Herbalife Scam: Pyramid Scheme or MLM? [Review]

Herbalife is a company that sells nutritional supplements through a multi-level marketing (MLM) business model. Chances are you’ve heard about Herbalife from a friend or family member who’s involved with the company. 

And if you’re like many people these days, you might be looking for ways to make some extra cash. Herbalife offers an opportunity to work from home by becoming one of their independent distributors.

As an online entrepreneur, I have reviewed many similar online opportunities over the years. So I can tell you what you need to know.

Just so you know, I don’t have any affiliation with Herbalife, and I’m not getting paid to write this review. That means you can trust me to give you an unbiased assessment.

And here’s something else to consider: at the end of this review, I’ll also share with you an alternative to the Herbalife MLM program that has worked for me in generating a full-time passive income online. So keep reading!

What is Herbalife?

Herbalife Nutrition Ltd. is a big name in the world of multi-level marketing (MLM). Founded by Mark R. Hughes back in 1980, the company specializes in developing and selling nutritional supplements. Today, Herbalife has an estimated 9,900 employees across the globe and a network of around 4.5 million independent dealers and members in 95 countries.

John O. Agwunobi is the current CEO and Executive Chairman of Herbalife, having taken on the role in March 2020. One thing that sets Herbalife apart from other companies is that its products aren’t available in stores. Instead, the only way to get your hands on them is through their network of distributors.

While you can find product and pricing information on their website, you can’t actually buy anything directly from there. Originally, Herbalife started out selling weight loss products, with their first offering being a protein shake to help with shedding those extra pounds. But over time, the company has expanded its product line to include offerings for women’s health, aging, digestive health, fitness, and more.

Today, Herbalife is worth billions of dollars. However, the company has also faced criticism over the years, with some people accusing them of operating a “sophisticated pyramid scheme.” Despite this, Herbalife continues to thrive and serve its millions of customers worldwide.

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What Products Does Herbalife Offer?

Herbalife Nutrition offers a range of products, including weight loss and protein shakes, protein bars, teas, aloe, vitamins, and sports, energy, and personal care products.

One of Herbalife’s most popular products is the Formula 1 protein shake. It’s a soy-based meal replacement shake and has been around since 1980. In fact, it was their best-selling product in 2015, accounting for almost 30% of their total sales.

Herbalife manufactures its products at five facilities in the US and China, as well as with third-party manufacturing partners. They claim that health experts, consumers, and government agencies scrutinize their products’ health claims.

However, Herbalife faced a lawsuit in 2008 due to laboratory tests that showed lead levels in some of their products exceeded California state law. Long-term consumption of such products could cause liver problems.

Herbalife promotes its products through “nutrition clubs,” where members gather, sample beverages, and talk about healthy living. In reality, these clubs are just a way for Herbalife to grow its business and promote its products.

Herbalife claims that these nutrition clubs help people who would otherwise eat out or from vending machines. They offer healthy and balanced options and support people in transitioning to a healthier lifestyle.

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Is Herbalife An MLM?

Yes, Herbalife is an MLM. According to a 2010 article in the Los Angeles Business Journal, Herbalife Nutrition was one of the most profitable companies in Los Angeles County, and its business model is based on multi-level marketing.

When you become a member of Herbalife’s MLM program, you’ll be working as an independent distributor of Herbalife products. However, you won’t receive a regular salary from the company. While it’s possible to earn a good income selling their products, it’s unlikely. Most MLM programs, including Herbalife, rely on recruiting new members to work under you. As a result, your income is tied to the success of your recruits.

In an MLM, those at the top of the pyramid are known as “sales leaders.” Imagine a triangle with you at the top and your recruits forming the base. As a member of Herbalife, you’ll earn commissions from everyone in your downline if the person at the top recruits ten people, and each of these ten recruits ten more. If you can bring in just 10 people, you’ll make $1100.

Most people in an MLM would rather earn a lifetime passive income from recruiting others than a one-time commission from selling products, even if the MLM offers a wide range of products. As a result, those at the top of the pyramid have the most financial success, while those at the base have the least.

To succeed in a multi-level marketing company like Herbalife, having a large number of people in your downline is essential. Herbalife management even considered the number and retention of distributors a critical parameter and monitored them closely in financial reports. Sales leaders must requalify by January of each year. Individuals who have not met the qualification requirements for sales leaders in the previous 12 months are removed from that rank in February of each year.

You may also want to read our article on the top MLM companies.

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Is Herbalife A Pyramid Scheme?

