Tuesday, 7 July 2015

5 Reasons Herbalife’s Survey Won’t Save It from Prosecution

Bonnie Patten (TruthInAdvertising.org) 
Deconstructing Herbalife's defense that a survey found most people join for discounts
 
In the recent Bostick v. Herbalife class-action case, which settled in California federal court in May, Herbalife’s primary defense as to why it isn’t a pyramid scheme was a static 2013 survey estimating that approximately 73% of its members joined the company to receive a wholesale price on products. In other words, Herbalife, a Los Angeles-based multi-level marketing company that is also under investigation by federal officials, believes it can shield itself from prosecution by claiming that a majority of people join only to receive lower prices on its dietary supplements and weight-loss products, not to earn money. The Bostick court opined that “this evidence seriously undermines Plaintiffs’ endless chain scheme claim, as it suggests most members did not join ‘for the chance to receive compensation’ for recruiting new members.” But here are five reasons why this defense simply won’t work. 
 
1. Follow the money. Determining whether an MLM is a pyramid scheme or not by analyzing people’s motivation for joining an organization is of little to no value. As Koscot, a cosmetics MLM that the FTC deemed an illegal “entrepreneurial chain” in one of its first pyramid scheme actions, and its progeny have made clear, the real issue is what the company motivates its distributors to do – that is, whether the company focuses on paying distributors for recruitment rather than retail sales. And this is not an analysis that can be isolated to one particular moment in time. Quite to the contrary, in determining whether or not an organization is operating a pyramid scheme, the data must be reviewed over time to see if there is a common pattern and practice of ongoing reward for recruitment with little evidence of sustained consumer demand. See Omnitrition, 79 F.3d at 782 (citing Koscot, 86 F.T.C. at 1181) (“The promise of lucrative rewards for recruiting others tends to induce participants to focus on the recruitment side of the business at the expense of their retail marketing efforts, making it unlikely that meaningful opportunities for retail sales will occur.”)
2. Totally irrelevant. Assuming Herbalife’s survey is accurate (which is a big assumption), it simply means that its business can be divided into two primary segments: its retail discount programme and its distributor programme. That 73% joined Herbalife at one moment in time for a retail discount doesn’t mean that the 27% engaged in direct sales for Herbalife are not involved in a pyramid scheme. And as Bostick made clear, those involved in the distributor programme purchased a disproportionately larger amount of products than did the discount buyers. See FTC v. Burnlounge, Inc., 753 F.3d 878, at 881 (“The evidence at trial showed that BurnLounge’s business had two primary aspects – its Retailer programme and its Mogul programme. . . The Mogul programme was the only aspect of BurnLounge that the district court found to be a pyramid; accordingly, this opinion focuses on the Mogul programme.”)
3. Prosecutors don’t care. There are two prongs to determining whether a company is operating a pyramid scheme: (1) the right to sell a product, and (2) the right to receive rewards, which are unrelated to sale of the product to the ultimate user, in return for recruiting other participants into the programme. The primary reason why someone says they joined Herbalife is of little consequence in determining whether Herbalife’s focus is on recruitment with rewards rather than sales of merchandise. Which is to say that why someone joins a business doesn’t obviate the fact that the business may still be a fraud. (See Webster v. Omnitrition International, Inc., 79 F.3d 776, 782 (9th 1996) in which the court found that MLM Omnitrition was a pyramid scheme because “[t]he mere structure of the scheme suggests that Omnitrition’s focus was in promoting the programme rather than selling the product.”)
4. Identity crisis. While Herbalife is a multi-level marketing company, for purposes of its pyramid scheme defense it relies on static survey evidence that 73% of its members actually consider it more of a buyers’ club (a la Costco). The argument goes like this: internal consumption by the majority of Herbalife members amounts to sales to the ultimate users so any rewards paid on these sales are related to the sales of products to ultimate users and have nothing to do with recruitment or illegal schemes or the like. But here’s the problem with this argument, there has been and always will be internal consumption in MLMs – it is a constant that can be wholly eliminated from determining if a company is a pyramid scheme because it does not (and never will) answer the question of how an MLM’s bonus structure operates in practice. Moreover, such static survey information fails to capture the true life cycle of these discount customers, who generally quickly become inactive and no longer make any purchases. (See FTC v. Burnlounge, Inc., 753 F.3d 878 at 887, which found that “[i]n practice, the rewards BurnLounge paid for package sales were not tied to the consumer demand for the merchandise in the packages; they were paid to Moguls for recruiting new participants. . . . Rewards for recruiting were ‘unrelated’ to sales to ultimate users because BurnLounge incentivised recruiting participants, not product sales.”)
5. Devil’s in the detail. The January 2013 distributor research survey that Herbalife holds up as its golden goose to defend itself against pyramid scheme allegations is largely a mystery as Herbalife keeps the document behind its corporate veil. And while it may not be worth the paper that it is written on, in the end it really doesn’t matter because it cannot prove that Herbalife is or is not a pyramid scheme.
 

