Analysis of FTC’s complaints against Herbalife
Following a Freedom of Information (FOI) request sent by the New York Post on the 26th of January 2012, the FTC sent back a reply in late January.
The FOI request specifically targeted consumer complaints the FTC had received against Herbalife. After checking their records, the FTC disclosed that they had 717 pages of records detailing 188 complaints.
15 pages were “withheld” by the FTC, with the agency citing the information exempt due to the information being obtained “via a law enforcement investigation”.
After the New York Post went live with the story last Sunday night, the FTC responded to enquiries about the language of the FOI reply sent out, clarifying that
it had made a mistake and should have cited a foreign government agency, not law enforcement.
Unfortunately the FTC continue to neither deny or confirm whether or not they are investigating Herbalife themselves. Nor have they clarified which “foreign government agency(s)” are currently investigating the company.
With the above clarification noted, what I haven’t seen addressed anywhere however is the mention of “pending law enforcement action”, mentioned in two of the complaints the FTC provided.
Both complaints (#138 from New York and #165 from Hawaii) originate from the “Internet Crime Complaint Center” and are prefaced with the following message:
To prevent interference with pending law enforcement action, prior to any investigative action, please contact the IC3.
The Internet Crime Complaint Center (also known as the IC3) is
a partnership between the Federal Bureau of Investigation (FBI) and the National White Collar Crime Center (NW3C) a partnership between the Federal Bureau of Investigation (FBI) and the National White Collar Crime Center (NW3C).
(The IC3) was established to serve as a means to receive Internet related criminal complaints and to further research, develop, and refer the criminal complaints to federal, state, local, or international law enforcement and/or regulatory agencies for any investigation they deem to be appropriate.
It isn’t clear whether or not this is a blanket note placed on all complaints forwarded to the FTC by the IC3 or whether or not an investigation into Herbalife by either the FBI or NW3C currently exists.
Both complaints were filed in 2012 with complaint #138 filed on the 13th of July and dealing with repeated failure in trying to get a refund from a Herbalife distributor after paying $399 to join and being informed that they would then have to hand over another ‘$4000 plus another $500 to $5000 for advertising‘.
Complaint #165 from Hawaii was filed on the 12th of December and details somewhat of a strange consumer experience:
I received an email from Gary Spergeon in the first part of September.
The relationship is hostile and he is not supposed to be communicating with me but I was singled out for an email soliciting a home based business.
When I clicked on it my computer froze and an FBI page covered the screen asking for $200 to unblock the screen.
The repairs cost a total of $450-$500, including lost time from business and repairs from two computer companies.
He admitted doing it but when I asked for payment of damages he ran away.
I’m not exactly sure what that has to do with Herbalife, however the company’s name is attached to the complaint.
Other strange consumer complaints received by the FTC include Herbalife distributors “prescribing” products (#73):
I am a 64 year old woman who is disabled with many diseases, including Type-1 Diabetes for which I am currently taking insulin up to four times a day depending on my sugar levels.
Yesterday, Saturday April 2, 2011 two neighbours who are private distributors for Herbalife came to my home after my son noticed the logo of Herbalife (which neither I nor he were familiar with) on the back of their van.
(My son) asked one of the distributors if they sold that was good for the pancreas. The guy’s name who my son spoke to was Jesus.
Both Jesus and Rosalinda spent about an hour in my home, even though my son only asked for a product which could help my diabetes, the two distributors acted like doctors and “prescribed me” a bunch of supplements for every disease that I have. (They) told me not to tell our doctors at all.
They even managed to entangle my son into buying a lot of products for constipation. Everything ended up costing us $450.
They left us a handwritten receipt with the prices of each product along with the dosages that my son and I were supposed to take on a daily basis up to three times a day.
Later we noticed that the recommended use on the bottles was much less than what Jesus & Rosalinda told us to take.
That’s when we started getting suspicious, and we obviously realised what these two individuals were trying to do.
We immediately called Jesus & Rosalinda (and) at first they would not answer their phones, but I left them messages.
It wasn’t even an hour later when Jesus actually answered his phone and when we told him we wanted our $450 back, he stated that he and Rosalinda had already spent the money.
Sexual harassment by a Herbalife nutrition club owner’s friend (#154):
I was sexually harassed by one of the owner’s friends who happens to be a Herbalife distributor. When I complained both owners of the Herbalife nutritional club did not believe me.
Only when I asked for my registration fee back did one of the owners call and apologise. She said she’d call back to apologise to my husband she never has and it has now been 2 weeks.
I fear when she gets my money for the refund of my registration she will not give it to me. I spent close to 300 or 400 dollars at their nutritional club only to be treated like a liar and a fool.
The man who sexually harassed me knew I was married and knew I was not interested. Meanwhile he made up an excuse why he continuously called me till 2 o’clock in the evening sending me text messages and blocking his number so I’d answer my cell.
This man is still working at that nutritional club among the female public.
And identity theft (#130):
Consumer says that she signed up with Herbalife and says that they hacked into her computer.
Consumer says they are trying to use and might be using her pictures.
Consumer called them and asked them not to use her pictures and they threatened her to call the police. Consumer says they haven’t used her information.
Fortunately most of the other complaints are of a more “normal” nature, with a great deal referring to issues trying to get refunds out of Herbalife distributors.
One particular complaint (#20) documents what appears to be an attempt by Herbalife to charge a distributor for years they weren’t a part of the company:
The consumer wrote that she decided to rejoin Herbalife and contacted a rep who told her that it would cost $10 to rejoin.
The consumer had been a member in 2003 and was charged the $10 for each of the years 2004, 2005 and 2006 plus the current year of 2007.
When the consumer told the company that they couldn’t charge her for the years that she didn’t use the service, the company didn’t agree.
Another (#77) details exhorbitant lead fees one Herbalife distributor was pushing onto their downline:
I joined Herbalife around April 3/11. I joined as a distributor to get 50% off the products when I sell to a customer.
They want you to buy lead without explaining that these are unrefundable and the company is in Barbados, so no chance of getting your money back.
First I ordered a Canadian lead which my coach did not tell me to not order, so I lose $500 when I quit. He told me “oh do not worry just order 2 more leads from the states”. So there went another $1000.
So now I am out $1500.
Then they make you order all these starter packs around $2000 and $1400 of stock. At this time they never issue proper receipts, the order is all done with your coach on the phone.
Of course by this time they have your credit card #. It was constantly having to pay for this or that and leads never amounting to anything.
As far as I’m concerned this is a pyramid scheme. So around 3 weeks I just felt I was getting scammed and left to flounder in this business.
The coaching I was promised never really there cause the coach is too busy trying to pump up his leads and find another person to spend $5000 to be a Supervisor.
I decided to quit before it maxed out my credit card and they had me jump through hoops to get back 90% of the products I had on hand and I am still waiting for my money.
