What the FTC Settlement Means for Your U.S. Business

What the FTC Settlement Means for Your U.S. Business

Herbalife FTC Settlement Reached - July - 2016

Over the next several months, we will be rolling out improvements that will strengthen Herbalife and the entire U.S. direct selling industry culminating with the change to distributors earning compensation based on retail receipts effective May 2017.

The settlement does not change our business model as a direct selling company, but has resulted in some enhancements that will make it easier for us to demonstrate what we have known all along – that there is overwhelming consumer demand for our products and the services our Members provide.

There will be mandatory training for all Distributors to ensure that you have all of the tools and support you need to understand and implement the changes. Here is an overview of the improvements you can expect:

	WHAT WE DO TODAY	WHAT WE WILL DO
Member Categories	All Members are treated as potential business builders and can join for the discounts on products or for the business opportunity to retail, recruit and earn. They are not required to designate their reason for joining	• All current and future Members will be asked to select the Membership category that best fits their goals, and will be provided the training and materials they need: “Preferred Members” or “discount purchasers” will be the terms used for customers who only wish to purchase products at a discount for self-consumption. Discount purchasers will not be eligible to retail, recruit or earn. “Distributors” or “business builders” will be the terms used for those who wish to pursue the business opportunity, retail and recruit. They will be able to purchase products at a discount for personal consumption or retail sale.
Compensation Basis	All Members earn wholesale profit (commissions) based on the purchases of their downline and the volume accumulation of their downline. Qualification to earn royalties and production bonus is based on meeting monthly volume thresholds, which are reached through purchases from Herbalife. • All Members earn royalties and production bonus based on the volume accumulation of their downline. All Members earn a progressive discount based on their own purchases and the purchases of their downline.	Distributors will earn commissions solely on verified retail sales of their downline, declared and allowable personal consumption, and purchases by downline discount purchasers. Distributors are required to submit standardized retail receipts for verification of all retail sales. Qualification to earn royalties and production bonus will be based on meeting verified retail sales thresholds. Distributors will earn royalties and production bonus based on the sum of verified retail sales and allowable personal consumption of their downline. Distributors will be able to earn progressive discounts based on verified retail sales and purchases by downline discount purchasers. • Distributors will be able to earn a progressive discount on product for resale based on verified retail sales and sales to discount purchasers. * There will be limits to the amount of Distributor personal consumption that will qualify towards earnings.
Income & Lifestyle Claims	All income and lifestyle claims must be true, be verifiable and include the disclaimer. • Provide Members with our Statement of Average Gross Compensation.	We will provide additional training and guidance to ensure that income claims are truthful and accurate. • Our Statement of Average Gross Compensation will continue to be provided.
Nutrition Clubs	90 day waiting period and a required training course before opening a Nutrition Club.	One year waiting period and submission of a business plan before signing a new lease or opening a Nutrition Club. Required training course before signing a new lease or opening a Nutrition Club. Training sessions will be on the following topics: How to create a budget; How to learn about and comply with local laws; and How to create a business plan.
Refund / Buyback Policy	100% buyback, including return shipping, for a time period of 90 days for an Herbalife Member Pack and one year for products.	100% buyback for all Distributors, including initial shipping as well as return shipping. This will be for a time period of one year for an Herbalife Member Pack and one year for products