Hispanic Federation Urges FTC To Investigate Herbalife
Latinos are not happy with the nutritional supplements company. The Hispanic Federation wrote to FTC on Friday, seeking an investigation into Herbalife Ltd. (NYSE:HLF), saying that they had concerns about the company’s business model.
The letter asks for a probe into the way the company promises huge gains for the distributors but in reality they end up losing money. The letter alleges that Herbalife’s marketing campaign lures immigrants into buying its products with the promise of big money by working only a few hours at home, but says that the real picture is different.
The Hispanic Federation expresses its concern over the confusion on how Herbalife’s distributors make money. It emphasizes that if the distributors are supposed to earn profits by recruiting more distributors then that is an indication of a pyramid scheme. Hispanic Federation’s President, Jose Calderon was also not excited about the way “get rich” schemes particularly target immigrants. In particular, Calderon asks for the resolution of this question, “Are distributors incentivized to sell products or to recruit new distributors into the pyramid?“. The letter urges FTC to probe into the matter and see if this multi-level marketer is a legitimate business.
This action by the HF is important. HLF will likely see a decline in new Distributors because of it. This event , although eclipsed by the recent price surge, is another example of HLF's eroding credibility.