MLMLegal.com has released a seminal article by noted direct selling industry expert and legal authority, Jeffrey Babener

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Herbalife: What Short Sellers Missed on the Way to the Press Conference…

The Personal Use Issue in Pyramid Analysis; Who is an Ultimate User?

An excerpt from the article and link to the full article at www.mlmlegal.com.

History repeats itself.

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 akin to a replay of 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 the 1970’s FTC challenge, the criticism went to whether or not the core of the MLM referral selling model was a "deceptive" way to market. In the 2012 short seller attack, along with other criticisms, a principal complaint is 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.

Memo to short sellers and algorithmic financial bloggers:

It may be time to reassess.

Some very salient facts and cases may well have been missed in the rush to challenge direct sellers.

1. A survey of FTC, SEC and Justice Department leading pyramid cases during the last two decades is instructive. Interestingly, in massive releases of the Herbalife short seller and the prolific financial blogging "call to action" that Herbalife is a pyramid that should and will be prosecuted by the FTC, NO ONE has bothered to actually examine the facts of leading FTC, SEC and Justice Department pyramid prosecutions of the last two decades… if they had done so, they might observe a significant chasm that exists between inherently deceptive and egregiously abusive pyramid schemes and the practices of leading direct selling companies.

2. They also may have missed the FTC’s own statements on personal use, as well as the trending legislation in more than a dozen states, recognizing the validity of personal use as a legitimate end destination of product.

This article is also available online at: http://mlmlegal.com/herbalife%20Personal%20Use.html and http://mlmlegal.com/MLMBlog/?p=410#more-410

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Topics:  DOJ, FTC, Herballife, Pyramid Schemes, SEC

Published In: MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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