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Introduction to Business 2e

Ethics Activity

Introduction to Business 2eEthics Activity

Ethics Activity

As cosmetics companies roll out line after line of products to satisfy consumers’ quest for beauty and a healthy appearance, the shelves are getting crowded. How can a company stand out? Products such as Thrive Causemetics and Method IQ promote their science-backed products and biotech approach to product design to distinguish them from the competition. Other companies in the healthy living market also claim science-backed products, including Herbalife Nutrition, Juice Plus+, and BODi.

The practice of multi-level marketing by companies like Herbalife and Plexus can be a controversial business model. In fact, some companies that previously used the approach have switched to a direct-to-consumer selling model. Basically, multi-level marketing enlists a new salesperson by making the individual purchase training and inventory of the company product at a discount and begin selling the product at retail prices, while also recruiting new salespeople as their “downline” salespeople. The idea is that eventually you will make most of your income via the results of your downline salespeople—the people you brought into the business.

There are numerous critiques of multi-level marketing, the most notable being investor Bill Ackman’s accusation that weight loss company Herbalife was engaging in a pyramid scheme. A pyramid scheme is an arrangement whose entire whole purpose is the enrichment of the top of the pyramid at the expense of new recruits. Herbalife was able to refute Ackman’s accusations in a lawsuit brought against them by showing that their results were based on product sales rather than recruitment and that they offered money-back guarantees if the recruits were unable to sell the product. Herbalife continues to face legal and regulatory challenges, including foreign bribery charges and distributor lawsuits.

Ethical Dilemma: Is the practice of multi-level marketing ethical? How can companies that use the approach conduct business fairly for both their sellers and for customers who buy their products?

Sources: “Multi-Level Marketing,” Investopedia, https://www.investopedia.com, accessed October 1, 2017; "METHODIQ," https://www.methodiq.com, accessed March 4, 2026; "About Us," https://thrivecausemetics.com, accessed March 4, 2026; "BODi to Transition from Multi-Level Marketing to Single-Level Affiliate Model," DSN, https://www.directsellingnews.com, October 1, 2024; "Beachbody Shifts to Affiliate Model, Cuts Workforce by 33%," Investing.com, https://www.investing.com, September 30, 2024; "All About Plexus Worldwide," https://helpcenter.plexusworldwide.com, accessed March 4, 2026; Lesley Fair, "It’s No Longer Business as Usual at Herbalife: An Inside Look at the $200 Million FTC Settlement," Federal Trade Commission, https://www.ftc.gov, July 15, 2016; Hank Schultz, "Herbalife to Pay $12.5 Million to Settle Class Action Suit Over Event Costs," Supply Side Supplement Journal, https://www.supplysidesj.com, May 10, 2023.

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