Category Archives: Herbalife

Herbalife, Forced to End MLM Structure, Could Impact Food Retailers

herbalife

A recent settlement agreement between the FTC (U.S. Federal Trade Commission) and Herbalife, a marketer of dietary supplements, is likely to have, in the short term, only a marginal impact on food retailers who sell dietary supplements. That sector includes supermarkets with pharmacies and retail pharmacies, most of which give significant amounts of space to such supplements.

The reason the settlement agreement will have any impact on supplement retailers is because, as part of the deal, Herbalife is required to restructure its business away from the multi-level marketing format it has been employing since its founding. The company also has to pay a fine of $200 million to the U.S. government for deceiving consumers into believing that as agents for and sellers of Herbalife products, they could, as they recruited others to be agents, earn substantial sums.

However, according to FTC, Herbalife’s compensation structure was based primarily on participants recruiting others to join and purchase product, rather than on the sale of products.

It is reasonable to assume since that approach has been shot down, Herbalife’s restructuring will be in a direction that will see the company seeking retail shelf space – in competition, of course, with the multiple supplement brands already doing the same thing.

This approach could, somewhere down the road, create space-allocation issues for retailers and even possibly lead to attempts to alter the system(s) determining who gets how much space, and where, in retail stores.

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