Herbalife Convicted For Pyramid Selling In Belgium

[Doc Bunkum]

Interesting developments in Europe.

Herbalife In Belgium Convicted For Pyramid Selling

Some interesting follow up comments on that link. ie:

I’m sure we have not heard the last of this – Herbalife have been around long enough and are sufficiently well funded to be able to put some legal muscle behind an appeal.

herbal life is good just like other other mlm companies, the government should be put under the jail cell.

Good summary on Pyramid Scheme Alert:

The Belgian court zeroed in on several key points that affect many other MLMs.

1.) It showed that Herbalife is not a direct selling company.

2.) The court also rejected Herbalife’s claim (which is also made by many other MLM companies) that its salespeople can be classified as “retail customers.”

Of course, Herbalife plans to appeal.

HERBALIFE STATEMENT:

LOS ANGELES, Dec 16, 2011 (BUSINESS WIRE) — Herbalife plans to appeal a recent Belgian Commercial Court judgment in a case brought by local consumer organization Test-Aankoop in 2004...

While the Belgian market represents less than 0.65 percent of the company's worldwide net sales, Herbalife remains fully committed to supporting its Belgian independent distributors and the large customer base they have built over the many years Herbalife has been in Belgium. The company firmly believes its sales method is in compliance with all applicable Belgian laws.

Herbalife believes the judgment contains factual errors and is based on misinterpretations of the law and its direct-selling sales model...

...and so on and so forth.

[wserra]

Thanks, Doc. That decision is interesting, despite the fact that the English translation leaves something to be desired.

Most interesting (at least to this lawyer) is the common-sense approach of the Belgian court. It keeps citations to a minimum, and language plain and straightforward:

This overview shows that according to the judgment of the court, the distributor in the sales network of Herbalife can get more profits out of the indirect profit payments, Royalty Overrides and production bonuses who are calculated over the sale of products by the under their in the network situated distributors as by the profits out of the direct sale of products to the consumer. The [extension structure] prioritizes therefore the extension of the network.

In other words, recruiting is more important than sales. We know.

Furthermore the most purchases were performed against a discount percentage of 25% and 35%, which shows that Herbalife is getting the biggest part of her profit out of the distributors who don´t make a high monthly turnover and who most likely resign after less
than a year, which is shown in the rotation figures of the distributors.

IOW, the guys on the bottom of the pyramid get screwed, to the benefit of those on the top. We know that too. That's why recruiting is so vital (if you're on the top).

all distributors in the network of Herbalife, without exception, are independent entrepreneurs and thus should be considered as such. Nowhere in the documents is it shown that ‘people who buy for 500 volume points are consumers’ and neither do the documents show that ‘people who buy less than 2,000 volume points are consumers who, to a limited degree, will sell products to family and neighbors’ as Herbalife claims in its conclusion.

The Belgian court is saying what the Ninth Circuit found in Omnitrition - that one of the many ways in which MLMs cook their books is by claiming that low performing distributors are actually consumers, and then not counting them.

The “supervisors” apparently seek to expand the hierarchical network, by recruiting lower placed salespeople to realize profit from products purchased by these salespeople, rather than to drive sales to end-consumers.

And thus screw the new recruits. That's a good summary.

Nice find, Doc.

[Number Six]

Thanks, Doc!

I posted the info. over at FactNet which also tracks cults and MLM scams.

Have all of the major MLM companies originated in the U.S.?