There’s another twist in the saga of Herbalife, the California company accused of being a pyramid scheme. Some distributors for the protein shake company were sent a survey that seems aimed at finding out if Herbalife is indeed a sham. Coincidence?
Activist investor Bill Ackman argues the company’s business is all about getting distributors of Herbalife products to sign up other recruits, for which they get more money. That’s known as multilevel marketing, and it’s OK as long as there are customers who want to buy Herbalife products. Ackman says there are no real customers and that in the end, the distributors are stuck with tons of protein drinks, which makes Herbalife a pyramid scheme.
The accusations have further set Ackman against fellow activist investor Carl Icahn, who has taken Herbalife’s side. The two billionaires, who are also in a long-running legal fight, had a riveting verbal battle on CNBC in January. In February, Icahn gained two seats on the Herbalife board.
Ackman’s hedge fund, Pershing Square, is not behind the survey, according to sources, who say that it was paid for by an “individual private entity.” (That theoretically leaves open the possibility that an intermediary commissioned it, but there is no evidence of that.) The survey was sent out by Marketing Edge Consulting, a firm based in the US state of Connecticut. Marketing Edge offers to pay distributors $40 for a completed survey and an additional $10 for every other distributor they recruit to fill one out. Ironically, this seems akin to multilevel marketing for surveys, the practice Herbalife uses. In marketing terms, the survey’s payment offers are known as “snowball sampling.” They are notorious for producing biased results since the research doesn’t come from a random sample.
At first, the survey looks like it’s aimed at people involved in direct sales in general, those who sell products for Avon, Mary Kay, Amway and others. Quartz hasn’t been able to ascertain yet whether distributors for any of these other firms were sent the survey. But as you get further into the 50-question poll, it seems squarely aimed at the accusations surrounding Herbalife. Here are some of the questions.
• How many end customers do YOU sell to in an average month, not including sales to other distributors and sales by other distributors in your network?
• Of the products you purchase each month to sell to customers, on average, how much are you actually able to sell to customers each month?
• Please indicate whether you agree strongly, agree somewhat, disagree somewhat, or disagree strongly with this statement: I am pressured to purchase more product than I am able to use or sell.
One distributor in the US state of Georgia, who has sold Herbalife products for about five years, said he had never received a survey about his work until he got this one. With the drama around Herbalife, he reported the survey to his Herbalife representative and declined to take it. “I was really upset and angry about it because it seems like it’s aimed at bringing Herbalife down,” he said.