They have had my product for over 10 days now but no money has been credited to my card BUT they have taken two withdrawals off my credit card recently, one for $100 and one for $40 and change.
In the numerous complaints detailing refund issues, a common scenario of Herbalife distributors joining the company, spending either hundreds or thousands and then finding their uplines dropping communication with them once a refund is requested emerges.
Not all of these wind up being unresolved though, with the FTC noting that two complaints were eventually resolved (#51 and #170), with complainant #170 even being issued interest on their refund.
Misleading and deceptive advertising was another common theme in the FTC complaints, with a number of complaints detailing frustration at having time wasted due to Herbalife distributors not revealing the company they belonged to until money had exchanged hands.
I responded to a website about working at home (and) I was contacted by a Herbalife Independent Distributor.
I don’t remember how much money I paid to have an information kit sent to me. After I reviewed the information I was again contacted.
I don’t remember how much money I paid to have additional information sent to me. I decided to join the company as a Supervisor, which required a fee of how much I don’t remember.
I was required to purchase an inventory of products for around $3000. I was not told up front the additional charges that would be required to start up my business as an independent distributor.
I had to set up 3 websites and join their internet communication network.
I never was able to sell any products or sign up any distributors and ended up selling my inventory on Amazon at a considerable loss.
I purchased sales leads that went nowhere. At every turn I just was required to spend more money and I never was able to make any money.
The company was not forthright and honest about making money at home. It was represented to be an internet business when infact it is jsut internet marketing.
I was sold on the Global Internet Marketing System where I was told if I paid 9.95 for a training package I would be shown how to run my own internet business.
I purchase the package and was then scheduled a follow up appointment. I interviewed with Ana Arias who told me that I could get more information by purchasing the IBP package for 199.00.
I did that and was scheduled another appointment to see if I was a good fit for her team. She told me she was making $8800 a month and it was so easy and she did this around her family life.
I received the IBP package and a password to access the rest fo the original training pack where I then found out it was Herbalife.
I had my appointment with Ana as scheduled and was pitched that I was going to fast track to wealth and that I seemed to have what it took to jump many levels to success if I bought in as a Supervisor.
In my naive state I did that. I asked her how much that would cost and she said $1299 plus shipping and handling, which totaled an additional $1400 plus.
I was then told I had to complete the online training, set up and pay for the costs of merchant accounts to accept credit cards, web URLs and countless more.
In total it cost me close to if not more than $4000 just to get to that point.
Then I was told I had to purchase recruiting leads if I was to truly be succesful and that is where you make your best income potential.
I did that and invested another $5200 roughly and still had to market my retail base.
Once I became live I was told I have to run my credit card for $29.95 everytime I sold a $9.95 training package to another poor soul like myself.
I believed the hype and worked the leads I had purchased and netted $9.95 less $29.95 per order.
I quickly began to realise I got duped into a pyramid scheme and immediately resigned my distributorship.
I contacted my so called mentor Ana and she was so upset with me because I was so good at this. What I was good at was giving countless dollars to a scam with a negative return of close to $10,000.
I was basically going to go bankrupt if I continued, never mind the moral and ethical issue as I as told to tell them a story of my wealth and business success and how easy it was and how I worked around my life part time and was making oodles of money.
They wanted me to lie and sucker more people like me… I immediately resigned on the 10/04/2012.
I went into this business just assuming they provided nutritional shakes/supplements to the general public.
Once inside they tried to sell me on their line of products and nutritional counseling.
The problem is that none of the employees are formally training in nutrition or are registered dietitians or nutritionists.
None of the employees actually had a background in nutrition, all they learned was from the literature from the company that provided their products.
In an establishment such as this I feel that it is unfair to the public to have uneducated people advising others on nutritional counselling with no factual knowledge of actual nutrition.
As an individual who holds a bachelors degree in nutrition, this was very disturbing and felt unethical to me because the information that the individuals were giving me was inaccurate and misleading.
There were many more complaints in regards to misleading advertising but due to not wanting to blow this article way out size wise, I haven’t included them all here. That said I would suggest that in addition to the above three, #59, #30 and #13 all make for some very interesting reading.
Other complaints noted the apparent side effects of consuming Herbalife’s products, with complaint #3 mentioning “stomach pains” and skin turning “yellow-orange” after two weeks of taking purchased products.
Complaint #21 notes the consumer feeling “sick” after taking Herbalife products and that they believe ‘Herbalife is trying to brainwash people with a food pyramid‘.
On the topic of pyramids,
Responded to radio ad for income at home. Charged $9.95 for company info. Contacted within 2 days and asked to pay an additional $39.95 for additional info as well as $149.95 for personal diet products.
Was not informed until that time that the company was Herbalife. Encouraged to enter the company as a Supervisor so that I would get 50% profit on sales.
(My upline) informed me that she had been with the company for 3 weeks and had made $12,000. Asked to pay $3000 for company investment as a Supervisor and was sent 6 cases of products to sell.
It was my intent to recruit rather than to sell retail as I was told there was much more money to be made in recruiting.
Multiple calls by company President Anthony Powell urging me to do “whatever it takes to get to the next level”. Each level in the company promised more financial gains.
By this time I felt like I was “stuck” – I had invested so much money and time I felt like I couldn’t quit.
It was at this time that I received an email from (my upline), informing me that she was unable to handle Herbalife and was cencelling her account with the company.
I asked her why she was canceling her account. Her exact words: “I decided that the only ones making any money were those at the top.
I invested $15,000 into the business and only made $1,500. A 10% return was not what I was led to expect. They told me that I would have to continue the investment of money for at least 18-24 months in order to make any more!
That means they wanted me to invest over $75,000 and get only about $7,500 for 2 years. And then maybe get more money – depending on how many more people I could get to invest.
I felt like a con artist. I apologize for “conning” you into this and I just could not do it anymore.
I now see why they don’t tell you everything up front! You would never get involved!”
At that time I cancelled all of my accounts.
I was interested in earning income from home so I purchased a $9.95 DVD.
Then, Danny Singston contacted me and they have you listen to these phone tapes about how much money you can make from home. They never tell you what the product is or what you would be doing from home.
Prior to the first phonecall from your “sales mentor” they have you listen to the DVD and do workbook pages. Then, you have your phonecall.
They have you listen to some more testimonials about the product (you still don’t know what it is you will be selling or doing from home). Then they tell you that to move on they need to send you the “start up package” for $199.95.
At the end of this call, they tell you it is Herbalife. Then, you still don’t know what you will be doing for them.
So they set up an online “mentor” session to show you how to make money.
There are 3 levels – you can be a senior consultant (for $275 more dollars), or you can be a Success Builder (for $580 more) and the last you can be a Supervisor (for $4000 more).
They push the Supervisor level because this is where you find other people to sell the product and you are paid a % of their sales.
