• Login
    • Join
  • FOLLOW:
  • Subscribe Free
    • Magazine
    • eNewsletter
    Checkout
    • Magazine
    • News
    • Exclusives
    • Nutraceuticals
    • Markets
    • Health
    • Jobs
    • Events
    • Buyers' Guide
    • Showcases
    • More
  • Magazine
  • News
  • Exclusives
  • Nutraceuticals
  • Markets
  • Health
  • Jobs
  • Events
  • Buyers' Guide
  • Showcases
  • Current & Past Issues
    Features
    Columns
    Editorials
    Digital Edition
    Subscribe Now
    Advertise Now
    eNewsletter
    Editorial Guidelines
    Top Features
    Health Products Association - China Executive Director Reflects on Market Dynamics, Challenges

    Blood Sugar Management: Personalized Testing Drives Home The Need for Early Intervention

    New and Evolving Formulation Options Must Be Mindful of Blood Sugar Maintenance

    Tapping Functional Beverages to Meet Modern Wellness Needs

    Adaptogens: Where Ancient Remedies Meet Modern Wellness Products
    Breaking News
    Certifications, Approvals and Patents
    Exclusives
    Industry & Market News
    People
    Products
    Regulatory
    Research
    Supplier News
    Supplier Insights
    Live From Shows
    Top News
    CoQ10 and Royal Jelly Supplementation May Improve High Intensity Exercise

    Shiitake Mushroom Extract Appears Helpful in HPV Infections

    Fi & Hi Europe Returns with Over 20,000 Global Attendees Expected

    United Plant Savers Launches First Film Festival

    Azelis Opens Food and Nutrition Lab in Cairo, Egypt
    Exclusives
    Blogs & Guest Articles
    Health E-Insights
    Area Code 420
    eBook
    Antioxidants
    Dairy-Based Ingredients
    Enzymes
    Fatty Acids
    Fiber & Carbohydrates
    Green Foods
    Herbs & Botanicals
    Marine Nutraceuticals
    Minerals
    Omega 3s
    Probiotics & Prebiotics
    Proteins, Peptides, Amino Acids
    Sweeteners
    Vitamins

    CoQ10 and Royal Jelly Supplementation May Improve High Intensity Exercise

    Shiitake Mushroom Extract Appears Helpful in HPV Infections

    United Plant Savers Launches First Film Festival

    Roquette Launches Nutralys Rice Protein

    Upcycled Coffeeberry® Cascara Offers Versatility in Functional Beverage Development
    Consumer Trends
    Contract Manufacturing
    Cosmeceuticals / Nutricosmetics
    Delivery & Dosage Technologies
    Dietary Supplements
    Flavors & Colors
    Functional Foods & Beverages
    Healthcare Trends
    Medical Nutrition
    Mergers & Acquisitions
    Natural/Organic
    Nutrition Bars
    Packaging
    Pet Nutraceuticals
    Quality & Safety
    Regulations
    Research
    Testing
    World Markets

    CoQ10 and Royal Jelly Supplementation May Improve High Intensity Exercise

    Shiitake Mushroom Extract Appears Helpful in HPV Infections

    Fi & Hi Europe Returns with Over 20,000 Global Attendees Expected

    Azelis Opens Food and Nutrition Lab in Cairo, Egypt

    Florida Food Products Acquires Javo
    Bone & Joint Health
    Cancer Risk
    Cardiovascular Health
    Cognitive Function
    Diabetes & Blood Sugar Management
    Digestive Health
    Energy
    Eye Health
    Healthy Aging
    Immune Function
    Infant & Children's Health
    Inflammation
    Men's Health
    Mood Health & Sleep
    Oral Health
    Sexual & Reproductive Health
    Skin Health
    Sports Nutrition
    Weight Management/Weight Loss
    Women's Health

