Instigator / Pro
9
1503
rating
78
debates
48.08%
won
Topic

MICRO DEBATE: Herbalife is a pyramid scheme

Status
Finished

All stages have been completed. The voting points distribution and the result are presented below.

Arguments points
3
3
Sources points
2
4
Spelling and grammar points
2
2
Conduct points
2
2

With 2 votes and 2 points ahead, the winner is ...

RationalMadman
Parameters
More details
Publication date
Last update date
Category
Society
Time for argument
One week
Voting system
Open voting
Voting period
One month
Point system
Four points
Rating mode
Rated
Characters per argument
2,500
Contender / Con
11
1679
rating
290
debates
67.24%
won
Description
~ 268 / 5,000

Only 3 Rounds.

This is a micro-debate 2,500 characters. Three days per argument
4 sources per round.
MWD for definitions.
One week to argue (due to my busy workload)

For those who don't know what Herbalife is, it's an MLM "health" company https://www.herbalife.com/

Round 1
Pro
I would like to emphasize the definition of pyramid scheme: "a usually illegal operation in which participants pay to join and profit mainly from payments made by subsequent participants

1. Cost to Join Herbalife

In order to join Herbalife, you must be sponsored by an existing distributor (aka an upline) and purchase an Herbalife Nutrition International Business Pack. The cost to join is around $100.

2. Mainly profit by downlines 

As I mentioned, you must be part of someone's downline in order to join. If you look at Herbalife's income disclosure statement, ~30% of distributors made $0, while only 1.4% made over $35,000 - barely enough to live on. If you look under the economic opportunity section, it states:

Multi-level compensation on downline sales
• Royalties
• Bonuses 

In other words, when you make a sale, a portion of that goes to your upline. 

3. The vast majority lose money

According to the FTC, over 99% of people who join MLMs like Herbalife will lose money. Additionally, Facts About Herbalife reports

Those who do, make money primarily from recruiting new Herbalife distributors, convincing them to buy product, and getting them to recruit even more distributors. Simply put, because Herbalife’s incentive structure rewards recruiting as opposed to retail product sales, Herbalife is a pyramid scheme. It lures in new distributors by promising riches and preying on entrepreneurial dreams but the truth is that 89% of Herbalife distributors will never earn a penny from the company
Conclusion

There are two main criteria, by definition, for something to be considered a pyramid scheme: 1) They have to pay to join; and 2) they profit mainly by recruiting and having a downline. Herbalife meets both criteria, ergo they are a pyramid scheme. 
Con
Not all scams are pyramid schemes (PS).

Pro's definition of PS is far too simplistic and generalised to suffice. Simply charging people to apply for something and not paying them back is a Con, but not a PS, even if that thing is to work for them. While it's true that asking people to recruit others is part of a PS, the most important aspect is that the company doesn't have real products, usually they offer a service rather than a product or have very poor quality products that are jus tfor show. 

The job you apply for is usually a recruiting one (they rarely deny that) but they promise that after a while, you will transfer to the actual job, or they even say that recruiting isn't the job, it's just your way of getting bonuses to get the product cheaper or get let in to an exclusive group.

KEY TAKEAWAYS
  • A pyramid scheme funnels earnings from those on lower levels of an organization to the top, and are often associated with fraudulent operations.
  • The vast majority of pyramid schemes rely on profiting from recruitment fees and seldom involve the sale of actual goods or services with intrinsic value.
  • Multi-Level Marketing operations (MLMs) are similar in nature to pyramid schemes but differ in that they involve the sale of tangible goods.

Herbalife has actual (specialised) products for purchase

From aging to immunitythey sell actual goods. Pro hasn't even mentioned this, nor the fact that to purchase them you don't need to apply to some scheme/course nor recruit anyone.


Herbalife has a lot of documents specifically about refunding, career opportunities etc.

They even have a website set up independently, called 'myherbalife' to process hiring and refund requests:
https://www.myherbalife.com/ which links to DSA to process refund complaints. Why would they have such a legitimate method of getting refunds if they're running a scam?

They explain in their career opportunities that they look for qualifications and experience in a wide variety of things. In fact their hiring page lets you apply for 6 distinct sections of work (legal, financial etc) only one of which is marketing. It even goes through the effort of having specific jobs in each section, and on the top-right you can change your region, careers are offered in US but not in the UK one, for instance.

Here is a modern slavery statement for UK, regarding their workers.

Why would a PS have so much effort put into their job applications and documentation?



Round 2
Pro
Not all scams are pyramid schemes (PS).

This point is irrelevant. The definition of a pyramid scam is "a usually illegal operation in which participants pay to join and profit mainly from payments made by subsequent participants." It's true that not all scams are pyramid scams, but that's not relevant to this debate! Con's use of investopida hurts his case significantly: 

  • A pyramid scheme funnels earnings from those on lower levels of an organization to the top, and are often associated with fraudulent operations.
  • The vast majority of pyramid schemes rely on profiting from recruitment fees and seldom involve the sale of actual goods or services with intrinsic value.
  • Multi-Level Marketing operations (MLMs) are similar in nature to pyramid schemes but differ in that they involve the sale of tangible goods.
As I've shown in my opening, the upline makes a profit for each time the downline sells. You can't make money unless you recruit. 

Herbalife has actual (specialised) products for purchase

Once again, irrelevant. There has been a long list of MLMs with real products that were deemed to be pyramid scams. For example, Holiday Magic was an MLM that sold home-care products and cosmetics, but was deemed to be a pyramid scheme and shut down. 

Herbalife has a lot of documents specifically about refunding, career opportunities etc.

