Instigator / Pro

MICRO DEBATE: Herbalife is a pyramid scheme

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Debate details
Publication date
Last update
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
Description
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
Published:
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. 
Published:
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
Published:
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? 
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Round 3
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