    CoQ10 and Royal Jelly Supplementation May Improve High Intensity Exercise

    Shiitake Mushroom Extract Appears Helpful in HPV Infections

    Upcycled Coffeeberry® Cascara Offers Versatility in Functional Beverage Development

    Botanical Gum for Kids Aims to Curb Sugar Cravings

    Combination of Collagen and Boswellia Serrata Shown to Reduce Joint Discomfort
    Industry Events
    Live From Show Events
    Webinars
    All Companies
    Categories
    Trade Associations
    Company Capabilities
    International Buyers Guide Companies
    Sabinsa Corporation

    Botanic Healthcare LLC

    Nutrition21, LLC

    Aiya America, Inc. (Aiya Matcha)

    KLK OLEO
    Companies
    Product Releases
    News Releases
    Literature / Brochures
    White Papers
    Jobs
    VIdeos
    Services
    Add New Company
    International Buyers Guide Companies
    Sabinsa Corporation

    Botanic Healthcare LLC

    Nutrition21, LLC

    Aiya America, Inc. (Aiya Matcha)

    KLK OLEO
    • Magazine
      • Current / Back Issue
      • Features
      • Editorial
      • Columns
      • Digital Edition
      • eNewsletter Archive
      • Editorial Guidelines
      • Subscribe Now
      • Advertise Now
    • Breaking News
    • Buyers' Guide
      • All Companies
      • Categories
      • Trade Associations
      • Company Capabilities
    • Nutraceuticals
      • Antioxidants
      • Dairy-Based Ingredients
      • Enzymes
      • Fatty Acids
      • Fiber & Carbohydrates
      • Green Foods
      • Herbs & Botanicals
      • Marine Nutraceuticals
      • Minerals
      • Omega 3s
      • Probiotics & Prebiotics
      • Proteins, Peptides, Amino Acids
      • Sweeteners
      • Vitamins
    • Markets
      • Consumer Trends
      • Contract Manufacturing
      • Cosmeceuticals / Nutricosmetics
      • Delivery & Dosage Technologies
      • Dietary Supplements
      • Flavors & Colors
      • Functional Foods & Beverages
      • Healthcare Trends
      • Medical Nutrition
      • Mergers & Acquisitions
      • Natural/Organic
      • Nutrition Bars
      • Packaging
      • Pet Nutraceuticals
      • Quality & Safety
      • Regulations
      • Research
      • Testing
      • World Markets
    • Health
      • Bone & Joint Health
      • Cancer Risk
      • Cardiovascular Health
      • Cognitive Function
      • Diabetes & Blood Sugar Management
      • Digestive Health
      • Energy
      • Eye Health
      • Healthy Aging
      • Immune Function
      • Infant & Children's Health
      • Inflammation
      • Men's Health
      • Mood Health & Sleep
      • Oral Health
      • Sexual & Reproductive Health
      • Skin Health
      • Sports Nutrition
      • Weight Management/Weight Loss
      • Women's Health
    • Online Exclusives
    • Webinars
    • Slideshows
    • Blogs & Guest Articles
    • Health E-Insights
    • Videos
    • Podcasts
    • Infographics
    • eBook
    • Whitepapers
    • Research
      • TrendSense
      • Monograph Center
      • White Papers
      • Research News
    • Jobs
    • Events
      • Industry Events
      • Live From Show Events
      • Webinars
    • Supplier Showcases
      • Companies
      • Product Releases
      • News Releases
      • Literature / Brochures
      • White Papers
      • Jobs
      • VIdeos
      • Services
    • About Us
      • About Us
      • Contact Us
      • Advertise With Us
      • Privacy Policy
      • Terms of Use
    Online Exclusives

    Herbalife Reaches Settlement with FTC for $200 Million

    Herbalife will restructure multi-level marketing operations and pay fine for consumer redress.