Then each person you find can find three additional people and you get paid a % of all those sales as well.
It is a pyramid scheme but they limit your depth to three deep, but then those three can find three more and so on and so on.
They also won’t show you their online system for generating leads to sell the product and/or to find people to sell until you pay the next fee.
I think that their marketing practices are misleading and the way they want money in order to find out what the product is and what you will be doing is unethical.
Customer service was also an issue, with one visitor to a nutrition club noting (#162):
The service at this nutrition shop was beyond unacceptable. The worker suggested that I had a problem and needed their services in order to control myself.
When I told him that I was offended he told me that this was simply my own opinion and that I should listen to his advice.
I would never return to this place of business due to the extreme lack of respect and insults I received while I was there.
Finally, a fair few complaints also detail spam and harassment by Herbalife and its distributors, despite many complainants belonging to the “do not call registry”.
Coming in now at just over 3000 words, I could continue as there’s plenty more information available in the FTC’s FOI reply but I think the above provides a wide enough spectrum of the complaints the FTC has received.
Looking at the obvious coaxing and pressure to buy in at the Supervisor level and recruit new Supervisors to actually earn any money, it’s a wonder a regulator agency in the US hasn’t taken a deep and involved look into Herbalife’s operations.
Surely the experiences of the complainants above wouldn’t be all that hard to replicate? And if the above is at the heart of the Herbalife opportunity, as the compensation plan certainly suggests that it is, why are these guys still in business after so many years?
Footnote: The entire FTC FOI reply to the New York Posts’ request can be read over at the FTC website.
That wasn’t too bad. It reflected “normal consumer complaints” in most parts, plus different “distributor issues” in other parts, but rather few “company issues”.
“Consumer complaints” will usually focus on something the consumer can FEEL is a bad business practice. It usually is, but it doesn’t have to be very serious. They’re complaining to “get even” with the business themselves, not to solve anything for other consumers.
Some of the complaints reflected retail sales attempts, but I have the impression that retail sale is only a method to get people on the hook, while the main goal is to recruit them as distributors.
“Distributor issues” typically fits within the same cathegory as consumer complaints, but if you have many similar distributor issues it will probably reflect the company itself. #77 is serious, the one about $500 per lead.
The serious complaints there are the ones where people have been given plans for how to buy themselves a higher income position by purchasing more products (specific amounts). #61 is serious, and it involves the company’s President.
I had trouble downloading the pdf yesterday when I had time to read it, so I haven’t read any of the other complaints. From my viewpoint, those complaints aren’t ENOUGH for FTC to start an investigation. They’re enough to put it on a “watch list”, but not more than that.
Another side of the story is that the complaints reflected very poor training. Most of the complainants sounded like they had been given very little formal training about “correct business practices” for an IBO. Most of the training seemed to be about recruitment, or actually about how to sell MORE products to the ones you already have recruited.
The same part of the story was reflected in the few pyramid scheme complaints. They didn’t receive much training, only motivational calls about purchasing more products themselves.
does herbalife generate or sell these leads or is it a bunch of distributors who have set up a company within a company, and are selling these leads to new distributors who join herbalife through their company.
if it is not herbalife directly then such complaints are no reflection on the company
these are serious amounts of money. if many distributors at this level are failing i am SURPRISED by the lack of complaints reaching the FTC in seven years. i would’ve expected some serious blood letting.
but i agree with norway, the complaints are FEW and pretty tame. in a company employing a few hundred thousands in the US, a few people may have a problem.
i recently read somewhere that american express has far far far more complaints than herbalife.
They have reached local courts, e.g. in class action lawsuits. The average amount in one lawsuit (in 2004 or so) was around $10,000 in losses per distributor.
Class action lawsuits are about money and are usually settled.
I had sorted that complaint under “distributor issues” rather than “company issues”, but it’s being reflected in the lack of training in “Another side of the story …”.
“Another side of the story” is about what the complaints INDIRECTLY reflects. There’s a clear lack of professionals there, e.g. people with reasonable amounts of experience from business. There’s a clear overweight of “typical consumers” and “unexperienced people”, so called GUMP (Good Unexperienced Money People).
“Another side of the story” is reflecting a company that offers very little meaningful training, other than for how to promote yourself to supervisor or higher levels through personal purchases and by recruiting other consumers. It reflects a company targeting “financially unsophisticated” people as their main target.
The complaints are basically telling the same story as the “Selling the American Dream” documentary, the same story Bill Ackman is trying to tell. But they don’t tell it DIRECTLY, it’s being reflected.
Here’s one of them:
Oh, there are various ways…
* blame the minions (they got the wrong upline who didn’t train them right)
* blame them (they don’t know how to sell)
* blame the environment (they’re in the wrong place at the wrong time)
* peer pressure / public shaming to keep going (we’re a team! you can’t let us down!)
* self-shame (I can’t believe I got taken for that much, I don’t want to shame myself further by making it a public spectable, esp. when all my former “team” will come after me)
There’s probably a couple more
The lack of complaints does not eliminate the possibility of massive fraud. The 20 million Ponzi scheme Pigeon King International was reported to Canadian authorities, but because of the lack of customer complaints, the police did not investigate it.
They concluded that if this was a fraud as reported, there would be hundreds of complaints. They were wrong.
K. Chang mentions some of the reasons why people don’t complain. The fear of self-incrimination is another one. However, the biggest problem seems to be cognitive dissonance. Most of the victims will never admit to themselves that they have been scammed, and they construct all kinds of stupid reasons why they joined, why they left and why it was all worth it.
That is also the main reason why people that have lost thousands to MLM scams keep joining new schemes over and over again.
A quick Google using the terms “Herbalife” and “Diabetes” will show another reason why the company is attracting (adverse) attention.
ONE complaint that Herbalife and/or its’ distributors are suggesting its’ product/s are in any way a valid treatment for diabetes is one complaint too many.
Am I missing something here?
These guys run an MLM income opportunity, if they want to offer a discount to customers start up a “preferred customer” class with autoship, a discount and no access to the income opportunity.
Until then every distributor who didn’t recruit or earn money failed at the income opportunity. Claiming otherwise is saying nobody actually lost money in pyramid schemes because they joined for the products. Ditto Ponzi schemes (“there are no victims in Zeek Rewards because they all bought bids” – lol).
Such attempts at legalistic weaseling take the world to be fools. Where are the retail sales Herbalife?
And claiming they failed because they “did not recruit any other distributors” or their “recruits did not sell enough products (to other recruits)”?
Will the real FTC please stand up.
if they want to offer a discount to customers start up a “preferred customer” class with autoship, a discount and no access to the income opportunity.- soapbox
sorry , the DSA thinks quite differently from you . maybe you’re stuck in a time warp or something ? it appears the DSA has moved ahead of clear distinctions in defining distributors and customers which i’ve been saying too , those terms just don’t fit this market .
remember the DSA has clout and if it defines its parameters of different types of distributors [customers] so openly in a press release , then chances are these parameters have the blessing of the FTC .
read the article at http://www.dsa.org/press/press_releases/?fa=view&docID=5402
Complete and utter horseshit. Stop inventing “facts” and stick to the actual facts please.
