April 8, 2014
Last month, a front page New York Times investigative report revealed that Bill Ackman, the hedge fund manager crusading against nutritional supplement company Herbalife, had pressured legislators and paid civil rights organizations upwards of $130,000 to start a federal investigation into the company’s business practices.
The New York Times acknowledged that “Herbalife has mobilized its own army of lobbyists to defend itself against Mr. Ackman’s charges.” But it didn’t emphasize that Herbalife spent nearly 800 percent more on lobbying in 2013 than Ackman did. It also didn’t mention that Herbalife’s intense lobbying effort last year is part of an influential, decades-old political strategy undertaken by the multi-level marketing (MLM) industry — a group of companies and industry groups like Herbalife that promote so-called “direct sales” businesses, which sell products in tandem with the opportunity to sell products. This political strategy — with ties to dozens of current congressional representatives who have received handsome donations from MLM companies and industry lobbyists — has pushed federal regulators away from investigating these companies. It’s also encouraged federal regulators to avoid defining the explicit difference between a legal MLM and an illegal pyramid scheme.
Only three days after the New York Times’ report, Herbalife announced it was being investigated by the Federal Trade Commission (FTC). But with Herbalife officials now in their third week of closed-door meetings with the FTC — and with the majority opinion in a US Supreme Court ruling expressing last week that unlimited campaign contributions by corporations represent “the most fundamental First Amendment activities” — it’s worth asking how MLMs have influenced federal regulators in the past through political maneuvering, and how that influence might continue.