Reference no: EM133329794

Chapter 11 Ethics Activity

As cosmetics companies roll out line after line of products to satisfy consumers' quest for youth, the shelves are getting crowded. How can a company stand out? Products such as the Cosmedicine and Rodan+Fields lines promote their affiliation with research institutions and medical doctors to distinguish them from their competition. Shortly after Johns Hopkins University began consulting with the then- owner of the company that produced Cosmedicine products, medical ethicists criticized Johns Hopkins for this arrangement. Hopkins initially defended its position, claiming that its consulting work does not imply any endorsement of Cosmedicine. "We have been pretty clear about our role," said Hopkins CEO Edward Miller. "We are reporting on the scientific validity of studies that were done by outside testing agencies." Cosmedicine packaging includes a disclaimer that discloses the nature of the research and financial relationship between Hopkins and the cosmetics company. Similarly, Rodan+Fields was established as a cosmetics company by two medical doctors. They began their company by starting out as a multi-level marketing company. The practice of multi-level marketing by companies like Herbalife, Rodan+Fields, Beachbody, and Plexus also is controversial to some. 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.

Ethical Dilemma:

1. Is it ethical for research institutions like Johns Hopkins and medical doctors to endorse products such as skin care?

2. Is the practice of multi-level marketing ethical?

3. Does the money-back guarantee provided by Herbalife provide evidence that they are not engaged in a pyramid scheme?