I don’t really give a crap what the DSA say. I’d take common-sense over the claim distributors are retail customers any day of the week regardless of who is saying it.
Not one MLM company in history has been busted for having >50% non-distributor retail sales. You can claim your distributors/affiliates/members are your retail customers but do so at your own peril if this is where the majority of your income is coming from.
As for your DSA quote, sounds more to me like they’re merely observing rather than an assertion, and I see absolutely nothing claiming distributor purchases are retail sales.
Making up facts, misrepresenting the DSA… you’re hitting all time lows anjali.
Why do you cite DSA as some sort of “authority”? It’s a member association, mostly for MLM companies. If anyone is stuck in something here it has to be you, “stuck in the lack of reality sense”.
You know perfectly well that no one here are impressed by different “authorities”. We analyse WHAT they say or do, not WHO they are.
And I have already analysed some parts of DSA’s “Code of Ethics” without being impressed. I have superficially analysed its “Board of Directors”, and that didn’t impress me either.
DSA might have some “weight” as a lobby organisation, but that’s all.
You can’t be serious? “Have the blessing of the FTC”? When did the FTC start to regulate member associations or give them “blessings” to anything?
“Dear FTC. Here’s our new rules. Do we have your blessing to publish them in a press release?”. 🙂
DSA is pointing out that “The main economic objective of many who join a direct selling company is simply to qualify for purchasing product for their own consumption at a significant discount.”
But you don’t have to become a distributor to do that? It’s possible to have a “preferred customer” group, with similar discounts and qualification purchases as today. Those customers could even be offered a “customer starter kit”, without all the unneeded stuff.
A preferred customer can of course not participate in the compensation plan, e.g. by recruiting other preferred customers.
Anjali, I’m sorry to say, but your “authority” sounds completely stupid to me. DSA has tried for YEARS to change laws, while it could easily have solved the problem by changing its own rules.
I take it that selling Herbalife products at retail would be a difficult sell since most consumers tend to do price and ingredient (quality) comparisons with similar products at retail locations like Vitamin Shoppe, GNC, Costco, Sam’s and even online where the discounts on many supplements are even more significant.
Aside from that, it is pretty well known that the majority of distributors have no formal business backgrounds so the learning curve would appear to be greater over a period of time, hence many drop out as expenses exceed income.
All in all, there appears to be more a lack of business management training within the MLM industry than anything else.
Is that with or without the 25% discount? 🙂 Okay, just kidding. There’s big profit margin in this… it’s the only way a MLM company can sustain the MLM commission payout. In fact, all of these nutritional supplements cost little to make, and are 70-90% profit.
But the problem here is… Herbalife is arguing it’s a hybrid of buyer’s club (I joined for the discount) and MLM (I joined to sell the stuff). The two are regulated very differently. By failing to separate the two, it will be hit legally one way or another.
Ah, but then Herbalife claims that 72% of their distributors joined for the product, not for profit.
A better question is… who joins a company NOT expect to make profit? Or do they join as distributors to get a discount, then realized they can make $$$ by recruiting others to do the same? So are the other 28% people smarter / greedier? Or perhaps the other 72% were just lying to themselves? 😀
New set of 250+ questions from Ackman to Herbalife.
I’ve only had time to go over the first quarter of the document but it looks pretty solid (and covers a lot of the red flags raised and discussed here).
i’m not sure DSA is looking to impress you norway, it’s the FTC and legislators they work to impress and the ‘weight’ they carry is not something to be ignored.
this is a quote from kevin thompson :
instead of being silly and taking my phrase literally , you could UNDERSTAND the gist of it? what i’m trying to say is that DSA has really put it OUT THERE for herbalife.
they are practically echoing herbalifes claim that ‘distributors are our customers too’. the dsa have given a press release – there’s no retracting this statement. so the ‘confidence must be high’ and they must ‘feel assured of support’ to take such a strong stand.
LET THE GAMES BEGIN !!
question – why is ackman relying on the omnitrition judgement? is it correct to apply rulings which are not laws to subsequent cases? and in the case of omnitrition it’s not even a final order?
this is what DSA says about omnitrition:
also the matter is under appeal by the DSA? how can a ruling from a case ‘in progress’ be used as a standard for the industry in general? something stinks?
Oh and pershing square is using burnlounge too . i thought that order is restricted for the purpose of that particular case .
NOT FAIR !
I don’t know how many times I have to say it, fuck the DSA and anybody else who suspends logic and asserts that distributor internal consumption somehow equates to a retail sale.
Common sense will always trump marketing agendas and wordsmith attempts to circumvent the obvious fact that if you have less than 50% in retail sale revenue, you’re participating in a scam.
The above is from the FTC, November 2012. And you’ll note the complete disregard for any of the “distributors are retail customers” bullshit.
Game over, thanks for playing and be sure to send us a postcard from your new jail cell.
If you look at DSA’s Board of Directors, you will be less impressed too. The association is very far from being “independent”, “neutral” and “qualified”, other than as a lobby organisation expressing what MLM-companies WANT.
Brett R. Chapman (Herbalife) is the current DSA Chairman of the Board. DSA is simply reflecting MLM-companies viewpoints, not “qualified viewpoints” other than that. The “echo” you heard from them was exactly that, an “echo” of Herbalife’s POV.
When it comes to lobbyists, I’m more impressed by Nick Naylor in “Thank you for smoking” (movie) (link disabled):
Compared to Nick Naylor, DSA isn’t exactly “impressing”. 🙂
It has the “weight” of an association of MLM-companies. The companies and their owners, rather than the public being exposed to them. It’s not something to be impressed of. It has the same weight as any other private organisation, and that is typically about the right to be heard.
Parties affected by new laws have the right to be heard, the right to propose changes. DSA is simply representing the MLM companies in that matter. It’s not an “expert authority” or anything like that. It’s just an “echo” of what companies WANT.
The Omnitrition case is not binding for subsequent cases, but it’s “authorative”. It can be used as a “guideline” for subsequent cases.
It is simply amazing how tone deaf the MLM trade can be. I mean, even casual observers have noticed over the years the bizarre dynamic that so often accompanies MLM scams: “Christians” cheerleading for felons and demonizing law enforcement when agencies expose egregious abuses, for example.
Michael Johnson, of course, has the right to defend his company. The unfortunate reality for Johnson is that Herbalife exists in a sphere that serves up one train wreck after another. And yet the major MLM companies and trade associations — ANMP in the Zeek case, for example — largely remain silent or even dance with the devil.