Friday, 26 June 2015

Bombay High Court allows FSSAI to recall Amway products

Nagpur: After Maggi, it's now the turn of network marketing major Amway Enterprises to 
withdraw its products from the market. The Nagpur bench of Bombay High Court on Wednesday 
directed Food Safety and Standard Authority of India (FSSAI) to go ahead with its action 
of recalling seven Amway products.
A division bench comprising justice Bhushan Gavai and justice Indira Jain tersely asked 
FSSAI what was preventing them from taking action when products were found unfit for 
consumption in their scientific studies. The court then adjourned hearing of PIL filed by 
social workers Sachin Khobragade and Jammu Anand through their counsel Nihal Singh Rathod 
by eight weeks.
Earlier, FSSAI filed an affidavit through senior counsel Mehmood Parasher and Rohan 
Malviya that as many as 37 products of the chain marketing major were put under the 
scanner. Of these, seven were found to contain more than permissible quantity of minerals 
and vitamins as per studies conducted by Indian Council of Medical Research (ICMR) and 
National Institute for Nutrition (NIN). All these products were found without mandatory 
licenses and no-objection certificates (NOC) or product approvals from the food 
authority.
Out of 37 products were under the scanner, seven including Nutrilite Natural B tablets, 
Calcium Magnesium D, Nutrilite Iron Folic tablets, Nutrilite Bio C, Positrim Vanilla, and 
Nutrilite Kids Drink in mixed fruit flavour had been rejected by the food authority. NOC 
of Nutrilite Salmon Omega 3, Nutrilite CH Balance and Nutrilite Fiber had expired, still 
they were being sold.
The main reason for rejection of NOC was that ingredients such as protein and minerals 
exceeded beyond permissible limit in the products. Some products contained protein powder 
that had been denied NOC, approval or license by FSSAI, whose product approval committee 
had rejected all such products. However, even after warnings, the company failed to
withdraw them from the market. The petitioners alleged that despite being directed by 
FSSAI to recall them, the company is still selling them openly in the market.
Citing provisions of Food Safety and Standards Act 2006, the petitioners prayed for 
directives to FSSAI to recall all Amway products which are being sold without valid 
license/approval/NOC, and investigations from an independent body into entire episode. 
They also demanded conducting audit of FSSAI.

AMWAY PRODUCTS WITH EXPIRED NOC
Nutrilite Salmon Omega 3
Nutrilite CH Balance
Nutrilite Fiber
PRODUCTS UNFIT FOR HUMANS
Nutrilite Natural B tablets - Excess vitamins
Nutrilite Calcium Magnesium-D - Excess minerals, vitamins
Nutrilite Iron Folic tablets - Excess minerals, vitamins
Nutrilite Bio C - Excess vitamins
Positrim Vanilla - Excess vitamins
Nutrilite Kids Drink in mixed fruit flavour - Can't be given without doctor's 
recommendation

http://timesofindia.indiatimes.com/city/nagpur/HC-allows-FSSAI-to-recall-Amway-
products/articleshow/47806874.cms
(With inputs from Ritika Singh)