So what? 
Con
My opponent's link to prove that MLM can be a pyramid scheme doesn't disprove me. The idea of 'requirement' is where my opponent has so far proven absolutely nothing other than hearsay. In fact the literal page he links to, in order to slander it and fraudulently call it a pyramid scheme reads as follows:

Can I Make Money With Herbalife?
Yes but you have to also have patience. This is not a scam or a pyramid scheme. This may be the hardest work you’ll ever do but it will be a work of love. You are not working for someone else with Herbalife. You are the CEO of your own Herbalife business.

So, your income potential will be entirely dependent upon your level of focus, drive and commitment. The average Herbalife supervisor only makes about $549 USD annually. That being said, your goal should never be simply to make it to the supervisor rank and stop there.

There are Herbalife distributors making anywhere from several hundred dollars a month to several thousands of dollars per month. So, how much does it cost to join Herbalife is a great question to ask. You are seeking answers and obviously are desiring more out of your life than simply trading time for money.

The fact that his own link supports my case (only link actually, there is 0 testimony given from any supposed victims of the scam) should basically win me this debate's sourcing points alone.

Pro also concedes by asking 'so what' to the fact that this company 0% pressures or forces you to sign up and become a distributor, both in terms of the real goods being sold in single purchases (no 'sign up scheme' required) and the fact that the jobs section is so in-depth that it splits by region, by sector of job only one of which is marketing.

I do not know what to tell you other than my opponent has not at all proven this to be a scam of the pyramid scheme type. It has an area of the website that he links to, which on the very same page actively discredits calling it a pyramid scheme and justifies why.

I will now add on some evidence and testimony. It's ranked as a 4.5 - 5 star (out of five) trustworthy company to work for across many sites:

Even individual products score this high (proving it delivers):

I have tried the products and have lost some weight, look younger, feel better, smarter and earned supplemental income.
When combined just about 20% exercise with 80% nutrition the results are amazing.
Round 3
Pro
Voting Issues and Conclusion

In this debate, I set forth two criteria for which we must judge if a company is a pyramid scheme:

  1. That you have to pay money to join; and
  2. That you profit mainly from payments made by subsequent participants that you recruit. 
Premise 1 has not been challenged. Extend that across the board
Premise 2 likewise has not been challenged. Extend that across the board. 

This is a micro-debate and within the micro-debate format, con has agreed to use the MWB dictionary as the standard definition for which we are to judge. While con is correct that they do have a real product, that doesn't disqualify them from being a pyramid scheme if the first two definitions are met. I do not believe investopedia's definition is adequate. 

Sure, con is correct that you can make money, but the source also states that it is hard work and most make less than $600/year. With the cost of the products and cost to join, that amount will go down. Moreover, you profit more by your downline so you are far and away incentivized to recruit rather than sell. 

A note about their products

My opponent cites one testimony of their products working. Again, so what? Everyone should know that you don't conduct a scientific study on the basis of one individual testimony. Several studies show that their products also have harmed people:

 There have been many reports of acute, clinically apparent liver injury in persons taking Herbalife products, but the link to the HDS product has often been controversial. The specific ingredients in the various Herbalife products that might cause liver injury have not been identified.

Employee Review

My opponent is guilty of cherrypicking the data. Here is one example of a 1-star review

Herbalife is a pyramid scheme. stay away from Herbalife. overpriced products and false advertisement of products. You have to "sell" to your family members. a lot of pressure to recruit. A typical pyramid scheme where 10% at the top make 90% of the money, and the 90% at the bottom make peanuts.

Pros
flexible work schedule
Cons
no salary, no benefits, constant pressure to haggle your family and friends

Con
What you are investing in is a completely transparent and honest 'you are gambling on your success as a distributor to make the money back' scheme. Not only is it crystal clear honest, the website and thus company has put so much effort into having legal documentation to both protect workers' rights against slavery or fraud (look at my links in Round 1) but also customers. The website makes it clear that you can work for it and be employed as a non-marketing employee and even the marketing jobs in the sections I showed are different and where they hire you, as opposed to you gambling on your ability to distribute.

The optional facet to sign up to its distribution program where you invest gambling on your ability to distribute the product enough to get enough out of your 'cut' to make more than you lost is not at all fraudulent. The very source that Pro uses to 'expose the cost to sign up' had on that very same page an entire clause that I quote in R2.

To put it bluntly, Pro saying this:
In this debate, I set forth two criteria for which we must judge if a company is a pyramid scheme
is like me saying this:
In this debate, I set forth different criteria to Pro for which...
It's not about him or me setting any criteria, they are not up to Pro to invent or define. They are already official and defined by what I posted in R1. You need to have it made mandatory to join (or severely inconvenient to not join) the recruitment/distributor program. Usually, you are not even a distributor of the product in a pyramid scheme, you are more usually a recruiter of recruiters of recruiters etc. It's an endless loop and that's how it runs. Herbalife isn't even close to this.

If Herbalife were a pyramid scheme, why has it not been shut down in what we call 'developed' countries? Pro implies that there's a solid case against the company and I admit that it's been in the News but this is nonsense and actually it's Libel. Herbalife is not deceiving anybody, what it's being accused of is showing its honest offer to desperate people and I agree with the media on that being immoral, like targetting recovering gambling addicts with a game of poker or blackjack. By all counts, I implore companies to advertise responsibly and targetmarket ethically but you can do neither and still not be a pyramid scheme.

Pro said I cherry picked, then cherry picked a 1-star review.

This was rather peculiar... Go ahead and see the reviews for yourselves, the average is 4 star at worst.