The settlement with Herbalife that the Federal Trade Commission (FTC) recently achieved is a big win for consumers who paid hundreds, sometimes thousands of dollars for a money-making opportunity that in many cases failed to pan out. But we also hope that the restructuring that the Herbalife agreed to make to its operations will serve as a model for how all multi-level marketing works in the future. In multi-level marketing, people sign up to become distributors, selling vitamins, kitchenware, beauty products and other goods, typically through house parties, by going door-to-door, or using other direct sales methods. They make money on those sales, and they can make more money by recruiting others to also become distributors, for which they receive rewards and a cut of the profit from those people’s sales, and sales of others that those people recruit, and so on.

But as the FTC’s complaint against Herbalife described, very few people made the profits that they were led to expect by the company’s promotional materials, which featured pictures of lavish mansions, luxury cars and exotic vacation spots, and testimonials about earnings that were not representative of what the vast majority of participants made. Another problem was that people’s ability to reach the upper tiers of the business structure and receive the highest levels of compensation was closely tied to the amount of products that they bought from the company. This created a strong incentive for participants to buy more products than they could realistically hope to sell to others or use themselves.

Under the settlement, Herbalife will now have two categories of participants. One will be “discount buyers,” people who join just to buy products for their own use at less than the full retail price and who will not sell to others or earn any kind of rewards. The second category, the distributors, will have to be compensated mainly on the basis of retail sales. At least two-thirds of what they make must come from such sales. To compensate distributors at the current rate, at least 80 percent of the company’s sales must be to legitimate end-users; otherwise, the rewards will be reduced. The settlement also prohibits Herbalife from misrepresenting distributors’ potential earnings and requires it to pay $200 million in consumer redress. In addition, it will stop certain unfair practices in connection with the “Nutrition Clubs” that it encourages participants to open and will pay an independent auditor for seven years to ensure that it abides by the terms of the settlement.

The incentive will now be to sell Herbalife’s products to people who will actually use them. Instead of an inflated number of distributors, most of which lose money and drop out, to be replaced time and time again by others chasing the same dream based on false promises, there will be a cadre of distributors who understand that there is no easy money – what they earn will depend on their own hard work and whether the product is good enough that people will want to buy it. The success of this settlement, however, is endangered by a bill in Congress, the Anti-Pyramid Promotional Scheme Act of 2016, which despite its name would actually make it harder for the FTC to take similar action in the future. Experts such as former FTC economist Peter Vander Nat explain why the language of the bill would establish criteria for what constitutes a legitimate multi-marketing plan that run counter to well-established case law and open the door to abuses such as basing compensation on how much product distributors buy, regardless of what they sell to end-users. That’s why Consumer Federation of America and other groups oppose this bill.