    Herbalife Reaches Settlement with FTC for $200 Million
    Related CONTENT
    • New IADSA Chair Lauds Explorations of Supplementation in Healthcare Policy
    • Third-Party Certifications Support Consumer Demand for Quality and Transparency
    • Quality Standards: A Waste-Reduction Strategy for Pathogen Testing to Improve Consumer Products
    • USP Reinvented: New Technology for Quality Control
    • Lycored Partners with Herbalife Nutrition to Launch Herbalife SKIN LycoGlow
    07.18.16
    Herbalife, Ltd. has agreed to restructure its U.S. business operations and pay $200 million to compensate consumers to settle Federal Trade Commission charges that the company deceived consumers into believing they could earn substantial money selling diet, nutritional supplement and personal care products.

    The terms of the settlement, which concludes FTC’s investigation, do not change Herbalife's business model as a direct selling company, but the company will now reward distributors for whey they sell instead of how many people they recruit.

    In its complaint against Herbalife, the FTC also charged that the multi-level marketing company’s compensation structure was unfair because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product, causing substantial economic injury to many of its distributors.

    “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 Edith 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.”

    According to the FTC’s complaint, Herbalife claimed that people who participate can expect to quit their jobs, earn thousands of dollars a month, make a career-level income, or even get rich. The FTC complaint claimed that the overwhelming majority of distributors who pursue the business opportunity earn little or no money.

    For example, as stated in the complaint, the average amount that more than half the distributors known as “sales leaders” received as reward payments from Herbalife was under $300 for 2014. According to a survey Herbalife itself conducted, which is described in the complaint, Nutrition Club owners spent an average of about $8,500 to open a club, and 57% of club owners reported making no profit or losing money.

    The distributors who do make a lot of money, according to the complaint, are compensated for recruiting new distributors, regardless of whether those recruits can sell the products they are encouraged to buy from Herbalife.

    Finding themselves unable to make money, the FTC’s complaint alleges, Herbalife distributors abandon Herbalife in large numbers. The majority of them stop ordering products within their first year, and nearly half of the entire Herbalife distributor base quits in any given year.

    The settlement requires Herbalife to revamp its compensation system so that it rewards retail sales to customers and eliminates the incentives in its current system that reward distributors primarily for recruiting. It mandates a new compensation structure in which success depends on whether participants sell Herbalife products, not on whether they buy products.

    The order imposes a $200 million judgment against Herbalife to provide consumer redress, including money for consumers who purchased large quantities of Herbalife products (such as many Nutrition Club owners, among others) and lost money.

    Herbalife and the Illinois Attorney General also reached a settlement, and the company agreed to pay $3 million as part of this separate agreement. With the conclusion of the Illinois investigation, Herbalife said it is not aware of any active investigations by any other state attorney general.

    "The settlements are an acknowledgment that our business model is sound and underscore our confidence in our ability to move forward successfully, otherwise we would not have agreed to the terms," stated Michael O. Johnson, chairman and CEO, Herbalife.

    While the company said it believes many of the allegations made by the FTC are factually incorrect, Herbalife believes settlement was in its best interest because “the financial cost and distraction of protracted litigation would have been significant,” and after more than two years of cooperating with the FTC's investigation, the company wanted to move forward.

    Under the order, Herbalife will pay for an Independent Compliance Auditor (ICA) who will monitor the company’s adherence to the order provisions requiring restructuring of the compensation plan. The ICA will be in place for seven years and will report to the FTC, which will have authority to replace the ICA if necessary.

    The settlement also prohibits Herbalife from misrepresenting distributors’ potential or likely earnings. The order specifically prohibits Herbalife from claiming that members can “quit their job” or otherwise enjoy a lavish lifestyle.

    The terms of the settlement apply only to the company's sales in the U.S., which comprise approximately 20% of total net sales. Herbalife said many of the terms agreed to were either already being contemplated or are extensions of practices already in place and will be implemented over the next 10 months. The two primary components of the agreement are:

    Those who currently have a membership with Herbalife, and those coming into the business, will be categorized as either a preferred member (those who become a preferred member to purchase products at a discount) or distributor (those who choose to build a business and sell products through direct sales). This will allow Herbalife to better track both groups and provide a personalized experience for these individuals.

