LYNN — Herbalife, a health food multilevel marketing company, will soon open up shop in Lynn.
City council voted unanimously to approve Herbalife employee Floriceda Hernandez’s petition to open an Herbalife nutrition shop at 170 Chestnut St. at a meeting Tuesday night.
Hernandez, alongside North Shore Latino Business Association CEO Frances Martinez, approached the podium to introduce herself.
“Hi. My name is Floriceda Hernandez, and I will be the one opening up the shop on Chestnut Street,” she said, before taking her seat.
Lynn resident Calvin Anderson approached the podium next, speaking in favor of the proposed Herbalife opening.
“This is at the edge of my neighborhood, and I always welcome small businesses into our city — I think it’s the key to our present and future,” Anderson said.
Even though consumers can purchase Herbalife products in retail stores and online, the company has a reputation for operating primarily through person-to-person sales, encouraging Herbalife salespeople to recruit other salespeople, who then sell their products to more salespeople.
The company’s multilevel marketing structure kept it in the public spotlight for years. In 2016, Herbalife paid out $200 million to consumers after the Federal Trade Commission (FTC) charged that the company deceived consumers into believing they could earn substantial profits selling diet, nutritional supplement and personal care products.
The FTC wrote that Herbalife’s compensation structure was unfair, as it rewarded distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product.
The commission found that the marketing structure caused “substantial economic injury to many of its distributors.” The small minority of distributors who did earn a significant profit were compensated for recruiting new distributors, regardless of whether those recruits could sell the products they were encouraged to buy from Herbalife, the FTC reported in 2016.
“This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” former FTC Chairwoman Edith Ramirez said.
In addition to the multi-million dollar payout, Herbalife was forced to change its structure completely. The FTC required the business to compensate vendors based on their retail earnings, as opposed to their recruitment practices.
On August 28, 2020, Herbalife paid out more than $123 million in combined penalties after the company was charged with violation of the Foreign Corruptions Act for falsifying financial records to maintain business overseas.
“By engaging in a decade-long scheme to falsify its books and records to conceal corrupt and other improper expenditures, Herbalife misrepresented the information available to investors. Today’s resolution reflects the department’s ongoing commitment to combating corruption and ensuring that investors can trust the accuracy of the financial statements of publicly traded companies,” former Acting Assistant Attorney General Brian C. Rabbitt wrote.
Despite Herbalife’s history, Hernandez said that her Lynn shop would not engage in recruitment practices and would serve only as a retail health foods store.
“I will not be doing any recruitment or anything. It will be just a regular retail store where we will be making juices with the products that we sell,” Hernandez said.
Hernandez said that she began selling Herbalife two years ago, after consuming the product for seven years prior. The Herbalife location would serve as her first-ever retail store.
Ward 2 Councilor Rick Starbard said that although he is aware of the company’s history, he met with Hernandez and is convinced that the store will only serve as a retail health food store.
“I’ve heard a lot of people say that the Herbalife products are good, and I know that these folks here, the applicants, will just be selling their products,” Starbard said.
