Multi-Level Marketing Business Models Examined by Law Graduate

The need for the Consumer Protection Act (CPA) to be used to protect consumers in South Africa is what motivated Business Law Master’s graduate, Ms Johara Ally, to investigate the relevant sections of the Act and their application to multi-level marketing in South Africa.

Ally’s study titled: A Critical Examination of Herbalife’s Business Model in Order to Determine Whether it is a Prohibited Scheme under the Consumer Protection Act 68 of 2008, focused on global multi-level marketing corporation Herbalife Nutrition.

The focus was on whether internationally established business models comply with South African law. The study was supervised by Professor Tanya Woker.

‘Many people are drawn to such business models through which perpetrators and promoters often lure people into joining their operations by promising great wealth and lavish lifestyles in return,’ said Ally.

‘However, this is contrary to reality where very few make money and the majority of participants incur financial loss. This is also one of the factors differentiating a pyramid scheme from a legitimate multi-level marketing company.’

Ally added that those involved in multilevel marketing in South Africa needed to ensure that they were aware of the applicable laws and abide by them which was crucial for safeguarding and protecting consumer rights.

‘Multi-level marketing is a form of direct selling which, unlike pyramid schemes, is legitimate,’ said Ally. ‘In light of the havoc caused by pyramid schemes worldwide and the devastating impact they have had on South Africa’s retail sector, I hope this research will provide valuable insights and help consumers protect themselves and their rights.’

As part of honing her research skills which earned her a distinction for her dissertation, Ally spent a year serving as a research clerk for Judge Malcom Wallis.

‘My main duties included reading case records, researching relevant law and preparing memoranda for cases. When Justice Wallis was on long leave from the Supreme Court of Appeal, we debated current and pressing legal issues. I am eager to go out into the working world but have yet to procure articles of clerkship. I am actively applying and hope to commence next year,’ she said.

Words: Thandiwe Jumo
Photograph: Abhi Indrarajan