    Distributors will be compensated based upon retail sales and will provide receipts for their transactions. Their compensation will also be based on purchase for personal consumption within allowable limits. Herbalife's independent distributors are currently required to keep sales transaction receipts. With advancements in mobile technology, tracking retail sales is now even easier, and the company has already developed proprietary technological solutions including a mobile application in the U.S. to make the process as efficient and easy as possible.

    Other terms agreed to include enhancing training provided to distributors; requiring a business plan and a one-year waiting period before opening a nutrition club; extending the amount of time a distributor may return an initial membership pack; paying for all shipping costs associated with any returned products; prohibiting auto-shipment of products; auditing by an independent third party; and extending the protections on income claims including greater specificity around lifestyle claims.

    Importantly, as was the case with the FTC's Amway decision in 1979 (In the Matter of Amway Corporation Inc., et. al.), the company anticipates these agreed upon procedures will now provide direction for the entire direct selling and multi-level marketing industry. Therefore, the company believes that while some of the additional terms do not have significant impact, these provisions will improve policies throughout the industry.

    For example, Herbalife implemented stricter consumer protection rules relating to auto-ship several years ago and the practice now represents less than 1% of all company sales. Similarly, only 0.02% of all Herbalife products in the U.S. are returned to the company, so paying shipping costs associated with returned orders is expected to have minimal impact.

    "I have always believed in Herbalife's strong fundamentals and am pleased the Board has decided to increase my ownership limit from 25% to 34.99% of the Company's outstanding shares. A significant part of my investment success is directly tied to our in-depth investment research and understanding of often complex and unique issues facing companies," said Carl Icahn. "I have the greatest confidence in Herbalife's CEO, Michael Johnson, and the entire management team, who have skillfully led the Company through adversity, including holding firm against a high-profile PR campaign against the Company by Bill Ackman where it was alleged more than once that the company would be shut down. Obviously, we are still here."
    Related Searches
    • Research
    • herbalife
    • Nutrition
    • amway
    Related Knowledge Center
    • Dietary Supplements
    • Regulations
    Suggested For You
    New IADSA Chair Lauds Explorations of Supplementation in Healthcare Policy New IADSA Chair Lauds Explorations of Supplementation in Healthcare Policy
    Third-Party Certifications Support Consumer Demand for Quality and Transparency Third-Party Certifications Support Consumer Demand for Quality and Transparency
    Quality Standards: A Waste-Reduction Strategy for Pathogen Testing to Improve Consumer Products Quality Standards: A Waste-Reduction Strategy for Pathogen Testing to Improve Consumer Products
    USP Reinvented: New Technology for Quality Control USP Reinvented: New Technology for Quality Control
    Lycored Partners with Herbalife Nutrition to Launch Herbalife SKIN LycoGlow Lycored Partners with Herbalife Nutrition to Launch Herbalife SKIN LycoGlow
    FDA’s Dr. Cara Welch Opening Speaker at the 9th AHPA Botanical Congress FDA’s Dr. Cara Welch Opening Speaker at the 9th AHPA Botanical Congress
    2021 AHPA Awards Recognize Excellence in the Herbal Community 2021 AHPA Awards Recognize Excellence in the Herbal Community
    Understanding FTC Standards for Claims Substantiation Understanding FTC Standards for Claims Substantiation
    NAD Refers Advertising for BodyArmor Sports Drinks to FTC NAD Refers Advertising for BodyArmor Sports Drinks to FTC
    Political Disruption Presents  Opportunity for Industry Political Disruption Presents Opportunity for Industry
    Dietary Supplement Insurance: Trends & Tips for 2017 Dietary Supplement Insurance: Trends & Tips for 2017
    Prevagen Marketers Charged With Making False Claims Prevagen Marketers Charged With Making False Claims
    Herbalife Nutrition Reveals CEO Transition Plan Herbalife Nutrition Reveals CEO Transition Plan
    AOAC Approves Official  Methods for Aloin & Theanine AOAC Approves Official Methods for Aloin & Theanine
    CRN & NAD Celebrate 10th Anniversary of Self-Regulatory Program CRN & NAD Celebrate 10th Anniversary of Self-Regulatory Program

