Is Herbalife An MLM? - The List

When you sign up as a Herbalife distributor, the last thing you want is to end up wasting time and money. The whole point is to earn more so you can finally break the 9-to-5 grind, travel more, or buy something nice. Back in 2016, the FTC reported that half of Herbalife's top distributors actually made less than $5 per month by selling products. Some even launched physical stores to promote and sell the company's products, but they ended up losing money. The corporation had to pay a staggering $200 million back to distributors and consumers. The FTC settlement also required Herbalife to change its compensation model and stop making deceptive earnings claims.

The few distributors who actually made money were the ones with the largest number of recruiters, says the FTC. Simply put, their earnings didn't come from product sales — and that's a pyramid scheme, not MLM. The FTC explains that companies using pyramid schemes encourage their members to recruit others rather than promote and sell products. MLMs, on the other hand, generate revenue through direct sales. An MLM company may choose to reward its members or distributors for bringing in recruits, but the focus is on the product itself. However, both MLMs and pyramid schemes typically require an initial investment, so there's a risk of losing your money.