Friday, July 15, 2016
Federal Trade Commission Penalized Herbalife With $200M Fine
The diet and nutrition company Herbalife has been hit by the Federal Trade Commission with a $200 million fine and ordered them to restructure their business after allegations of “unfair and deceptive practices.”
The Cayman Islands company agreed to fully restructure its U.S. business operations and pay a $200 million settlement over allegations that it deceived consumers, but it avoided more serious charges that it was operating as a pyramid scheme.
The FTC said that the settlement is a “significant law enforcement action,” but the company claimed it as a victory in its fight against claims it was operating a pyramid-style scheme.
“The company promised people a dream – a chance to change their lives, quit their jobs and gain financial freedom,” FTC Chairwoman Edith Ramirez told reporters, “but the FTC has charged that this wasn’t true.”
“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," she added.
The company was charged for deceiving thousands of people into believing they could make money as “distributors,” or salespeople, of Herbalife products when the only real money was actually in buying the products themselves and then recruiting other salespeople to do the actual selling.
Also there are a lot of Herbalife independent distributors that promises medical miracle that is simply untrue despite company policies that prevents them from doing so. A news reporter who was wearing a hidden camera was told by a Herbalife distributor that a woman with a brain tumor became symptom free after starting on Herbalife products.
“She used to shake like this because she lost control of her motor skills to the tumor and she said part of her cerebellum was deteriorated,” he said. “If you see her now, she’s like one of us here... Whatever it is that the product did, it helped her a lot.”