Thursday, 18 June 2015

Raid on Amway outlet for selling banned baby food

HYDERABAD: In the wake of the controversy over Maggi noodles and cries for action against 
other such ready-to-eat food items, the State Commission for Protection of Child Rights 
(SCPCR) conducted a raid on the Amway outlet in Somajiguda here on June 15, 2015 for allegedly  selling baby food and drinks banned by the erstwhile united Andhra Pradesh government. 
On June 5, the SCPCR received a complaint from Shyam Sundar, secretary of Corporate 
Frauds Watch Society, against Amway, for allegedly selling products by issuing misleading 
advertisements. Almost 18 products banned by the food and safety department authorities 
were on display at the outlet, alleged SCPCR. 
Officials of the SCPCR said that the Supreme Court on December 2010 had cracked down on the company on misbranding charges and selling of unhealthy products. The SCPCR alleged that Amway continued to sell products not good for children flouting the apex court orders. Products such as protein powder, chewable multi-vitamin/mineral tablets, dietary supplements, kids' toothpaste, etc, hazardous to health, were being sold by Amway, the SCPCR officials said. 
"Several products banned by the SC are on display. As per SC orders, neither are these 
allowed to be sold nor put on display in their showroom or godown," said Achyutha Rao, 
member of SCPCR.
Rao confirmed that legal action would be taken against the company for flouting the SC 
order. A notice has also been sent to the principal secretary of health Suresh Chanda, he 
said. 
"We have received several complaints based on which we are planning to conduct raids on several upmarket food joints and outlets that are involved in such illegal activities. 
This is just the beginning," said Rao. 
Meanwhile, Amway denies the allegations put forth by the SCPCR. 
"Cases referred by the members of SCPCR were filed way back in 2007 in undivided AP and are currently sub-judice in the respective forums. We had no prior notice or intimation 
about this visit. We are not selling any product for which approval has been denied by 
FSSAI," said an Amway spokesperson. 
This is not the first time that Amway has been in the news for wrong reasons. Last year, 
the Hyderabad police had arrested Amway India's CEO, S Pinckney, following a consumer complaint against the direct-selling firm. In June 2006, Hyderabad police had shut down all offices of Amway citing illegal business model of the multi-level marketing firm.

http://timesofindia.indiatimes.com/city/hyderabad/Raid-on-Amway-outlet-for-selling-
banned-baby-food/articleshow/47682847.cms

Friday, 5 June 2015

Corporate Frauds Watch seeks action against Amway products too.




On the lines of action against Nestle product Maggi, Corporate Frauds Watch sought action against the misbranded and adulterated products of Amway India in the country. Amway has already been facing criminal charges in more than one State in India. Corporate Frauds Watch in a plea to the director of Institute of Preventive Medicine, Public Health Labs and Food (Health) Administration, Hyderabad sought against Amway.

To                                                                                        Date: 5/6/2015
The Director,
Institute of Preventive Medicine,
Public Health Labs & Food (Health) Admin,
Narayanaguda, Hyderabad-500029.

Respected Sir,

Sub:  Representation to initiate action against the misleading and misbranded products of M/s Amway India Pvt. Ltd, Somajiguda, Hyderabad in terms of FSSA, 2006– Regarding.

****

1.       I, M.V. Shyam Sundar, Secretary of Corporate Frauds watch Society, Hyderabad branch, humbly submit that the Corporate Frauds Watch Society is a registered civil society organisation striving to create awareness among general public against the frauds being committed in the corporate veil. 
2.       It came to our notice that M/s. Amway India Private Ltd, Somajiguda, Hyderabad has been selling products by issuing misleading advertisements. Apart from it, several criminal cases have been pending against the products of the M/s Amway India. Still Amway has been selling the same products with impunity which is detrimental to the health of general public.  Previously, also several products of the Amway were found to be misbranded, not food and adulterated in the united state of A.P.  The Food Safety authorities of several State Governments in India have also found during their tests that the products are not safe and initiated action against the M/s Amway India Enterprises.  Several people also brought to our notice that their health was affected after using the products of Amway.  But, no action has been initiated in Telangana and Andhra Pradesh against Amway though it is aggressively selling products in the two states.
3.       In the interest of health of general public, it is prayed that the esteemed officer may be pleased to launch enquiry by testing the products of Amway regarding its genuineness in terms of the Food Safety and Standards Act, 2006 and initiate action and save the health lakhs of innocent people.