No, Herbalife is not a pyramid scheme. It is a legit multi-level marketing (MLM) company that offers members the opportunity to earn money by selling their dietary supplements. Unlike pyramid schemes, Herbalife members can earn money without relying solely on recruiting others.

However, before you can become a member or representative, you’ll need to purchase Herbalife products. You can then sell these products or use them to promote your business. This is why some people get confused and mistakenly think Herbalife is a pyramid scheme.

Critics have accused Herbalife of being a pyramid scheme, but these allegations have been refuted. For example, in 2011, a court in Brussels ruled that Herbalife was an illegal pyramid scheme. However, Herbalife appealed the decision, and in 2013, a Belgian appeals court upheld Herbalife and overturned the lower court’s ruling.

So, what exactly is a pyramid scheme? A pyramid scheme is a fraudulent system of making money by recruiting an ever-increasing number of “members” who are promised money or services in return for recruiting others. The problem with pyramid schemes is that they’re unsustainable and often scams because members at the bottom end up losing money.

In a pyramid scheme, those who want to join must pay a membership fee to the company that runs the scheme. The company then shares a portion of the funds raised from each additional member they recruit as a reward. However, the scheme is only profitable for the directors of the company, i.e., those at the top of the pyramid, since they can receive a portion of the payments from every newly recruited member.

Pyramid schemes almost never sell valuable goods or services. The only source of revenue for these schemes is from recruiting new members and soliciting more money from current members. The scam will fail if there are no new recruits and other sources of income, which is why most participants lose their money.

A good example of a pyramid scheme is Vemma, a producer of energy and weight loss drinks. The Federal Trade Commission (FTC) accused Vemma of operating a pyramid scheme in August 2015 that paid more to recruit new members than to sell products. According to the FTC, the majority of participants lost money.

You may read our article on the difference between MLM and pyramid schemes here.

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Is Herbalife a Scam?

No, Herbalife is not a scam. It’s a legitimate MLM company that has been around for over four decades and generated over US$5 billion in revenue in 2020. However, critics have accused Herbalife of operating like a pyramid scheme.

In 2016, John Oliver did a segment on multi-level marketing that focused on Herbalife. He criticized the company for exploiting Latino communities and overstating the health benefits of its products. The Federal Trade Commission also suggested that the company was operating illegally.

While Herbalife is not currently classified as a pyramid scheme, it’s possible that it could be in the future. It’s also worth noting that a majority of Herbalife representatives do not earn any money, and those who do typically have to put in a lot of effort and recruit aggressively.

That being said, Herbalife does offer some protections for new representatives. New distributors are entitled to a one-year refund, and regular customers can return unused products within 30 days for a full refund.

Herbalife also has some high-profile sponsorships, including Cristiano Ronaldo and the LA Galaxy soccer team. These sponsorships can help reinforce the company’s credibility and make your job as a sales representative easier.

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Can You Make Money With Herbalife MLM?

It is possible to earn money through Herbalife MLM, but there are a few things you should keep in mind.

First, there are two main ways to earn money with Herbalife: selling products and recruiting new members. Selling Herbalife products can earn you a commission, and you can also earn bonuses by recruiting new members and having them bring in more members.

However, it’s important to remember that in order to sell products, you’ll need to purchase them first. So, how much you can afford to buy will determine how much you can earn. It’s also worth noting that you have a year to return unopened products if you don’t manage to sell them.

Another thing to keep in mind is that selling products alone may not be enough to make a substantial income with MLMs like Herbalife. In fact, recruiting new members is often more lucrative, as you can earn a percentage of everything they sell.

If you’re looking to make a lot of money with Herbalife, then you’ll need to focus on building a large downline. This means recruiting as many people as possible to join your team and sell Herbalife products.

However, it’s also important to keep in mind that MLM business models may not last forever, and you may eventually run out of people to recruit. So, while it’s possible to make money with Herbalife MLM, it’s not necessarily a sustainable long-term income source.

Herbalife Compensation Plan

If you’re curious about Herbalife’s compensation plan, here’s what you need to know.

First things first, the more Herbalife products you sell, the more cash you’ll rake in. But to be honest, most of your earnings won’t come from selling products directly. Instead, you’ll want to focus on accumulating volume points through sales.

Here’s how it works: when you sell products, you earn volume points. When you hit a certain number of volume points, you level up and earn a higher commission on sales made by your downline.

And speaking of downline, when they order products, you get volume points for those purchases too. So if you and your downline order more, you’ll earn even more volume points.

