Founded in 1980 by Mark Hughes, Herbalife International based in Los Angeles, California “is the third largest direct-selling, multilevel marketing company in the world” (Ferrell, Thorne, & Ferrell, 2016, p. 456). From a humble beginning of selling product from the trunk of Hughes’ car, Herbalife achieved $2 million dollars in sales in just two years. In 1986 the company went public on the NASDAQ stock exchange. After the untimely death of Hughes in 2000, J.H. Whitney & Company acquired Herbalife then took the company private for a few years before going public in 2004 on the New York Stock Exchange (NYSE). There are 6200 Herbalife employees and millions of independent contractors across the globe. From a business ethics standard, Herbalife …show more content…
Herbalife International does not sell in retail stores, but rather through direct sales by independent contractors. Independent contractors recruit new contractors in a multilevel marketing approach. In multi-marketing products are sold person-to-person by contractors to consumers. Contractors seek multi-marketing direct-selling for a few reasons which may include being passionate about the product or company and selling the products in order to discounted prices on products for personal use. Direct sellers can create a work schedule that is beneficial to them and alter the time commitment based on the financial benefit they want to realize as a result of their efforts. Some individuals enjoy the face-to-face interaction of selling a product they believe in or they may find on-line sales convenient and lucrative. About 71-72 percent of the Herbalife contractors are single level participants meaning they do not make money off of other recruits. In direct sales the compensation model can be single level marketing where the contractor sells product as a reseller and receives a margin or commission on the sale. It is difficult to determine the percent of product that is being resold to the end users compared to internal consumption; however it is legal for the contractor to consume the product they purchase if that is their desire, however, it is not required that contractors sell or purchases the product. However, it is believed that every contractor also is a patron or uses the Herbalife product (Ferrell, Thorne, & Ferrell, 2016). In a multilevel sales model the contractor creates or recruits a network of associates and they can earn additional commission from the sales of their recruits. There is no limit to the number of recruits a contractor can have at Herbalife International. Moreover, creating a