Yours faithfully,


(M.V. Syam Sundar)

Wednesday, 20 May 2015

Amway's Nutrilite in trouble

United States-based direct selling company Amway is in trouble as a lower court in Uttar 
Pradesh has pronounced that the company has been making false and misleading health 
claims for its vitamin supplement Nutrilite Daily and violating India's food law. 
United States-based direct selling company Amway is in trouble as a lower court in Uttar 
Pradesh has pronounced that the company has been making false and misleading health 
claims for its vitamin supplement Nutrilite Daily and violating India's food law.
Besides, the ruling could cast a shadow on the multinational company's flagship brand 
Nutrilite, under which it sells a range of products including vitamin supplements and 
protein powder.
After hearing a complaint filed by the food regulator, Food Safety and Standards 
Authority of India or FSSAI, the court said in a recent order that Amway has been
claiming that its product has exclusive natural extracts such as 'phytofactors plant 
compounds from Nutrilite's exclusive plant concentrates', without citing any scientific 
evidence to back it.
The court also slapped a penalty of Rs 10 lakh on the company. Amway said that it has 
already challenged the order in Food Safety Appellate Tribunal at Meerut and got a stay 
order.
The Greater Noida court also found Amway's claim - that its special coating called 
'Nutrilite exclusive nutria lock' makes it easier to swallow tablets - misleading and
without proof, and said that it fails to understand how the company's coating is 
exclusive and different from those used by several other drug making companies for the 
same purpose.
The judge also took note of the fact that FSSAI's product approval division has rejected 
applications for several other products under Nutrilite series such as Iron-Folic, 
Natural 'B' and Bio C, among others. The food regulator argued before the court that it 
has become a trend for many drug-making companies to project their medicinal products as 'food' to escape the tighter regulations under Drug and Cosmetics Act, and expensive and time consuming clinical trials mandated under it.
Leading brand consultants said the adverse impact of one subbrand has a negative rub-off  on other sub-brands under the umbrella brand. "An adverse event like this absolutely has the potential to make a dent in the brand image of the entire Nutrilite range of 
products, albeit not to the extent of damage faced by the brand of the product in 
question, Nutrilite Daily in this case," said Harish Bijoor, CEO of Harish Bijoor Consults Inc.
Amway said it doesn't think that the ruling will hit the brand image of Nutrilite in 
India.
"We have moved Food Safety Appellate Tribunal at Meerut challenging this order which 
questioned claims made through product merchandising literature of Nutrilite Daily. The 
Tribunal vide an order dated May 07, 2015 has stayed the order passed by ADM, Gautam Budh Nagar, Greater Noida. We are hopeful of getting a positive order in our appeal as we have adequate substantiation for all the claims made in the product merchandising literature of Nutrilite Daily," said an Amway spokesperson.
Claiming that Nutrilite is the world's No. 1 selling vitamins and dietary supplements 
brand, he added that all Nutrilite products globally comply with World Health 
Organisation and International guidelines like CODEX for vitamin and mineral content.
"The Nutrilite range has been manufactured and sold in India, after getting requisite 
licences under the food law, for more than a decade. Nutrilite Daily was launched in 
India in 2002 and we have lakhs of satisfied customers here," he said.
According to media reports published in March, of the over Rs 2,000 crore annual revenue that Amway clocks in India, the Nutrilite range of products accounts for 55%, beauty products portfolio contribute another 30% while the balance comes from the company's home care range.

Sunday, 12 April 2015

RBI warns against 'balance checking' app


Crooks always come up with new tricks to con the gullible. Earlier, they asked the debit card holders to reveal the pin and cleaned their accounts. This time they are out to clean the accounts once again with a new application.

Cautioning public against a fraudulent bank account mobile app in its name, the 

Reserve Bank has said that it has not developed any such application. The RBI on 

Saturday warned the general public against using the application allowing a 

person to check balances in various bank accounts.

In a statement, the Central Bank said that it has come to its notice that a software 

application is doing rounds on WhatsApp purportedly to facilitate checking of 

balance in customers' bank accounts.

The software application has the RBI logo on it with the title 'All Bank Balance 

Enquiry No' and has listed several banks with either mobile number or call centre 

number.

"The Reserve Bank wishes to clarify that it has not developed any such 

application. Members of public are, therefore, advised to use the application, if at 

all, at their own risk," RBI said.

