Health supplement giant Herbalife avoided a lengthy legal battle, and much of the negative publicity that would go along with it, by agreeing to a settlement in a class action suit. The lawsuit, filed by a former distributor of Herbalife, claimed that the manufacturer’s policies and practices were akin to that of a pyramid scheme.
The lawsuit, filed in the second quarter of 2013, alleges that hundreds of thousands of Herbalife distributors have had difficulty turning a profit due to the structure and policies of the company. Herbalife operates on a system where distributors can make money directly from products they sell and from the products that other distributors that they enlist sell. They aren’t the first company with this structure to face heavy criticism or legal action for running an alleged pyramid scheme.
While Herbalife has agreed to the settlement, which totals nearly 18 million dollars in damages and product returns, the company hasn’t officially admitted any wrongdoing or unlawful activity. Spokespeople for Herbalife have stated that the settlement is a better alternative than being involved in a lengthy and distracting legal battle. As part of the settlement, the supplement company will also undergo several changes to current policies and business structure that will clarify the parameters of membership agreements and more clearly define the role of distributors.
Companies or individuals who decide to become a distributor for a larger entity should have clearly defined roles and objectives that can produce profit. If you feel as though a company is unlawfully using your services to profit without providing a clear opportunity or path for you to yield a profit you should reach out to an experienced attorney for help.
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