Ackman clearly has recognized this bizarre incongruity, the extremely odd deflections even from within the highest ranks of MLM executives.
Did Michael Johnson ACTUALLY suggest that Herbalife should be left alone because no one challenges the Girl Scouts when they sell cookies via direct sales?
Gawd! That sounds like one of the “defenses” that surface for schemes such as Zeek or ASD on the Ponzi boards. The industry just can’t get out of its own way.
On Page 38 of the Ackman document to which Oz linked above, Ackman quotes Johnson as saying the Girl Scouts use direct selling and “nobody attacks them.”
Ackman then asks a series of questions that distinguish what the Girl Scouts do from what Herbalife does.
Johnson just walked into it by even making a comparison to the Girl Scouts — and Johnson is not stupid. It seems as though he’s just internalized the chant that so often makes MLM look bad.
I remember back in August 2008 and through 2009 — back when AdSurfDaily was doing its best to destroy itself and the concept of legitimate MLM — by advancing the Stepfordian argument that “rebates” are legal.
The issue in that case NEVER was whether rebates were legal; the issue was how the 125 percent rebates were funded — and the Feds said they were funded with new-member money and money recycling within the system.
ASD “defenders” repeatedly pointed out that GM and Big Box retailers offered rebates — and no one attacked them. It was an incredibly disingenuous argument, given the fact that GM wasn’t sending customers $25,000 if they bought a $20,000 car and Staples wasn’t sending customers $125 if they bought a $100 printer.
The ASD case got so bizarre that the Stepfordians tried to enlist Sen. Patrick Leahy to advocate on behalf of Ponzi schemes. Then the “sovereign citizens” got involved, and the ASD case turned into a symphony of the bizarre.
If there was a teaching moment in that case, it was that the “rebates are legal” deflection just made ASD look even more ridiculous.
Comparing Herbalife to the Girl Scouts just makes the company look ridiculous.
I wound up finishing the document later in the evening and it should be very interesting to see Herbalife’s answers.
Given they’ve previously stated their committed to full transparency and will answer any questions presented to them, it should be a riot.
Herbalife can answer Ackman’s (perfectly reasonable) questions and look like a pyramid scheme, or they can choose not to and look like a pyramid scheme.
Kudos to Ackman for giving them a choice in the matter.
Lol. Considering it takes a bit of capital to start an MLM distributorship, the smartest route would appear to be to start one’s own MLM company with a bit of start up capital and scale it up.
As you said, K, the profit margins are looking very nice from an owner’s point of view.
Girl scouts don’t recruit from people they sell to. 😀
Herbalife is not answerable to ackman . they should not respond to the questions of a MOTIVATED vigilante justice[money] seeker like ackman .
checking out herbalife is the job of the FTC and if they so conclude, the courts .
this type of public trial ,by a [motivated] private citizen,who has no locus for doing so, reminds me of LYNCHING . and because there’s lots of money involved it reminds me of MURKY .
here’s a hint for ackman. if he gets down really deep into the functioning and money trails of multinational banks and companies he’ll discover a rich river of shit. he can short these companies, one after the other, and never do an honest day’s work in his life.
Herbalife have previously stated they are happy to answer any questions about their business. They have publicly committed themselves to “full transparency”.
Failure to answer Ackman’s perfectly reasonable and legitimate questions only confirms the company is a pyramid scheme.
You can use as many ad-hominen insulting adjectives as you want to describe Ackman, it changes nothing.
Blahblahblah, Speak Asia was a Ponzi scheme – get over it.
Assessing motivations and ignoring facts presented is a common tactic of scam supporters. So is attempting to deflect attention away from or propsing justification of such schemes by trying to introduce banks, “other companies” and usually the evil gubment into the discussion.
It’s all irrelevant.
We see it a lot around here although I usually just send them straight to the spam bin as they only serve to derail and detract from the discussion at hand.
Unless you’ve got an analytical objection to Ackman’s questions in and of themselves, you’re just wasting everybody’s time. Regardless of who asked them, they need to be answered as the answers to quite a few of them will confirm Herbalife operate as a pyramid scheme functionally.
Unfortunately for Herbalife, what the law says is secondary to what the public at large thinks.
The share market has already indicated what “IT” thought of Herbalife, once it took a closer look.
I think anyone who thinks Herbalifes’ problems are centered only around the FTC is gravely underestimating the intelligence of the public at large.
Personally I don’t find it in the least unreasonable to assume Herbalifes’ move into the Asian market is driven, at least in part, by the fact it has reached “saturation point” in it’s traditional market/s.
Not so much in terms of product sales but more in the increasing difficulty in sourcing numbers of new members who haven’t either been prospected already or have seen through the usual MLM industry smoke and mirrors and realized the individuals’ chances of making a decent income are miniscule.
After all, “It’s not Amway, is it?” didn’t become part of the modern lexicon by accident.
well yes , an association will naturally lobby for their own industry, they are not a charitable organisation. this is true for all other lobbies whether it’s the banking ,tobacco ,gun or oil lobby, to name a few rascals .
the public gets to express their opinion when voting comes around, or by not purchasing shares of a public company or by rejecting their products. i hate the way you paint the ‘public’ as some kind of helpless child which continuously needs the protection of ‘intellectuals’ like yourselves.
soapbox, we will talk about speakasia after restart. meanwhile stop falling back on it, in this thread, and thereby breaking your own rules .
you may be wrong about that .here’s an article form the business journal which says
“The market has voted with an excess of buy orders as to the invalidity of Ackman’s inquiries,” Robert Chapman, founder of Los Angeles based Chapman Capital LLC and an Herbalife shareholder, said in an email to The Wall Street Journal’s MarketBeat blog.
“Like with a virus, Herbalife stock is becoming immune to Ackman’s bad medicine.”
read the article at http://www.bizjournals.com/triad/blog/2013/02/ackman-hits-herbalife-again-but-stock.html
Or by analysing and discussing on blogs such as this.
Childish comments aside, there’s clearly demand for this information otherwise this site wouldn’t exist.
The flip side of the coin is Ponzi supporters like yourself would like nothing more than an information blackout.
Even the DSA aren’t above simple analysis of an MLM company’s business model and compensation plan. If analysis and the DSA are at odds with eachother, I’m going to back on analysis every time.
Those of us who have observed and analysed the MLM industry for some time are well versed in the copious amounts of wordsmiting and psuedo compliance bullshit that plagues the industry like no other.
That was about DSA’s “weight”, I believe?
DSA is simply an “echo” of the MLM companies. You identified it as an “echo of Herbalife” yourself, e.g. “they are practically echoing herbalifes claim”, and I confirmed it. Statements from DSA is simply an “echo” of what the MLM companies WANT, e.g. what they want to legalize. It’s not a provider of “expert opininions” in any way.
