Friday, March 18, 2016

A technical question on Herbalife for Mikeo: What happens to distributorships on the death of the distributor?

This is a question for those who have spent too much time thinking about good versus not-so-good multi-level marketing schemes. 
I apologise in advance for the very narrow subject matter.

@mikeo188 is an anti-Herbalife account on Twitter. (S)he is very well informed seeming to know the news from the anti-Herbalife camp before it is public.

As someone who is long Herbalife (and has done considerable work) I still take Mikeo seriously. It is Bronte's policy to seek out opponents of our views so we can test their arguments.

Mikeo asked me if I had seen the ESPN piece on Advocare. Sure.

Then asked me what the difference between Advocare and Herbalife was. I said plenty if you looked on the ground (and I have looked on the ground).

But I want to ask a question in response.

Herbalife and Advocare have very different policies as to what happens to the ownership of a distribution business on the death of a distributor.

Here is the Advocare policy:

It is in the full document somewhat more complicated - but the sentiment is that a distributorship ends at the death of the distributor and the upline distributor then gets the income. It is very hard to maintain a distributorship even with an active will.

And here is the Herbalife rule which allows a period of distributor inactivity in which continuity rules do not apply:

The Herbalife rules are designed to ensure the continuity and inheritability of the business.

To the people who claim to have done all this research into Herbalife - can they please explain why Herbalife has such different rules?



Anonymous said...

The value of the franchise is the value of the social network created. Herbalife would rather preserve the value than yank the distributorship?

(What do I know? I'm just long HLF since $42/share because you said so, John.)

Anonymous said...

A blast from the past

Anonymous said...

Not an expert here, but it seems that you are over analysing this. These basically focus on different contingencies.

Advocare talks about what happens when there is no legal heir (presumably because they don't want the franchise to be lost in limbo or to transfer to the state), whereas the focus of the Herbalife text is on the specific rules/conditions that apply when there IS a legal heir.

Just my 2 cents worth.


Anonymous said...

I think Anonymous (#3) has it wrong here - it doesn't say 'when there is no legal heir', but when it's not _expressly provided for_ the transfer in a valid will. This is quite a bit more restrictive, as it does not just mean absence of a legal heir - a legally valid will that did not expressly provide for transfer of the distributorship would also not work.

That said, the point may still be valid, the Herbalife conditions are also pretty specific - possibly equally so in practice.

"Terms and conditions apply" may be the most you can say about it from the outside.

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