Herbalife Working On Settlement To Resolve FTC Investigation Into Business Practices
Nearly two years ago nutritional company Herbalife revealed that it was under investigation by the Federal Trade Commission for its often controversial business practices, or what some people claim is a pyramid scheme. Now, it looks like the company is ready to put the federal probe behind it.
Herbalife revealed in its recently filed annual report [PDF] that it was in talks with regulators to resolve the nearly two-year long investigation.
“The company is currently in discussions with the FTC regarding a potential resolution of these matters,” Michael Johnson, chairman and CEO of Herbalife, said during an earnings call Thursday. “A possible range of outcomes include the filing by the FTC of a contested civil complaint or further discussions leading to a settlement, which could include monetary penalties and other relief or the closure of these matters without action.”
The FTC’s investigation centered on the company’s multi-level marketing sales strategy that worked by exclusively selling weight-loss shakes and nutritional products through a network of independent distributors, or “members,” who earn through commissions on sales to other recruited members.
The probe was initiated after the FTC received more than 100 complaints about the company in 2013, and came on the heels of a years-long legal battle with investor Bill Ackman, who accused the company of operating a pyramid scheme.
Johnson said Thursday that the company has been cooperating with regulators for the past two years, but could not predict when or if a resolution would come.
“Moreover, no assurances can be given that the outcome of these matters will not have a material adverse impact on a company’s business operations, its financial condition or its results of operations,” he said during the call. “At the present time, the Company is unable to estimate a range of potential loss, if any, relating to these matters. We cannot comment on the scope, duration or the outcome of the investigation at this time. We will provide updates when appropriate to do so.”
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