Canadian Herbalife Marketers Fined $150,000
for Operating Illegal Pyramid Scheme
November 23, 2004
A Competition Bureau investigation into a Vancouver-based multilevel marketing firm has led to a $150,000 fine and guilty pleas on two counts under the deceptive marketing provisions of the Competition Act. The matter has been resolved with Global Online Systems Inc. (GOLS) voluntarily pleading guilty and signing a Prohibition Order filed with the Federal Court of Canada. An investigation by the Bureau revealed that GOLS was operating a scheme of pyramid selling that involved health-related products marketed by Herbalife Canada Ltd.
Contrary to the Act, participants were compensated for the recruitment of new participants and had to buy specific quantities of products as a condition of joining the plan. In addition, GOLS and its participants—through its Web sites and other promotional materials—recruited new participants by exaggerating income expectations without disclosing the income of a typical participant.
"Those who join pyramid schemes are often enticed by promises of easy money, but only the very few at the top ever see any real benefit," said Raymond Pierce, Deputy Commissioner of Competition. "The Bureau is committed to pursuing these offences under the Competition Act and ensuring that Canadians do not fall prey to such scams."
According to the Prohibition Order, Global Online Systems Inc. and its directors, Deborah Jane Stoltz and Marilyn Thom, have agreed to:
- Pay a $150,000 fine;
- Disclose the average income actually received by all participants in GOLS;
- Inform all of its existing distributors and participants of the terms of the Order; and
- Not become involved directly or indirectly in any business operation engaged in a scheme of pyramid selling.
The Competition Bureau is an independent law enforcement agency that oversees the application of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Consumers who suspect they have been the victim of deceptive business practices or who want information about the Competition Act should contact the Bureau's Information Centre at 1-800-348-5358, or visit our Web site.
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This article was posted on December 13, 2004.