You were citing the DSA as some kind of “expert authority” through several comments, e.g. “sorry , the DSA thinks quite differently from you”. So I told you how meaningless that strategy was, “echoing an echo of Herbalife”
DSA is an OPPONENT to anti promotional pyramid laws, rather than a neutral expert authority. It’s a weak opponent rather than a strong one. It’s weak because of its own “echoing specific interests” strategy.
The different laws regulating a market should normally be about “What will work for the whole market, for all parties affected by the regulations?”. DSA has failed to realize that principle, it has focused primarily on “What will work for us, as companies?”.
i can excuse DSA for thinking that, because they will protect their own interests .
this will be the job of the regulators and legislators.
norway when parties sit down to negotiate they often start with extreme positions . for example HR 1220 advocating ALL self consumption to be treated as retail is an extreme position.
generally parties will reach a middle of the road solution ie SOME self consumption can be treated as retail. i think the DSA will be quite content with such regulation.
the DSA have MANAGED to get this provision in several states as statutes, and several states are in the process of adopting such reforms. so i cannot agree with you that the DSA is WEAK.
“Weak” was about specific skills, e.g. “battle experience”, “fighting skills”, “strategic skills”.
I can check ONE of the states, e.g. Texas:
I removed some points to make it become more readable, e.g. a detailed point about repurchase agreements.
It will still be illegal if the emphasis of the scheme is to sell additional business opportunities rather than selling goods to consumers.
Texas has exactly the same “grey areas” as all the other places I have checked. First it allows commissions derived from internal consumption, but rule (d) tells indirectly that they will need external customers anyway.
Any business primarily focusing on recruitment will be illegal in Texas too, like it will be in most other places. As an example, FHTM was prosecuted in 2011 in Texas:
yes norway , but this does stand as an example of how DSA managed to get ‘some’ amounts of self consumption acceptable as retail. that’s a game changer in itself.’how much’ is once again relegated to the grey areas.
so basically the law allows regulators to factor in many other parameters before they decide to take action against an MLM .
the case of FHTM is obvious even to an untrained eye? cash joining and unimaginative products with hardly any retail margin. a sure recipe for instant death. wonder why it took authorities sooooo long to see through this one.
Actually, several states have previously saw through FHTM. Texas and other states have pretty much banned FHTM by suing them out of the state. FTC was simply a bit late to the game.
I’m in no doubt if the FTC introduced legislation to cover every eventuality WRT the MLM industry, she would be here complaining about the stifling of free trade and the regulators infringing on civil liberties.
‘Some’ amounts of self consumption has always been acceptable. Most of the established MLM companies were never in any serious danger of being prosecuted. The danger began when people started to advocate for the “new MLM model”, where they could REPLACE external customers with sales to a downline.
I was willing to look at the laws in ONE state, but looking at laws will usually be completely meaningless for most laymans. People have “confirmation bias” and will usually focus on the parts of the laws they like, so it’s mostly a method for self misleading.
Looking at the laws in Texas was only part of something else, i.e. analysing DSA’s POV in this case.
We can NOT analyse the laws in each and every country or state here. The correct authorities in the different states or countries will have to handle that part themselves.
I’m checking DSA’s POV, and here’s a part of their response to Bill Ackman’s presentation:
“But DSA willfully ignores the critical fact” that the distributors are participants, even if they don’t recruit anyone.
“Participant” is about the RIGHT to participate in the compensation plan by recruiting new participants. It’s not about whether or not they actually have recruited someone. Bill Ackman’s description is technically correct, the “failed distributors” have signed exactly the same agreement as all the other participants.
I wonder how DSA knows the main economic objective for those distributors? There’s nothing in their agreements which can be used to separate them from other distributors. They have to sign the same 124 page agreement, buy the same “International Business Pack” and buy the same “qualifying purchases” as any other distributor.
The one trying to misrepresent something here seems to be DSA itself. There IS actually a legal difference between participants and non-participants, and the court in Begium clearly pointed out that difference.
The court in Belgium didn’t like vague descriptions like “many distributors are actually customers”, especially when it was combined with “the other party has the burden of proof to prove they’re not”. The weight of evidence pointed in the opposite direction.
Obviously, in a big group of distributors, some of them WILL probably be a “customer type” of distributor (rather than “income opportunity seeker type”). But legally they’re not “customer type”, they are participants like all the other distributors.
Herbalife has chosen that solution itself by not separating between “preferred customers” and “participants”.
According to Nehra & Waak’s “Legal ABCs of MLM”, Herbalife’s “regulatory end is near, sooner or later” if the “distributors are customers” is the best defense it has.
Gerry Nehra is legal advisor for DSA, so I have tried to find someone supporting its own viewpoints rather than using an “unfriendly lawyer”.
I’m analysing this to see how much “weight” DSA really has, e.g. as an “expert authority”. It will have to retreat from a battle if it meets a qualified opponent.
Analysing another part of DSA’s response to Bill Ackman.
That argument is about “we’re providing livelyhood for many people”, plus a ‘defense statement’ for the “distributors are customers” statement.
It’s also about “We are all supporting our members, you’ll have to see all DSA members as a group rather than as one single company”. It can be extended to “If Herbalife is in trouble, the rest of us are in trouble too, so you’ll have to fight everyone of us”.
It has a big block of text about the organisation and its members. Quoting a part of it:
ANALYSING THE RESPONSE
* 4 lines are about DSA itself and “We will like to respond”
* 6 lines are about “we support people’s livelihood” and how they do that.
* 16 lines (28.5%) are about the “inaccuracies” in Bill Ackman’s claims, supported ONLY by the “distributors are customers” argument.
* 20 lines are about the organisation and its high standard of ethics, and about its members.
* 10 lines are a standard “About DSA”
From my POV, this response is extremely weak. The most important part should normally have been the legal part, e.g. pointing out WHY the “unsuccesful distributors” actually ARE customers in the eyes of the law.
The response is mostly telling the audience why DSA FEEL Ackman’s accusations are “unfair”, how important it feel it is as an organisation, and how willing it is to support its members. And that’s all. Many words about feelings, but very little that actually can be used to defend Herbalife.
DSA will be vulnerable to logical arguments like the one about the legal difference between participants and non-participants.
It will be vulnerable to statements like “Pyramid schemes will usually leave a trail of devastation behind them”, e.g. to counter “we’re supporting people’s livelihood” arguments.
So far, I’m not very impressed. I had a feeling of reading “MLM marketing propaganda” when I tried to analyse it.
but norway , the DSA will give a ‘general’ response a ‘show of support ‘ comment instead of a detailed legal response.
the prerogative of a detailed legal response lies with herbalife and they may choose not to talk at this point. answering ackman’s questions will just invite criticism from him , and a further list of questions from him.
it would be better for them to ignore him, so that their disinterest seeps into the share market too.
i think the DSA is gathering support for their ‘distributors can be customers’ idea by getting states to recognize ‘some’ self consumption as retail. they are training their member companies to think in the same way. over a period of time the system may shift gradually to accepting this as a natural progression.
