.
As for the rest of the distributors, who are really in Herbalife for the money, what are their chances of making it big, and how do they get there? A lot of them relied on "lead generation" companies (i.e.
lead seller), who basically sell them a list of people who may be interested in their sales pitch. And these are QUITE expensive... Typically $100 per name. What's more interesting, these lead generation companies are often run by Herbalife affiliates themselves. According to an
article from the New York Post,
6 out of the top 20 Herbalife affiliates either run a lead seller, or has close ties to one. Herbalife is well aware of them and has a list of approved lead sellers, which numbered 29 as of 2010.
According to the New York Post article, that number of
approved lead sellers has just been trimmed to TWO. That's right, from 29 to 2. Furthermore, that has been a longstanding clause in the affiliate agreement that
affiliates may not sell leads or advertising to other affiliates. Apparently these lead generators are considered "third-party" and thus not covered by that prohibition clause, even though
one of the remaining company is directly owned by a Chairman Club member Shawn Dahl. And even then, the internal Herbalife memo stated that no leads may be purchased from Dahl's company, Online Business Systems.
