The Hispanic Federation wrote to the Federal Trade Commission in May, requesting an investigation into Herbalife's business practices. This action follows growing concern among consumer groups and politicians about how the multi-level marketing firm targets America's Hispanic population. Critics accuse Herbalife of operating an abusive pyramid scheme.
Herbalife's public relations machine continues to highlight sports sponsorships and new executive hires. But a quiet storm has gathered between the company and consumer advocates in the United States. These groups primarily focus on the Hispanic community, a core market central to Herbalife's expansion.
In 2007, Herbalife reported that the national Hispanic market contributed 61% of its US business. The current percentage is not clear. However, a significant portion of the company's marketing operations targets Hispanics, including sponsorships of famous soccer stars.
This targeting has drawn the attention of Hispanic consumer groups and elected officials representing large Hispanic constituencies. All have expressed worry over Herbalife's recruitment methods within the community.
Congresswoman Linda Sanchez sent a letter to the FTC in June. She noted concern over "allegations" that Herbalife "victimizes our country's most vulnerable populations." Sanchez also pointed out that "independent distributors are compensated more for recruiting new distributors than for sales."
Around the same time, New York City Councilwoman Julissa Ferreras also wrote to the FTC. Ferreras, a Democrat representing a heavily Hispanic district in Queens, expressed her own concerns.
Ferreras urged the FTC to examine Herbalife. She stated that the company "has been accused of operating an abusive pyramid scheme that targets minority groups, especially Latinos, and falsely promises large profits." She noted the impact this company has on her constituents and the broader Latino community in New York.
Latinos in her district and across the country are falling prey to Herbalife's targeted recruitment, Ferreras wrote. Recruitment often begins when individuals are asked to join alleged nutrition and wellness clubs. Dozens of such clubs operate in her district alone. Herbalife representatives use these clubs to exploit people with little or no business experience.
Representatives make false promises of profit and ignore associated risks, Ferreras explained. They then recruit club members into becoming distributors. Since Herbalife's success depends on this aggressive recruitment, new distributors face pressure to recruit additional members. Ferreras concluded that by promising large profits for minimal work, Herbalife preys on vulnerable immigrant communities.