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.