In business, just like other areas of life, if something sounds too good to be true, it usually is.
That’s what a number of angry would-be millionaires are realizing as they file mounting legal claims against the company Herbalife, which specializes in healthy personal products.
Similar to Amway and other multilevel marketing companies, Herbalife requires its distributors to operate through a complex system that involves sharing the profits of new recruits. Distributors were generally led to believe that after they signed up with the company (through another distributor), purchased one of the company’s business packages that explained the company’s system and began selling products that they would achieve the same success they saw advertised in the company’s promotional materials.
The Federal Trade Commission (FTC), which has already settled a major claim against Herbalife for building a business model based on distributor recruitment, not actual products, has previously stated that the company’s promotional materials were filled with images of distributors living expensive lives — although the reality was far different. Few distributors ever came close to making the kind of wealth that Herbalife seemed to promise. Many distributors actually ended up going into debt trying to make a go of their business.
The plaintiffs in the newest lawsuits allege that they were basically promised success if they met their sales goals, found new distributors and attended the company’s national events. These events were touted as the keys distributors needed to have to obtain wealth — but they may just have been moneymakers for the company instead.
Herbalife is trying to get the case dismissed from Florida and moved to California. It asserts that many of the current claims are covered under the old settlement with the FTC — but the litigants claim that the prior lawsuit only covered the distributor system, not the deceptive promises given by the company about the multimedia events.
Lawsuits like these are a warning to any entrepreneur who wants to work with an existing company, particularly those involving multilevel marketing schemes. Some may be legitimate, but any that promise incredible riches by simply following a “system” should be looked at very carefully. It’s important to ask questions about how many people achieve the dream being offered. If you don’t get specific answers, it is wise to go the other direction before you end up having to file a lawsuit over deceptive business practices.