Herbalife makes settlement with FTC for $200 million
Controversial multi-level marketing corporation Herbalife will be required to pay $200 million to consumers in a settlement with the Federal Trade Commission, the regulator said on Friday.
The company is a major employer in the Winston-Salem-area of the Piedmont Triad, with more than 400 workers at its local branch.
Herbalife will be required to restructure its business, according to an FTC press release, which was called “unfair” due to the company’s compensation structure. The company rewarded participants based on how many others they recruited instead of product sales.
According to the FTC complaint, Herbalife made claims that participants could expect to earn thousands of dollars a month in a career-level income, but the overwhelming majority of distributors ultimately earned little to no money. This leads to nearly half of the entire Herbalife distributor base quitting in any given year.
Herbalife’s $200 million fine will be used to provide compensation for consumers who purchased large amounts of Herbalife products and lost money.
“This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” FTC Chairwoman Edith Ramirez said in the press release. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices.”
In a statement, Herbalife described the FTC allegations as “factually incorrect,” but said the company wished to “move forward” after two years of investigation.
Herbalife also announced that it had agreed to pay $3 million in a separate settlement with the Illinois Attorney General.