Donald Trump Pushes Health, Vitamin Pills

Donald Trump likes to claim he has uncanny business savvy, whether he’s developing luxury real estate or spotting executive talent on his reality television show. But his latest foray into the vitamin and health products industry not only raises questions about his business acumen, but about his business ethics as well.

Trump is joining forces with Ideal Health, a 12-year-old Massachusetts nutritional products company. The company is based on a close approximation to pyramid selling. Sales reps are encouraged to recruit even more sales reps to create ever expanding networks.

The problem occurs because the networks grow exponentially, by multiples, like a pyramid, and can quickly involve hundreds of people who must fight over ever shrinking territories. Such, multi-level marketing networks toe the line between legitimate and illegitimate.

For a network to be legal, it must sell real products to end users, pay commission only on product sales, not new network recruits, and the company must buy back inventory when someone quits. Marketers in the Trump Group receive commissions for the products they sell, along with a cut from products sold by salespeople they recruit.

Critics say that most of the products are bought by the distributors themselves, and that few salespeople actually make money.

In an e-mail to the Associated Press, Trump called the business a “rescue and recovery program” for people suffering in the recession.

The business has been renamed the “Trump Network” in an obvious attempt to cash-in on his name, and the Ideal Health makes no bones about using the mogul’s reputation to move products.

In a sign of his drawing power, 5,000 people packed into the hotel to hear him speak, when the partnership was launched over the weekend, according to news reports.

Amway, Mary Kay Cosmetics and retail brands such as Centrum use multi-level networks. Amway says it had $8.2 billion in revenue in 2008.

To join the Trump Network, people must pay a $48 fee, so they start in the hole right off the bat. The money goes toward a marketing kit and access to a personalized Web site to promote the products.

However, new participants are often up-sold a $497 package that includes the marketing kit, products, CDs, sales tips and coupons.

The products include everything from custom nutrition tests to vitamins to blueberry pomegranate bars. A 30-day supply of a customized vitamin formula costs about $57. Marketers can sell back any unsold inventory, the AP notes.

The Web site cautions: “If any product purchase creates a financial hardship, do not make the purchase. Your financial health is as important to us as your personal health.”

But does that make it right?