Direct Selling News featured MLM expert attorney, Jeff Babener, editor of MLMLegal.com, in its September issue. Direct Selling News sourced the following notable article “Herbalife: What the Short Sellers Missed on the Way to the Press Conference,” written by Jeff Babener. Below is an excerpt of the article “Herbalife: What the Short Sellers Missed on the Way to the Press Conference,” published by Direct Selling News:
History repeats itself. Just as Yogi Berra famously said, “It’s déjà vu all over again.”
The 2012 billion-dollar short seller attack on Herbalife, a 32-year-old NYSE listed direct seller of nutritional products in 80-plus countries with annual sales in excess of $3 billion, is a replay of the seminal challenge to the MLM/Direct Selling model won by Amway in 1979 [In the Matter of Amway, 93 F.T.C. 618 (1979)].
In that 1970s FTC challenge, the criticism went to whether or not the core of the MLM referral selling model was a “deceptive” way to market. Similarly, in the 2012 short seller attack on Herbalife, along with other criticisms, a principal complaint was that evidence of “substantial personal use and consumption” of company products by distributors themselves renders an MLM/Direct Selling model inherently deceptive and an illegal pyramid scheme. Armed with multi-hour slide presentations, short sellers and financial bloggers predicted that a direct selling program, in which substantial product is purchased by distributors for personal use, is doomed to collapse as an illegal pyramid scheme and that federal agencies should step in to hasten that demise…
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