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William Keep  

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  • Multilevel Marketing: The Long And Short Of It [View article]
    There are hundreds but they are structured differently with different incentive packages, policies, and processes, including efforts by some to track non-distributor customers. To lump them together does a disservice to these differences and, worse, suggests that regulators accept them all without distinction or close them all without evidence unique to each. The latter will not happen so the industry hopes for the former.
    May 4, 2015. 01:51 PM | Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    My comment is based on data published by Herbalife and other MLMs. Your conclusion that MLMs fill an employment void is offered without providing support. I have said before that anonymous comments do not improve the quality of discussion on SA.
    Apr 13, 2015. 07:36 PM | 3 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    An FTC investigation is to determine how the company actually operates and to consider if, in fact, it operates a pyramid scheme. The FTC has the power of a CID to collect information not publicly available (as can also happen during discovery). Not offering an opinion without access to relevant information is a reasonable choice; you may want to try it sometime. I can say with certainty that some MLMs have been found to be pyramid schemes and in my opinion Herbalife has yet to offer public information that would exclude it from that possibility. Perhaps they will share relevant data with the FTC. Your comment about me making a "quick buck" is laughable.
    Apr 13, 2015. 07:28 PM | 3 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    This comment ignores two things. First, this pieces focuses on the need for the FTC to stop pyramid schemes, not legitimate MLM opportunities. In fact, it is the FTC's failure to adequately regulate the MLM industry that has facilitated the development of fraudulent "opportunities." Second, the high churn rate and average low net earnings suggests little support for the statement "fill in an employment system that unjustly shuts out so many people who wish to reinvent themselves."
    Apr 13, 2015. 02:01 PM | 2 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Funny how you forget to mention that numerous MLMs who claim to be structured as you describe actually churn recruits, make false claims about products and/or compensation and close either having been proven in a court to actually pyramid scheme or closed under a pyramid scheme charge. That is the problem we are dealing with, not some idealized version for which you likely have little data.
    Apr 13, 2015. 07:53 AM | 5 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Real products is not a defense against a pyramid scheme charge. To suggest that is to literally ignore case law and those product-based, MLM-structured pyramid scheme that faded under a pyramid scheme allegation.
    Apr 11, 2015. 01:09 PM | 7 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    I appreciate your concern. I can only hope that regulators in other countries pay attention to the problems of pyramid scheme. i have little doubt that they are pervasive. Sometimes I wonder if cultures worry too little about the those who are less informed.
    Apr 6, 2015. 07:14 PM | 4 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Good question and (not surprisingly) you are not the first to ask. In my experience, experts often have an opportunity to view evidence not publicly available. Such evidence can be produced through discovery. I do not have evidence on Herbalife that is not publicly available, though presumably the FTC does through its investigative powers.

    What I see about Herbalife that I find bothersome:
    * 10 Customer and 70 Percent rules that are essentially (and perhaps intentionally) ineffective
    * A mixed message regarding any real concern for sales to non-distributors
    * A mixed message regarding accepting responsibility for the actions of distributors who, though independent, act as agents for the company
    * Concern for top distributors who go off-script (even with CEO support) comes only after HLF benefited and the media exposes the behavior. Does company oversight work?
    * A CEO who seems unable to defend or even explain what his company does (how weird is that?).
    * Pieces and parts of evidence strategically revealed to defend one point or another but that do not fit together to provide a complete picture. How many companies seem tongue-tied when asked about how they make money?
    * An apparent lack of concern for high distributor churn
    * A conveniently expanding definition of what constitutes renewal for a sales leaders.
    * The apparently ephemeral nature of the non-distributor customer base.

    I could go on but I doubt you will find me convincing. After all, as icahn1 writes, I do not have money on the line so my view needs to be questioned. Apparently, in this upside down/inside out through-the-looking-glass world we live in only the opinions of those who have something to lose are credible. Have a nice day!
    Apr 6, 2015. 05:48 PM | 8 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Is it a business where an upline gets paid to attract and keep happy discount customers or is it a fraud where compensation to participants derives primarily from churning recruits, retained customers are few, and misrepresentations are rampant? I believe those are at least some of the issues the FTC is considering.
    Apr 6, 2015. 03:06 PM | 5 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    I contend that the FTC provides so little guidance to the public in terms of identifying product-based pyramid schemes (i.e., distinguishing them from a legal MLM) that case law is all they have to point to. Indeed, each case has to be argued on its own merits but regulators protect consumers in many ways beyond winning cases. In my previous SA piece (below) I am quite specific as the wholly inadequate job I believe the FTC has done in presumably attempting to regulate the MLM industry.
    Apr 6, 2015. 12:46 PM | 3 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Your 15 years of enjoying 50% discount actually supports my argument. There is no need to pay upline rewards for a customer who willingly makes purchase to enjoy a discount. You act like a buying club member but the structure rewards others for recruiting you. Why? Oh, and given Herbalife's apparent turnover of non-sales leaders it would appear that they actually have few customers such as you.
    Apr 6, 2015. 12:38 PM | 4 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Thanks. I understand your concern regarding structure.