In a nutshell, the more you sell and the more your downline orders, the more you can earn through Herbalife’s compensation plan. So get out there and start building up those volume points!

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How Much Does It Cost To Join Herbalife MLM?

First things first, to become a distributor, you’ll need to purchase one of two available kits. The International Business Pack will set you back $94.10, while the International Business Pack-Super Starter costs $124.10.

Now, keep in mind that these kits are not the only costs you’ll encounter. There are additional expenses that your distributor agreement won’t cover, such as your time, phone calls, and gas to travel to and from your customers. These hidden costs can add up, so it’s important to factor them into your overall expenses.

Pros and Cons of Joining Herbalife MLM

Pros:

• Herbalife has been in business for 40 years, which means they have a solid foundation in the industry.
• Their dietary and weight-loss supplements are of high quality, and some people have reported successful results with them.
• A few distributors have claimed that their MLM experience with Herbalife was profitable.

Cons:

• As a distributor, you must purchase the items you intend to sell immediately. This may be a challenge if you don’t have the funds to make the initial investment.
• Some people have raised concerns that Herbalife operates as a pyramid scheme, which is illegal.
• Herbalife’s products and plans can be quite expensive, which may not be suitable for everyone’s budget.

Keep these points in mind and do your research before making any decision. Remember, what works for one person may not work for everyone, so take your time to determine if Herbalife is right for you.

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Why I Don’t Recommend Joining Herbalife MLM Program

Herbalife Products Can Cause Liver Damage

Although Herbalife products are marketed as a healthy way to lose weight and improve your overall well-being, they can have serious side effects. Some people who have used Herbalife products have experienced liver damage, jaundice, nausea, pale stools, fatigue, exhaustion, and abdominal pain. In some cases, the use of these products has even resulted in death.

In 2004, Israel’s health minister launched an investigation into Herbalife’s products after four people who had used them were found to have liver problems. The company was accused of selling products that contained toxic ingredients like Quaqua, Comfrey, and Kraska. The investigation, funded by the Israeli Ministry of Health, found a causal link between the use of Herbalife products and liver damage.

Very Few People Can Make Money With Herbalife

If you’re thinking about joining Herbalife’s MLM program, you should know that success is difficult to achieve. MLMs like Herbalife have sales quotas that require members to continue selling products to remain active and eligible for commissions. If they don’t meet the quota, they won’t get paid. As a result, many members lose money before even recruiting one person into the company.

According to statistics, 72.5 percent to 99.9 percent of MLM members lose money. So if you’re thinking about joining Herbalife to make money, you should proceed with caution.

Losses From Herbalife MLM Program Are Reframed As Investments

Herbalife MLM uplines often try to keep their reps in the MLM scheme by reframing their financial losses as “investments” in their business. They might dangle the carrot of future financial freedom, but the reality is that these are not investments. It’s unlikely that you’ll get your money back, and the return on “investment” is usually negative.

Herbalife is Like a Cult

Many MLMs, including Herbalife, have been accused of having cult-like company cultures. MLM representatives are discouraged from critical thinking and questioning the company’s practices. Those who leave the MLM are often labeled as failures or bad influences, and reps are not allowed to contact them. This can lead to a devastating loss of relationships with people who were once considered family.

You May Need to Purchase Herbalife Products Yourself

If you don’t have a large network of friends and family to sell Herbalife products to, you may end up buying the products yourself each month. This can become a losing proposition in the long run, and you may end up losing money instead of making money.

Herbalife Products are Overpriced

Herbalife products are known to be overpriced compared to similar products from other brands. This can make it difficult to sell the products, as potential customers can find similar products elsewhere at a much cheaper price. As a result, many people who join MLMs like Herbalife end up focusing more on recruitment than on selling products.

Skewed Commission Distribution

One major flaw of Herbalife’s MLM model is that the distribution of commissions is skewed towards those at the top. This means that those who are just starting out may have a hard time making a profit, while those who have been with the company for a long time tend to make the most money.

Exaggerated Claims of Income

Like many MLM companies, Herbalife makes exaggerated income claims that may not reflect reality for most distributors. In fact, according to Herbalife’s own payouts to distributors, over 99% of their distributors never make a profit.

Low Retention Rate

Another drawback of Herbalife’s MLM model is their low retention rate. Less than 41% of Herbalife distributors are active, which can be discouraging for those who are trying to build a successful business with the company.

Recruiting is Required to Succeed

MLMs like Herbalife put a lot of emphasis on recruiting new distributors. In fact, eight out of ten ways to earn money with Herbalife require recruiting. If you’re not interested in recruiting, you may struggle to make a profit.

