FTC Investigating Herbalife

herbalifegrabFor more than a year, some have accused nutritional supplement company Herbalife of operating a pyramid scheme and called for federal authorities to investigate the business. Today, the company confirmed that it is indeed under investigation by the Federal Trade Commission, though it did not reveal exactly why.

In a statement released to the press, Herbalife confirmed that it received a Civil Investigative Demand from the FTC earlier today.

Without going into the nature of the investigation, the company said it “welcomes the inquiry given the tremendous amount of misinformation in the marketplace,” and that it will cooperate fully with the FTC.

“We are confident that Herbalife is in compliance with all applicable laws and regulations,” continues the statement. “Herbalife is a financially strong and successful company, having created meaningful value for shareholders, significant opportunities for distributors and positively impacted the lives and health of its consumers for over 34 years.”

This record [PDF] released by the FTC in 2013 includes 100 Herbalife-related complaints filed with the agency.

A number of the complaints involve Herbalife’s multi-level marketing business model, which sells the supplements through a network of independent distributors, who then sell the products and make money with those sales, as well as getting commissions from other people they set up in the business.

While some, including hedge fund manager Peter Ackworth at Pershing Square Capital, the one who has most directly attacked the company, say this is a pyramid scheme that only enriches those at the top, the company has previously defended itself saying its business model is used by others without facing similar accusations.

“Girl Scouts sell cookies on a direct-selling method, and nobody attacks them,” said CEO Michael O. Johnson in 2013.

Read Comments4

Edit Your Comment

  1. GnRJosh says:

    “Girl Scouts sell cookies on a direct-selling method, and nobody attacks them.”

    They’re not attacked for their methods because their “business model” isn’t buying tons of cookies up-front from their upline representative and then hiring underlings to buy their product to then either sell it or try to hire their own underlings, and so on. Your business is a pyramid scheme, through and through. You emptied my dearly-departed grandmother’s bank account on the false hopes of making “thousands a month” when all you did was encourage them to buy more and sell to their downlines…..that’s not how Girl Scout cookie sales work. You disgust me!!

  2. DaddyBee says:

    Regardless of Herbalife’s ponzi scheme tactics, one thing remains absolutely clear: Peter Ackworth is 100% manipulating the market here. The guy made a bet against Herbalife to the tune of millions of dollars, and then immediately started attacking the company publicly.

    I just don’t understand – doesn’t anyone else see how blatant this guy’s greed is? It’s the pot calling the kettle black, and I honestly feel bad for Herbalife for having this guy pulling their pants down so he can make a quick buck.

    • MathManv2point0 says:

      If Ackworth’s claims are valid isn’t that just good investing? I am not sure if Ackworth short position is in the form of shorted stock or put options but remember, there’s always someone of the other side who either loaned the stock to Ackworth or sold the put option. There could be a hedge fund or investor on the other side who was blatantly greedy because they have been trying to manipulate the market for the stock to go up. I am not taking sides I am just bring up to point that sometimes groups/individuals manipulate the market to makes companies (and its stock) look more valuable than it actually is (Enron, Tyco…etc)

  3. econobikerredux says:

    I still miss the over-tanned visage, big TonyRobbinseque white teeth, and extremely well coiffured hair of the now-deceased Herbalife founder, Mark Hughes, from its 1980s infomercials which were akin to tent revivals.

    His wikipedia entry reads as a very well managed press release from the company.