    The from the FTC was written by Ms. DeMartino, Chief of Staff (at least, at the time). Here are two consecutive sentences from that letter: “Cases such as these can provide guidance to the public to help identify illegal pyramid schemes. Evaluating the difference between legitimate multi-level marketers and illegal pyramid schemes is a fact-specific inquiry.”

    I contend that if the second of the two sentences is true then the first cannot be true. In other words, while past cases may inform MLM lawyers, they certainly do not "provide guidance to the public."
    Apr 6, 2015. 11:35 AM | 3 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    Your previous comment: "you dont understand the difference between a pyramid scheme and a company with real stand alone products," suggests that the existence or absence of such products represents a distinguishing characteristic. It does not. When I give examples then you point to other factors, like paying for recruitment. The FTC recognizes that paying for recruitment can in fact be facilitated by the purchase of products “Modem pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services…commissions are funded by purchases made to obtain the right to participate in the scheme.”
    Apr 6, 2015. 11:20 AM | 10 Likes Like |Link to Comment
  • The FTC's Herbalife Quagmire [View article]
    It seems that you do not understand the difference between a legal MLM and a pyramid scheme - perhaps you have not read enough cases. A number of supposed MLMs were closed once facing a pyramid scheme charge even though they had "stand along products," e.g., Fortune Hi-Tech Marketing, Equinox, International Heritage Inc., etc.
    Apr 6, 2015. 10:26 AM | 7 Likes Like |Link to Comment
  • 15 Insane (But True) Reasons The Herbalife Fraud Should Be Shut Down Today [View article]

    Well presented piece with lots of evidence. I would like to add a word about a PATTERN of questionable behaviors over time, similar to those found in some other MLMs (e.g., Vemma, Wake up Now) and some pyramid schemes (e.g., Equinox and FHTM). We use patterns as heuristics to make initial decisions that then lead to more fact-finding and potential action.

    Investors use patterns to help inform decisions (e.g., "head and shoulders" to suggest an exit or irregularities to suggest when to short a stock). Regulators use patterns as possible indicators of fraud, such as insider trading. Similarly "patterns" exist among some MLMs - statements made time-and-time again by the company and its distributors that misrepresent the product and/or earnings, followed by an apology (repeat, wash with apology, repeat); concern for renegade top distributors only well after the company benefits from the misbehavior (e.g., the Herbalife distributor in Israel, Shawn Dahl and Income at Home); too much emphasis on recruiting, easily evident once we remove the patina message of product sales; and an all-around favorite, misdirection - "we cannot be a pyramid scheme because ___ " (fill in anything other than "participant compensation does not rely primarily on recruitment"). Some MLM companies continue to ignore that: “Even where a marketing plan formally bases commissions on sales, the plan may still be found illegal if, in practice, profits come primarily from recruitment” (see BurnLounge). Other MLMs have expressed serious concerns about such patterns, with Avon being the most recent (and with a bit of luck and common sense perhaps will we hear something from Pampered Chef).

    This is not an argument damning all MLMs but rather one that highlights the failure of the FTC to use the same tool (i.e., pattern recognition) used by investors and other regulators. When it comes to pyramid schemes, despite its own successful prosecutions, the FTC has explicitly avoided the use of patterns as early red flags. The BurnLounge decision ties together decades of successful pyramid scheme cases in a way that reduces the FTC's ability to ignore patterns. That plus two years of intensive pubic scrutiny have; a) shown the MLM industry to be the troubled industry a few of us identified as such many years ago; and b) shown the FTC to be ineffective in regulating the industry, preferring nonsense logic (see Bus Opp report) to reporting requirements that can reveal troubling patterns. Let's see how long this last and what it suggests about the future for Herbalife and some other MLMs.
    Dec 26, 2014. 07:50 AM | 12 Likes Like |Link to Comment