Karen E. Klein
Businessweek.com
“It’s been a wild ride lately for Herbalife,” said Karen Klein. One hedge fund titan, Bill Ackman, has called the multilevel marketing firm a pyramid scheme and bet $1 billion that the government will shut it down; another, Dan Loeb, is buying up Herbalife stock, convinced that the market for its nutrition products is real. But “what gets lost in the noise about the hedge fund scuffle is the pain of ordinary people who have been burned.” Multilevel marketing companies like Herbalife work by getting independent distributors to recruit more salespeople. It’s not easy. Nicole Lopez, a single mom in Utah, spent seven years paying off the $9,000 in debt she accrued to keep her Herbalife status. Almost 16 million Americans participate in the $28.5 billion multilevel marketing industry, and critics say more than 90 percent of them “either break even or lose money.” Yet thanks to intensive lobbying, the Federal Trade Commission has no “specific regulations in place for the industry.” These companies prosper with ease because what they’re “really selling is hope, something most people are eager to buy.”
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
-
Savages: a tragi-comedy set in a 'quirky handcrafted world'The Week Recommends This new animated film by Oscar-nominated filmmaker Claude Barras is undeniably political, but it has a hopeful message
-
Why 'faceless bots' are interviewing job huntersIn The Spotlight Artificial intelligence is taking over a crucial part of recruitment
-
Who will win the battle for the soul of the Green Party?An ideological divide is taking root among the environmentalists
-
Issue of the week: Do high-speed traders rig the market?feature Wall Street is abuzz over high-frequency trading.
-
Issue of the week: How Yellen spooked the markets
feature At her first press conference, the new Federal Reserve chair made the mistake of indicating when the Fed would raise interest rates.
-
Stop calling women ‘bossy’
feature Let’s ban “She’s bossy.” Instead, let’s try, “She has executive leadership skills.”
-
Issue of the week: GM’s recall disaster
feature Mary Barra is facing “her first big test” since she took over as GM’s new CEO in January: a recall of more than 1.6 million vehicles.
-
Issue of the week: Who gets Fannie’s and Freddie’s profits?
feature Fannie Mae’s and Freddie Mac’s shareholders want their money back.
-
Issue of the week: Comcast buying Time Warner Cable
feature Has Comcast won the cable wars?
-
Issue of the week: AOL’s million-dollar babies
feature AOL’s “gaffe-prone” CEO, Tim Armstrong, “got in some hot water” last week.
-
Issue of the week: Why Google unloaded Motorola
feature Three years after shelling out $12.5 billion for Motorola, Google announced its sale to Lenovo Group for $2.9 billion.