    Related Breaking News

    • Breaking News | Dietary Supplements | Industry & Market News | Regulations | World Markets
      New IADSA Chair Lauds Explorations of Supplementation in Healthcare Policy

      New IADSA Chair Lauds Explorations of Supplementation in Healthcare Policy

      Gerhard Gans, elected to IADSA on June 22, noted positive developments taking place in Europe.
      06.23.22

    • Consumer Trends | Dietary Supplements | Quality & Safety | Regulations | Testing
      Third-Party Certifications Support Consumer Demand for Quality and Transparency

      Third-Party Certifications Support Consumer Demand for Quality and Transparency

      Validation of standards can help build trust and ensure products are safe, efficacious, and contain what they claim.
      By Lisa Thomas, Senior Director, North America Product Marketing and Innovation, Herbalife Nutrition 05.10.22

    • Dietary Supplements | Quality & Safety | Testing
      Quality Standards: A Waste-Reduction Strategy for Pathogen Testing to Improve Consumer Products

      Quality Standards: A Waste-Reduction Strategy for Pathogen Testing to Improve Consumer Products

      New assay leads to reduced cost of pathogen testing and reduced lab waste while improving accuracy and specificity.
      By Peter Chang, Vice President of Corporate Quality Control, Herbalife Nutrition 11.01.21


    • USP Reinvented: New Technology for Quality Control

      USP Reinvented: New Technology for Quality Control

      Watch our FREE On-Demand Webinar!
      08.16.21

    • Antioxidants | Breaking News | Contract Manufacturing | Cosmeceuticals / Nutricosmetics | Delivery & Dosage Technologies | Dietary Supplements | Herbs & Botanicals | Natural/Organic | Products | Skin Health
      Lycored Partners with Herbalife Nutrition to Launch Herbalife SKIN LycoGlow

      Lycored Partners with Herbalife Nutrition to Launch Herbalife SKIN LycoGlow

      The phytonutrient blend is formulated to support skin smoothness, brightness, and firmness.
      07.16.21

    Loading, Please Wait..
    Trending
    • Three Grams Of Omega-3s May Be Optimal Dose For Reducing Blood Pressure
    • 3 grams of Omega-3s May be Optimal Dose for Reducing Blood Pressu
    • High Blood DHA Levels Linked To 49% Reduced Risk Of Alzheimer’s
    • Olive/Pomegranate Extract May Improve Dyslipidemia
    Breaking News
    • Kensing Acquires Vitae Naturals
    • CoQ10 and Royal Jelly Supplementation May Improve High Intensity Exercise
    • Shiitake Mushroom Extract Appears Helpful in HPV Infections
    • Fi & Hi Europe Returns with Over 20,000 Global Attendees Expected
    • United Plant Savers Launches First Film Festival
    View Breaking News >
    CURRENT ISSUE

    June 2022

    • Tapping Functional Beverages to Meet Modern Wellness Needs
    • Adaptogens: Where Ancient Remedies Meet Modern Wellness Products
    • New and Evolving Formulation Options Must Be Mindful of Blood Sugar Maintenance
    • Health Products Association - China Executive Director Reflects on Market Dynamics, Challenges
    • Blood Sugar Management: Personalized Testing Drives Home The Need for Early Intervention
    • View More >

    Cookies help us to provide you with an excellent service. By using our website, you declare yourself in agreement with our use of cookies.
    You can obtain detailed information about the use of cookies on our website by clicking on "More information”.