Apparently to DSA, 12 million people depends on MLM for its livelihood, but 72% of 2 million Herbalife distributors are NOT in it for the livelihood. Perhaps that number should be revised? 🙂
This case IS actually about FTC or another “correct authority”, not about public opinion or stock prices.
Einhorn’s 3 questions brought the stock price down from around $70 per share to around $50 per share. That was about public opinion.
Ackman’s presentation brought the stock price temporarily down from around $45 to around $24-$25. That was about public opinion, too. The current price is also about public opinion.
If FTC or another “correct authority” starts a serious pyramid scheme investigation into Herbalife, the stock will probably be suspended from trade. It will have much more impact on the stock price than any public opinion can have.
Herbalife is clearly more vulnerable to an investigation than to any public opinion. Yet it has much more focus on the public opinion than on building up its own defense system against a pyramid scheme investigation.
* The best defense against pyramid scheme accusations or investigation is to show some sales to external customers or “preferred customers”.
* A poor defense is to HOPE other people will accept vague statements, e.g. “our distributors are actually customers, they’re not distributors”. Herbalife hasn’t been able to convince me about that idea. It wasn’t able to convince the Belgian court, either.
I’m not underestimating the public here. Herbalife is CLEARLY more vulnerable to regulatory interventions than to public opinions.
DSA’s response is what we normally will call “Marketing BS”, designed for a non-professional audience. That type of audience is the primary and only target.
The method of counting the lines can be used to determine what types of audience the material is designed for, e.g. for a professional audience looking for factual information, or a general audience looking for something else.
When communicating with a “professional audience”, use only a short introduction, and then go directly to the main point.
* That audience will be looking for very specific answers, so don’t make any vague statements. Give them the answers they’re looking for ASAP.
* Make sure to back up your statements with correct logics and facts.
The target audience there is probably “MLM true believers”, people seeing DSA as an “expert authority” for MLM rather than as a lobby organisation, people looking for WHO is supporting Herbalife rather than for HOW they do it.
THE CURRENT STATUS OF THE CASE
Bill Ackman seems to be missing some key components in his strategy, i.e. he will need “the correct authorities” to start an investigation into Herbalife, and they will have to come to a conclusion relatively similar to his own conclusion.
From my POV, he should probably redesign his strategy, and try to win some small battles rather than solely be focusing on the main battle. His material probably contains identifiable battles that will be easier and faster to win.
Herbalife seems to be using the same strategy it used in Belgium, the “Our distributors are actually customers” strategy, combined with marketing BS. Herbalife should probably redesign its strategy too.
It’s actually not very interesting, but I have found information about Herbalife’s lobbying expenses:
From my POV, those expenses seems to be relatively normal. Lobbying is about paying professionals to represent your interests and viewpoints, e.g. when laws are about to be changed.
Herbalife’s lobbying expenses were $810,000 in 2012, where most of the money ($560,000) were paid to a daughter company.
Did you dig thru the FTC complaints on Herbal = fishy
Buyback policy is only valid when people buy directly from Herbalife, not when they buy from distributors. The complaints showed lots of trouble returning products and getting money refunded, e.g. different “strategies” to avoid paying anything back.
Complaint no. 42, as the first example I found:
It’s possible to have a 100% buyback policy, and still make it nearly impossible for people to return products. Herbalife and/or its distributors are using lots of strategies to prevent goods from being returned.
Complaint #45, as the second example I found:
DSA has “Code of Ethics”. Having rules doesn’t make much sense if you (or your members) don’t live by those rules.
Herbalife’s 0.4% returned products doesn’t reflect “satisfied customers”, it reflects how difficult it is for the customers to return products. The complaints reflects WHY it is difficult.
I have a compensation plan question to you = Where do you draw the line between “wholesale discount” and “compensation”?
“Unilevel pay plan”. Is that about the wholesale discount?
“Matrix plan”. I’ll guess that is about the Loyalty overrides?
“Generational plans”. I’ll guess that is about the different “Distributor facing expenses”?
The first one is actually a wholesale discount rather than compensation. Distributors CAN make a profit on it, but the profit will be paid from customers or downline, NOT from the company.
If the customer pays directly to the company, and the company pays the distributor a commission from that purchase, it will be a compensation from the company.
If the customer pays directly to the distributor, it will be a sales profit for the distributor rather than a compensation from the company. According to the complaints, most sales to new prospects seemed to be paid directly to the distributors.
Here’s an additional correction.
Ackman’s page 310 contains 2 footnotes. My attempts to copy them failed, but they are about the methods used.
Have anyone found Herbalife’s appeal case in Belgium?
I have tried to find it several times, using different variations of “Herbalife court Belgium” or “Herbalife appeal Belgium” search strings. The only hits are about PLANS for an appeal from December 2011.
An appeal could potentially show a better strategy than the initial one. But all search methods indicates that the case was never appealed.
the battle is hotting up .
icahn finally comes out and admits he has bought a 13 % stake in herbalife .along with loeb , both supporters of herbalife now have 20 % shares of the company . icahn’s announcement sent shares shooting up by 17.2 %.
meanwhile ackman is worried whether FTC will look into herbalife at all , and hopes some other agency in maybe other countries will hear him
I came to the same conclusion in post #41, only using different words. “Bill Ackman seems to be missing some key components in his strategy, …”.
He will need to understand better how government agencies work, e.g. what type of information they can use or cannot use, the time required in different parts of an investigation, and so on.
* Government agencies can’t use third party information directly, they will have to collect information themselves in any parts of the process, from the parties involved or from witnesses. Ackman will need to implement knowledge like that in his strategy.
* Collecting and analysing information is time consuming, so he’ll need to implement knowledge about general case handling rules, e.g. about the process itself and how much time it will require.
* Ackman will need specific information about how the FTC works, about the different “steps” in the decision process from the complaints has been received to the decision can be made by the Board, from first step to the final step before a case can be sent to court.
It’s possible to speed up a case through that system if you know how those agencies work. But pyramid scheme cases are normally extremely slow, it’s not wise to pick that type of battle as the first and final battle. He should probably look through his material to find easier battles to fight.
“Easier battles” is normally about where it’s easier and faster for a regulatory agency to collect and analyse the material, and easier and faster to make a decision about it. That will typically be about areas where you don’t have to involve more than one agency, or more than one set of rules.
He should pick that battle carefully from his own “field of expertise”, e.g. about investor related violations rather than trade related.
Frankly, any small-time investors should avoid Herbalife altogether. Too much risk and volatility, and that’s just strictly from an investor’s POV.
As someone said a month or two ago: the funds are like Godzilla vs. Mothra, and you don’t want to be near Tokyo when they meet up.
