A short YouTube commentary (Feb 14, 2014) by Kevin Thompson, an MLM attorney and managing partner at Thompson Burton, about recent attention on Herbalife after Senator Edward Markey sent a letter to the FTC. Thompson argues Herbalife is not a pyramid scheme, predicts the FTC will respond (likely by late February) but not with an enforcement action targeting Herbalife due to lack of specific data; instead the FTC will likely open a discussion or issue guidelines to clarify gray areas in network marketing (e.g., how much revenue must come from outside customers versus internal consumption). He notes regulators' ambiguity (cites a 2004 FTC memo and a referenced 50% figure) and calls for clearer standards.
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Kevin Thompson, MLM attorney and managing partner at Thompson Burton.
February 14, 2014.
He predicts the FTC will respond by late February (year implied 2014).
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Hey, everyone, Kevin Thompson here, Mlm, Attorney and managing partner at thompson, burton. And we're going to talk about herbalife. I've been really slow to respond to some of the latest developments by bill ackman. But there's two things I want to talk about. And I want to make a bold prediction here. That you haven't seen anywhere else. The first thing is, there was a senator, I believe, from massachusetts. Where he sent a letter to the ftc. Calling on them to investigate herbalife. And he also sent a letter, of course, to herbalife. With some specific questions. Now, this is really nothing new. We've seen various consumer groups Send letters to the ftc making the same request. Bill ackman, he's a man with a lot of influence. He's lobbying. He's getting some traction here and there. This is different, because it's a US Senator entering the conversation. And he's called upon the sec. I'm sorry, the ftc to respond. I think by late february, this is my prediction. The ftc will respond. It's not going to be within markey's timetable. And that's the senator, Senator markey. But they will respond. And they're not going to respond specifically about herbalife. Because they don't have the data, number one. Number two, herbalife is not a pyramid scheme. I've made that clear in multiple posts. But they will respond, and they're going to take this as an opportunity. To start a discussion. About ways to improve the network marketing space. It's not going to be outlawed. But in all candor, we do need some guidelines. There's an ocean of gray separating legitimate network marketing programs. From really bad pyramid scheme schemes. On the one hand, it's clear you can pay commissions on internal consumption. When distributors buy product, it can trigger commissions, no problem. But what if those products are token items? What if it's thousand dollar lemonade? Well, in that scenario, right, it's a token product. It's a subterfuge concealing a money transfer. There's no value being exchanged. It's a pyramid. Well, what about $200 bottles of juice? $100 bottles of juice? What about. I mean, what about companies that really flirt on the edge? And we know that the regulators want to see customer activity, but we don't know how much. Is 10% of revenue from customers. Good enough is 20%, 30%. And its regulatory actions? The FTC says 50. But yet, in a separate memo it wrote in 2004, it says that these actions don't represent the state of the law. So sorry to confuse you. Bottom line is, there's a lot of gray in the space. And it's time that we get a little bit of clarity. And so I do think the ftc is going to respond. And they're going to start a discussion to get some guidelines done. When there's a gap in the law, they issue guidelines to. To help fill that gap, to help the marketplace understand where they're coming from. We're due for that. So I think that's good for the space. That's my prediction. And at first I thought, oh, the ftc is going to be talking about herbalife. But then I slept on it, and I realized, what doesn't have any data. And the law is not developed to the point. Where they have any ammunition to use against herbalife. But we do need some clarity. So that discussion is going to happen at some point. So hope you find that informative. A lot of stuff in there. Please leave your comments below the video or on my blog. I love hearing from you folks. I don't hear from you folks enough. I feel so lonely. Just kidding. Take care.
