The FTC’s settlement with Herbalife validated many of the concerns that NCL and others had expressed. The Commission found that the company drew people into its “income opportunity” with false claims about how much money they could make, when in fact the main income generator was the recruitment of other distributors, not legitimate retail sales. This is the classic definition of a pyramid scheme. As a result, the FTC’s settlement with Herbalife requires that the company completely restructure its business model.

We were surprised to read Herbalife’s public account of the settlement, however, which suggests it received nothing more than a slap on the wrist. In a press release, Herbalife’s CEO Michael Johnson trumpeted that the settlement represents “an acknowledgment that our business model is sound.” That’s not what the FTC said. “This settlement will require Herbalife to fundamentally restructure its business,” announced FTC Chairwoman Edith Ramirez. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make,” she said. Indeed, it sounded like Johnson and Ramirez were discussing two completely different settlements.