Herbalife Products Are Not Approved by FDA

It’s essential to note that the FDA has not approved Herbalife’s products. While a former FDA official has joined Herbalife, it does not mean the company’s products have FDA approval. The agency has even requested that Herbalife remove a video that may mislead consumers.

However, it’s essential to note that the FDA has no oversight over natural supplements.

Herbalife Has Received Many BBB Complaints

Herbalife has an A- rating from the Better Business Bureau (BBB). However, the company has also received many complaints from customers and distributors. While there aren’t many reviews available, some customers were dissatisfied with the products. Herbalife has only addressed one of the six complaints listed on the BBB website.

Lawsuits Against Herbalife

Herbalife has faced a number of lawsuits over the years, many of which have alleged questionable business practices or even a pyramid scheme. In fact, the company was sued by the FTC for $200 million for operating a pyramid scheme. It’s not surprising given that Herbalife is one of the largest MLM companies in the world. If the company doesn’t change its business model, it’s only a matter of time before the FTC shuts it down. 

Additionally, the Better Business Bureau has listed misrepresentations of Herbalife’s business model on its website, and distributors have filed class action lawsuits alleging that the company misrepresented the amount of money they could make.

A Saturated Market

If you’re looking for a health and wellness company, there are thousands that are better than Herbalife. In fact, Herbalife doesn’t stand out to me as particularly unique or special. It seems like a fairly typical multi-level marketing company, and its bad reputation certainly doesn’t help it stand out in a positive way.

Complicated Compensation Plan

Herbalife’s MLM compensation plan is quite complicated, and it seems to focus too much on recruiting members rather than actually selling products. This can be frustrating for distributors who just want to make a decent living by selling quality products.

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FAQs

Is there a lawsuit against Herbalife?

Yes, there have been numerous lawsuits filed against them. In fact, the most recent one was filed this year. Among the allegations, they have been accused of bribing Chinese officials for the third time in four years. Additionally, they had to pay $123 million to settle with the US government for misleading investors with their China business model.

Why is Herbalife banned in the US?

Herbalife was not completely banned in the US, but the company did face some legal issues. In 2016, they reached an agreement with the US Federal Trade Commission (FTC) to reform their business practices and pay a $200 million fine in response to allegations that they were a pyramid scheme. In 2002, some states banned plant-derived ephedrine supplements, which led to Herbalife products being pulled from the market.

Final Verdict

After careful consideration, I have come to the conclusion that I don’t recommend joining Herbalife if you’re looking to make money.

The truth is, it’s tough in the beginning when you’re trying to find recruiters to add to your Herbalife commission. You’ll have to prospect and hustle to get people interested. The worst part? You’ll likely have to ask your family and friends to join your Herbalife business opportunity, and that’s not exactly fun.

To add to the pressure, your upline will constantly be following up with you, encouraging you to buy more Business Support Material, even when you’re struggling to get people to join your downline. Unfortunately, statistics confirm that you’re likely to lose more money than you’ll earn. In fact, according to a case study on the FTC’s website, 99% of people who join an MLM break even or lose money.

I understand that people who join these MLM-type businesses often feel under pressure to succeed, and that’s one of the main reasons they leave.

So, why not consider starting your own online business instead? It’s a great way to earn money and have a flexible schedule. You get to choose what you want to promote rather than having someone else dictate it to you.

In the next section, I’ll share some tips on how to build an online business in a legitimate way to make passive income. This is the approach that has allowed me to make a full-time income in just one year. Most importantly, it’s 100% legit and sustainable, unlike MLM models.

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Is There a Better Way to Make Money Online?

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Wealthy Affiliate offers everything you need to get started, from top-notch web hosting services to keyword research tools, community support, comprehensive training, writing tools, and other software to help you build your business step-by-step. Plus, you can sign up for a free account and get started with affiliate marketing right away without spending a penny.

If you like what you see, you can upgrade to the premium membership for only $49/month or $395/year to access everything on the platform. And the best part? There are no upsells afterwards.

You may read our article about the difference between MLM and affiliate marketing.

But what about earnings? Well, let me tell you, Wealthy Affiliate has a proven track record of success. Take for example a 21-year-old student who earned $7,395 in just one week applying the Wealthy Affiliate training.

You can read our full review of Wealthy Affiliate here.

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So don’t hesitate, sign up for a free account with Wealthy Affiliate and see for yourself how it can help you build and grow your online business.

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