    • About Us
    • Privacy Policy
    • Terms And Conditions
    • Contact Us

    follow us

    Subscribe
    Nutraceuticals World

    Latest Breaking News From Nutraceuticals World

    CoQ10 and Royal Jelly Supplementation May Improve High Intensity Exercise
    Shiitake Mushroom Extract Appears Helpful in HPV Infections
    Fi & Hi Europe Returns with Over 20,000 Global Attendees Expected
    Coatings World

    Latest Breaking News From Coatings World

    PPG to Increase U.S. Aerospace Products Manufacturing Output to Meet Rising Demand
    Solvay to Discontinue Use of Fluorosurfactants for Production of Fluoropolymers
    AkzoNobel Names New CEO
    Medical Product Outsourcing

    Latest Breaking News From Medical Product Outsourcing

    Study Confirms Safety, Accuracy of Vectorious' V-LAP In-Heart Sensor
    Norman Noble Achieves ISO 13485:2016 Certification
    Indian SMEs Gaining Access to Russian Medtech Market Amid Ukraine Conflict
    Contract Pharma

    Latest Breaking News From Contract Pharma

    Ixaka & Minaris Sign Tech Transfer & GMP Manufacturing Agreement for Cell Therapy Candidate
    Pfizer, BioNTech Adapt COVID Vax Against Omicron
    CoreRx Expands Capabilities
    Beauty Packaging

    Latest Breaking News From Beauty Packaging

    Nectar Recruits 8-Year-Old YouTube Star to Launch Her Own Bath & Body Line
    L'Oreal Exec Joins Function of Beauty
    Top 5 Beauty Tech Trends at Perfect Corp.'s Global Forum
    Happi

    Latest Breaking News From Happi

    Arey Launches Unisex Leave-In Conditioner
    Marianna Trofimova Named Function of Beauty’s Chief Marketing Officer
    Henkel Opens ‘Researchers' World’ Youth Classroom in Connecticut
    Ink World

    Latest Breaking News From Ink World

    Barentz Highlights Lincoln MFG’s New ISO 9001:2015 Certification
    Ingevity Appoints Christine Stunyo as Chief Human Resources Officer
    Dr. Tammo Boinowitz to Join Management Board of ALTANA AG
    Label & Narrow Web

    Latest Breaking News From Label & Narrow Web

    Eaglewood introduces Sitexco Label L10 anilox cleaning system
    Germark makes double press investment in Bobst
    UPM Raflatac to enhance service capabilities at Mills River factory
    Nonwovens Industry

    Latest Breaking News From Nonwovens Industry

    Rockline's Springdale Campus Achieves 15 Million Safe Work Hours
    Emmanuelle Picard to Join Ahlstrom-Munksjö's Executive Management Team
    Alkegen Completes Luyang Acquisition
    Orthopedic Design & Technology

    Latest Breaking News From Orthopedic Design & Technology

    Researchers Develop Microfluidic Sensors to Improve Implant Survival Rates
    Lawrence Yellin Appointed as Fuse Medical CFO
    Researchers Discover Novel Patching Material for Bone Defects
    Printed Electronics Now

    Latest Breaking News From Printed Electronics Now

    Identiv-Powered CVS Spoken Rx Wins NFC Forum 2022 Innovation Award
    LG Display Announces Winners of This Year’s OLEDs GO! Competition
    Weekly Recap: eMagin, Applied Materials, and Schott Top This Week’s Stories

    Copyright © 2022 Rodman Media. All rights reserved. Use of this constitutes acceptance of our privacy policy The material on this site may not be reproduced, distributed, transmitted, or otherwise used, except with the prior written permission of Rodman Media.

    AD BLOCKER DETECTED

    Our website is made possible by displaying online advertisements to our visitors.
    Please consider supporting us by disabling your ad blocker.


    FREE SUBSCRIPTION Already a subscriber? Login