Inside Ferne McCann’s controversial business venture as the former Towie star comes under fire over MLM scheme
WHEN Ferne McCann said she wanted followers who were “coachable and consistent and quietly sick of where they are” to join her business, nearly 3,000 people replied that they were ready.
The former Towie star, 36, didn’t however say what the opportunity actually was or what it involved – instead claiming it pays for her family’s security and her daughter’s education – and can even be done around a full- time job.
The business in question? Ferne wants you to join her and become an independent distributor for the controversial company Herbalife.
For nine years Ferne has been encouraging people to sign up for the global multi-level marketing (MLM) corporation that develops and sells dietary supplements.
But behind the glossy facade troubling questions have been asked about the multi-billion pound company.
Herbalife was once regularly pushed by reality stars, but now Ferne is among a handful, alongside Danielle Armstrong, who continues to work with them after a string of concerns.
From the very beginning, Herbalife was a direct-selling company, peddling products to the public through a network of members.
Nothing wrong with that. Plenty of other companies – such as cosmetics giant Avon – have the same model.
Where Herbalife has attracted criticism, however, is in their own particular version of the model.
In the past, members would receive money not just from selling products, but also from bonuses following sales made by new members they had recruited to the brand. New recruits were encouraged to buy a substantial amount of starter ‘inventory’, which meant the person who recruited them earned commission straight away even if the products had not yet sold.
But in 2016 the company was subject to a two-year investigation by America’s Federal Trade Commission.
They concluded that the structure incentivized recruitment over actual retail sales. Herbalife was ordered to pay £147million compensation and told to revamp its compensation structure so that distributors are rewarded for what they sell, instead of fundamentally rewarding recruiting over actual retail sales.
Since the ruling, the recruiter will only get paid commission after the new recruit actually sells those products to real customers and shows receipts.
The ruling did little to quell the fears of some that Herbalife still peddled unrealistic dreams to those who could least afford them.
And despite concerns, last month Ferne was busy recruiting again – sparking outrage and concern amongst ‘victims’ of MLM schemes in the past, who felt she had failed to declare she would be earning money if people signed up and started selling.
A spokesperson for Herbalife confirmed she would not make money just from people being recruited, which appears to be a common misconception about the company.
They said: “Many distributors simply sell products to consumers at a profit. Those who choose to can build their businesses further by coaching their own sales teams of independent distributors and earn a commission on their sales as well as their own. Herbalife distributors are not paid to recruit new members – a practice which is illegal in most countries globally.”
In a surprising move, Ferne admits that MLMs are ‘vague’ but doesn’t explain why – or indeed spell out her business model.
Alongside a series of glam images of herself, Ferne wrote: “Almost 9 years ago I joined a business I didn’t fully understand, with a baby on the way and no plan B.
“Today it pays for my girls’ education, it’s given my family a level of security I didn’t think was an option for me any more.
“I want to be real with you about what this is, because I think the MLM industry does itself no favours by being vague!
“It is flexible. You genuinely can build it from your phone, around school runs, around a full-time job, around whatever your life currently looks like. That part is true and it’s why I’m still here.
“I’m looking for people who are properly ready. People with a work ethic. People who are coachable and consistent and quietly sick of where they are. If that’s you, you already know it.
“I’ll train you, I’ll be in your corner, and I’ll show you exactly what I do.”
There was no direct mention of Herbalife or how anyone signing up, or indeed Ferne, would actually be financially rewarded. I took the plunge and followed the others, who mostly appeared to be women, by writing I was ‘ready’.
I instantly received a DM telling me: “There’s never been a better time to start, it’s exploding…we have such a slick system for anyone who’s ready.”
There was also an invite to watch a 20 minute Information Opportunity Video, hosted by Ferne, which is the point where I got cold feet.
Hundreds will no doubt be desperate to join – tempted by the promise of being able to work around the school run.
There are clearly still some concerns. Many followers were shocked to see Ferne promoting an MLM, with one person remarking: “It’s so disingenuous isn’t it. She knows that her downline won’t be as successful as her, because the only reason she has a decent downline herself is due to her being a celeb and having followers that way.”
Finding someone willing to talk about their experience with Herbalife is tricky – there appears to be a wall of silence surrounding former distributors.
One woman, who didn’t want to be named, told me how there have been issues with the company for decades and she lost around £15k when she signed up back in the nineties.
She explained: “I signed up through an old work colleague who looked like they were making good money.
“Little did I know they were doing it by piling stock onto the people they signed up, encouraging them to get to the next level or event.
“I trusted them and had no experience of MLM before and thought well if she can do it so can I.”
But it was far from an easy ride.
“Hindsight is a great thing isn’t it?” she said. “I lost around £15k I’d say over a two-year period of trying to make it work. I never encouraged customers to do what I did and that’s maybe why it didn’t work as it did for my referrer. I couldn’t sit with people getting into massive amounts of debt so I could earn commission.”
More recently there have been a lot more stories of MLM nightmares.
Laura Whitby, creator of The Nuance Nurse, with several years’ experience in network marketing and direct selling, spoke out after seeing Ferne’s post.
She still works within the direct selling industry but believes the criticism of MLMs is ‘justified’. She has not worked with Herbalife.
She explained: “I spent nearly three years with another company selling thousands of pounds of products every month. But between the money I was spending maintaining rank and trying to qualify for commissions, I barely earned anything.
“Three years of work, thousands of pounds spent, and God knows how many hours. I’ll never get back. And that’s where I want to discuss the difference between network marketing and community commerce. Because in my experience of MLMs, you open your back office and there’s quite literally a group of people with you at the top.
Laura added: “If a business is supposedly about selling products, why is there so much emphasis on recruiting people? And when we’ve got celebrities with enormous platforms promoting these opportunities, I think we need to be asking some serious questions about what they’re actually signing up for.”
Herbalife have denied this is the business model they are using.
The company is a long way from its humble beginnings.
It was founded in 1980 by diet product salesman Mark Hughes who formulated his own protein shake.
The business which he first ran from the boot of his car quickly snowballed and by 2011 its sales had grown to more than £3bn in around 90 countries.
The investigation by America’s Federal Trade Commission in 2016 was a minor setback.
It ruled that it had operated unfairly, cheating hopeful salespeople out of hundreds of millions of pounds with its high-pressure multi-level marketing scheme.
FTC chairwoman Edith Ramirez branded Herbalife’s sale of a “dream” career working from home as “an illusion” and many members “made nothing or lost money on their initial investment”.
And as one bruised former distributor put it: “I would be very wary of something that sounded too good to be true!”
What Herbalife told us:
A Herbalife spokesperson said: “Herbalife is a premier health and wellness company, community and platform that has been changing people’s lives with great nutrition products and a business opportunity for its independent distributors since 1980.
“There are a number of different reasons that people join Herbalife, including to supplement their regular income at a time when household budgets are being stretched. As self-employed individuals, all of our distributors choose how to manage their own independent businesses, and how to attract customers and new distributors.
“Many of them provide tailored one-to-one support to help motivate and coach customers toward their goals at nutrition clubs and fit camps. Other activities include wellness challenges and sports activities that help their customers embrace a healthier, more active lifestyle, as part of a supportive community.
“Our distributors choose how to manage their own independent businesses within the framework of our comprehensive set of rules, policies, and code of conduct designed to promote ethical and responsible business practices. Herbalife works hard to support our distributors with training and practical guidance to help them build their businesses responsibly.
“Herbalife is transparent about what to expect from becoming a Herbalife distributor through our Statement of Typical Distributor Earnings, which is available on our website.”