My dear fellow Indians! Do not fall for the dubious tricks of the conmen. Do not 

reveal any information regarding your bank account details to anyone.

Monday, 16 March 2015

There is no scientific case for homeopathy: the debate is over

Pharmacists who sell homeopathic remedies as anything other than placebos are putting their customers’ health at risk 

Edward Ernst
Drawers containing homeopathic remedies
 'Undeterred by the evidence, the public continue their long and intense love affair with homeopathy. Few wonder whether it is the homeopathic remedy or something else, eg the placebo-effect, that did the trick.' Photograph: Peter Macdiarmid/Getty Images

Homeopathy has been with me all my life. As a boy, I was treated by homeopaths; my first post as a junior doctor was in a homeopathic hospital, later I researched homeopathy and published more than 100 papers on the subject, and finally I summarised the entire experience in a memoir entitled A Scientist in Wonderland.
In 1993, when I became professor of complementary medicine at Exeter, I was more than happy to give homeopathy the benefit of the doubt. I would have loved to show that it is effective beyond placebo, not least because anyone doing that would almost automatically deserve a Nobel prize. He or she would have to show that a sizeable chunk of our understanding of the laws of nature is quite simply wrong. Homeopathy is based on the belief that “like cures like” and that the dilution of a medicine – homeopaths call the process “potentiation” – renders it not weaker but stronger. As both of these assumptions fly in the face of science, critical thinkers have always insisted that few things could be more implausible than homeopathy.
But plausibility is not everything. In Exeter, we conducted trials, surveys and reviews of homeopathy in the faint hope that we might discover something important. What we did find was sobering:
 Our trials failed to show that homeopathy is more than a placebo.
 Our reviews demonstrated that the most reliable of the 230 or so trials of homeopathy ever published are also not positive.
 Studies with animals confirmed the results obtained on humans.
 Surveys and case reports suggested that homeopathy can be dangerous.
 The claims made by homeopaths to cure conditions like cancer, asthma or even Ebola were bogus.  The promotion of homeopathy is not ethical.










Now, the internationally highly respected Australian National Health and Medical Research Council have conducted what certainly is the most thorough and independent evaluation of homeopathy in its 200-year-long history. Already their preliminary report had confirmed that homeopathy is nothing other than treatment with placebos. Predictably, this caused a storm of opposition from enthusiasts of homeopathy, and they were invited to submit their evidence to the contrary. The Australians then considered this evidence carefully and have now published their final report. It arrived at the same conclusion as the previous document. If anything, it went one step further by pointing out that “people who choose homeopathy may put their health at risk if they reject or delay treatments for which there is good evidence for safety and effectiveness”. Personally, I would go another step further and remind pharmacists who sell homeopathic remedies to the unsuspecting public that it is unethical to pretend they are more than placebos.
Undeterred by the evidence, the public continue their long and intense love affair with homeopathy. Worldwide, consumers use it in their millions and are convinced that it helps them. Few wonder whether it is the homeopathic remedy or something else, eg the placebo-effect, that did the trick. Homeopaths continue to claim that their approach is based on sound evidence; they even cite studies and reviews that seem to prove their point. Few of us wonder whether their evidence is cherry-picked and thus unreliable. In other words, the discussion about the value or otherwise of homeopathy has been never-ending, often intense and incredibly unproductive.In 2010, a House of Commons select committee assessed the evidence for and against homeopathy. It concluded that homeopathy was not more effective than a placebo and that the NHS should cease funding it. Subsequently, the government considered their report and essentially agreed with the verdict but nevertheless felt that, if patients want homeopathy, they must have it on the NHS. Such blatant disregard for the principles of evidence-based medicine infuriates scientists, perpetuates a needless debate and wastes sizable amounts of taxpayers’ money.
But, after 200 years of fruitless discussion, we finally have, in the Australian evaluation, a comprehensive, transparent and evidence-based review from a panel of experts who are competent and free of conflicts of interest as well as a government that is determined to abide by the advice thus generated. Let’s hope that others will now follow suit.
http://www.theguardian.com/commentisfree/2015/mar/12/no-scientific-case-homeopathy-remedies-pharmacists-placebos