products, perceived inaccurate marketing claims, and
unconventional distribution methods. Company sup-
porters stress that Herbalife is a profitable and repu-
table business that is a member of the New York Stock
Exchange (NYSE). Critics state that the company is
run like a pyramid scheme, its independent distribu-
tors use improper customer methods, and the com-
pany has poor organization and management of
distributors.
Some of the early products sold by Herbalife con-
sisted of ma huang (Ephedra sinica). The herb con-
tained ephedrine (EPH), which is one of the active
ingredients in the plant genus Ephedra. Ephedrine
was used widely as an appetite suppressant, asthma
and hay fever aid, decongestant and cold reliever, and
hypotension treatment. Eventually, Herbalife elimi-
nated ephedrine after consumers complained of
adverse reactions and its insurance premiums were
increased. The U.S. Food and Drug Administration
(FDA) banned the sale of all ephedra-contained sup-
plements beginning on April 12, 2004.
In 1981, the FDA began receiving complaints
from Herbalife consumers with symptoms ofconsti-
pation, diarrhea, headaches, and nausea from various
products. Initially, Herbalife officials informed dis-
tributors to tell customers that such symptoms were
the result of the removal of poisons and toxins from
the body by the use of such products. The FDA acted
against Hebalife in 1982 for making claims that its
Herbal-Aloe drink helped to treat bowel, kidney, and
stomach ulcers, and that its Herbalife Formula
ndash2 should be used to treat bursitis,cancer, her-
pes, and impotence. Consequently, the FDA required
the company to eliminate the ingredients of mandrake
and poke.
The Canadian Department of Justice filed numer-
ous criminal charges against Herbalife for false medi-
cal claims and misleading advertising practices in
- The California Department of Health, Califor-
nia Attorney General, and FDA brought a civil law-
suit against the company in 1985. The company was
charged with making misleading consumers, improper
product claims, and operating an illegal ‘endless-
chain’ scheme. Herbalife reached an out-of-court set-
tlement by paying $850,000 in costs, fees, and
penalties.
In 1986, Herbalife expanded into other countries,
including Israel, Japan, Mexico, and New Zealand,
after U.S. and Canadian sales declined due to negative
news stories. In order to raise cash, the company
merged with an Utah-based public company, and
called itself Herbalife International.
In 2001, the U.S. Federal Trade Commission
(FTC) provided to interested parties, in response to
the Freedom of Information Act (FOIA), numerous
customer complains against Herbalife International.
The customer complaints are listed in the following
FTC website: http://www.ftc.gov/foia/herbalife.pdf.
Still later, the company was cited by the U.S.
Securities and Exchange Commission (SEC) for
numerous violation involving is business practices.
Herbalife officials promised to fix their managerial
problems. In 2006, the company reported to the SEC
that it now annually re-qualifies distributors as a way
to better manage its independent contractors. As of
the first-quarter of 2006, Herbalife stated that it has
240,000 qualified distributors worldwide, with about
80% outside of the United States and Canada.Complications
Information gleaned from various sources indicate
that it is often difficult for Herbalife distributors to make
a profit. Initially, they must pay large amounts of money
to become a distributor. For example, according to
interviews and research performed by Rob Cockerham
(whose website is considered a well-known anti-scam site
for Herbalife) between March and July 2002, potential
distributors must purchase an informational packet for
$36 and, later, an InternationalBusinessPacket for $195.
After completing a distributor’s application, the new
independent distributor receives a catalog, order forms,
sales and marketing manuals, product samples, and
other such literature.
The distributor then signs up for Herbalife
Advantage Program, which costs $80 each month for
informational brochures and Web pages that describe
products. In addition, the company recommends that
distributors buy a Herbalife diet and skin product
website for $315 and a Herbalife business promotion
website, each for $315. Furthermore, Gold and Plati-
num E-Commerce Business Packages cost between
$952.90 and $1,994.22.
There are many websites on the Internet that
advertise Herbalife products, both on the corporate
and individual distributor levels. Distributors, accord-
ing to Herbalife, can earn up to $250,000 annually.
However, the average earning per distributor is esti-
mated at only around $1,500. As independent contrac-
tors, distributors do not earn salaries nor benefits
from the company.Parental concerns
Herbalife, as do many other companies, sells prod-
ucts that are not under FDA regulatory protection.Herbalife