The Federal Trade Commission (FTC)  has settled its claims against the multilevel marketing company Herbalife which sells nutritional supplements. The FTC had claimed that  Herbalife was an illegal pyramid scheme where affiliates’ earnings were tied primarily to signing up more affiliates rather than to selling products.   Sometimes a legitimate multilevel marketing business may look quite similar to an illegitimate pyramid scheme, which is one of the reasons that so many people fall prey to these scams.  For every legitimate multilevel marketing company, such as Mary Kay and Amway, there are many that are just scams.  In a legitimate multilevel marketing company, investors make money by selling products to the public and by recruiting new salespeople.  In a pyramid scheme the source of profits is based primarily on the recruiting of new members or salespeople.

Under the terms of the settlement Herbalife is required to revamp its compensation system to provide for rewarding retail sales rather than primarily providing incentives rewarding distributors for recruiting new affiliates. In addition, Herbalife will be paying 200 million dollars in refunds to the 350,000 people harmed by their scheme.  For more detailed information about the refund and how to get a check if this affects you, go to the top of this page to the tab entitled “FTC scam refunds.”

TIPS

Anyone who is considering investing in what is represented to be a multilevel marketing business should always investigate the company and the terms of investment carefully before investing any money.  In addition, you should also check out the company with the FTC and your state’s attorney general to make sure that the company is legitimate before investing any money.  Here is a link to information from the FTC that you should consider before investing in a multilevel marketing business.  http://www.consumer.ftc.gov/articles/0065-multilevel-marketing