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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.”
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