A Belgian court recently reversed a 2011 ruling that had declared Herbalife a pyramid scheme. This decision overturned a judgment made by the Commercial Court in November 2011, following seven years of litigation initiated by the consumer organization Test Aankoop.
Test Aankoop had claimed Herbalife breached Belgium's market practices act (WPMC) by operating an illegal pyramid scheme. Herbalife filed an appeal, asserting its sales model fully complied with Belgian law. The Belgian court granted this appeal.
Details surrounding the appeal's basis remain somewhat unclear, primarily reported through Herbalife's own December 3rd press release. The company stated it welcomed the judgment, which affirmed its sales model's compliance with Belgian law.
Herbalife had consistently maintained that the initial judgment contained factual errors and misinterpreted its direct-selling methods. It expressed confidence the original decision would be overturned. But the specific errors Herbalife cited in its appeal remain undisclosed.
The appeal's success appears to rest on the company's sales model complying with Belgian law, rather than a direct refutation of the pyramid scheme designation itself. Multi-level marketing (MLM), Herbalife's sales model, is not illegal in Belgium.
The Commercial Court's 2011 decision had highlighted that incomes from the distribution network significantly exceeded those from an equivalent number of retail customers. It also identified a higher probability of compensation derived primarily from recruiting new distributors into the system, rather than from product sales or usage.
The court further noted that most purchases were made at a 25% or 35% discount. This indicated Herbalife's largest profits came from its distributors. The original judgment concluded it was more profitable for a supervisor to sell to a distributor than directly to a consumer.
The recent appeal judgment effectively sets aside these findings, affirming Herbalife's operations within the bounds of Belgian law.