I’ve skimmed it and read your opinion on them. Some of the timing seem to be a bit convenient, but we don’t really have enough sample size to rule in or rule out any astroturfing.
Lack of complaints / timing of complaints may or may not be significant. Nobody complained about Madoff (at least no one listened) for years / decades.
That was only a vague suggestion, not a recommendation. The recommendation was “pick easier battles first”.
ACKMAN’S STRATEGY SO FAR
* He spent 5 months analysing the company. He could have spent some hours analysing government agencies and how they work. Regulatory agencies are key players in this game.
* He spent 6-7 months building up a short position and building up the presentation. Both are designed for a “frontal attack”. He could have spent some time building up “alternative strategies”.
* He has spent nearly 2 months presenting the case personally in different medias. He seriously needs to replace that strategy with a better one, a strategy that can direct the public focus towards the core issues of the case rather than towards his own role.
He hasn’t exactly acted as a “team player”. He’s drawing too much attention towards himself, and he’s not leaving much room for other players.
He’s offering other players to play a role in the “Ackman vs Herbalife” play or “hedgefund managers vs each others”, rather than allowing them to choose their own roles in their own games.
The $1 billion short position was probably needed to draw attention early in the game, but it doesn’t have the same effect now. It doesn’t draw the right TYPE of attention.
“The right type of attention” should be directed towards the core of the case = whether or not Herbalife runs a disguised pyramid scheme, and what to do about that issue. The different hedgefund managers and their positions simply STEALS too much attention, and draws the focus away from that.
If all the hedgefund managers had reduced their positions, the core of the case could potentially have received the attention it deserves. The stock prices are NOT the core of the case.
That description was rather “spot on”.
It’s rather difficult for anyone to participate in this game without becoming a part of the “investor game about stock prices”.
He has made this game become a game primarily about Herbalife’s stock prices, “hedgefund managers vs hedgefund managers”, or “Bill Ackman vs Herbalife”. Most people will prefer to stay away from a battle like that.
This game will eventually have to be about something else.
The key element in this case is the regulatory authorities, e.g. FTC or SEC. Those are the ones that eventually will cause any changes.
Another key element here is the general public. It should be THEM asking for a solution rather than HIM. It should be THEM wanting to know whether or not Herbalife is running a disguised pyramid scheme, and be asking about “What will the government do to find out about it?”.
The 340 page “Full presentation” and “Ackman’s 246 questions to Herbalife” are way too complicated for the general public. He’s “drowning” people in information rather than making the information available for different types of interest groups.
Information like that is only misleading. The stock price went up +$0.47 (+1.23%) from Thursday’s “Close” to Friday’s “Close”, from $38.27 to $38.74.
Nearly 38 million shares were traded, around 1/3 of the total number of outstanding shares. The stock has become a typical “speculation stock” since November/December 2012. The average traded volume per day is probably more than 10 times a “normal volume”.
The “Icahn effect” only lasted for half an hour or so, before the price gradually adjusted itself down towards its previous level. That only shows how vulnerable Herbalife is to different “signals” in the market.
It shows the risk rather than the potential, the stock has currently more risk than potential. The stock is currently more attractive to speculators than to long term investors.
right norway , and in the process he’s axing his own two feet. i guess when you place BETS on the legality of a company, you immediately lose moral standing and credibility.
so the public, who should be asking questions, will mostly look at ackman with suspicion rather than as some robin hood who’s taking on goliath for the little people.
a sharp spike in the stock prices when icahn announced his buying, is more like applause for the move . the price wont stick of course, but ackman must have broken out in a sweat ! seems icahn is not willing to forget his legal defeat by ackman .
so ,in this fight of rich men’s inflated ego’s , who’s got the time or interest to ask if herbalife is a disguised pyramid ? everybody’s just enjoying the show !
It was David (not Robin Hood) who fought Goliath. Robin Hood fought the Sherriff of Nottingham and his tax collectors. 🙂
Ackman’s frontal attack has forced Herbalife to reveal more information. That might have been a partial goal in his strategy. It has also brought most of its missing defense strategies out in the open, where they can be analysed.
It was David (not Robin Hood) who fought Goliath. Robin Hood fought the Sherriff of Nottingham and his tax collectors. :)-norway
duh i know that . just introduced robin hood to the cast of characters because he fought for the little people etc .
but thanks for free english literature class .
here’s a free gift for you too :
hear icahn talk about how confident he is the FTC won’t touch herbalife because they have ‘good products’.
Why are you looking for ‘how confident’ people are, rather than looking for logical substance in their arguments? 🙂
‘How confident’ investors are is usually where it goes wrong. Both Ackman and Icahn are ‘confident’ in what they’re doing, and both have had relatively onesided view.
Icahn used a Consumer Protection Bureau lawyer with 22 years experience with FTC as an advisor, but he still managed to use flawed arguments. Regulatory agencies will normally ‘follow the rules’, and they should normally not operate outside their own jurisdiction.
Some of Icahn’s arguments were outside FTC’s jurisdiction. He has obviously convinced himself about something here without sticking straight to the facts.
Some of Icahn’s arguments:
* “Unfair to share holders and people working for Herbalife”
* “FTC won’t put people out of work …”
* “… at least NOT to satisfy guys like Ackman”
My counter arguments:
* Whether a company is publicly traded or not should normally not have any weight.
* Jobs in publicly traded companies are outside FTC’s jurisdiction.
* But he’s right about that, FTC won’t start an investigation to satisfy Bill Ackman.
Carl Icahn had very little substance in his arguments. BTW, Icahn didn’t use the ‘good products’ argument, he used “Herbalife is a well runned legal MLM company”, a quote from his “FTC-advisor”.
Carl Icahn pointed out that they hadn’t really seen any “expert opinions” in Bill Ackman’s presentation, he had only indirectly mentioned a lawfirm he hed used as advisors. Looking for expert opinions is normally a bad strategy, we should normally be able to identify facts ourselves.
well in this case it certainly carries weight. had herbalife not been public ackman could not have shorted it.
i would in fact advice mlm companies to stay OFF the stock market, because they function in a grey area with too many if’s and but’s about legality. it becomes easier to attack them.
on the other hand attacks on such companies can also boomerang on the attacker, for the very same reason – too grey and difficult to conclusively prove illegality.
it is obvious that the FTC does not follow any 50 % rule. it’s obvious the FTC does not concern itself too deeply with self consumption, unless it’s on a list with more serious violations.
companies like mary kay and amway do not provide retail details either. in the UK amway was found to have 9 % retail when it got in trouble. however it was not shut down. it just reworked it’s compensation plan to make some retail compulsory before a distributor is allowed to recruit.
i think if herbalife is in a dialogue with the FTC they may just amend their ways a little and get away. that would always be a better option than shutting the whole thing down. there’s too much public involved.
govt’s hate upsetting the public too much if they can help it.
herbalife have announced their 4th quarter results for 2012