Federal trade regulators are sending checks to 350,000 Herbalife distributors who lost money by trying to sell the company's weight-loss shakes, bars and other supplements.
The checks come from $200 million that Herbalife agreed to pay in July to settle a complaint by the Federal Trade Commission that it had misled people into becoming its distributors by telling them falsely that they would quickly get rich. The overwhelming majority of Herbalife distributors earned little or no money, the regulators concluded after a two-year investigation.
Most of the checks are between $100 and $500, the FTC said. The largest checks amount to more than $9,000.
The agency mailed the first refunds Tuesday.
Regulators said they used Herbalife records to estimate which distributors in the United States lost the most money. Those receiving refunds paid at least $1,000 to Herbalife between 2009 and 2015, and got little or nothing back.
Herbalife said at the time of the settlement in July that it disagreed with many of the FTC's allegations but had decided to settle to avoid "the financial cost and distraction of protracted litigation."
Former distributors don't need to file a claim with the agency. The FTC said people should receive their checks by Jan. 20. Those who believe they should have received a refund can get more information at ftc.gov/herbalife or by calling (844) 322-8146.
The agency's investigation began in March 2014 after billionaire investor William Ackman claimed that Herbalife was operating a pyramid scheme. Ackman's hedge fund bet more than $1 billion that Herbalife's share price would fall, by selling the company's stock "short."
The FTC investigators sharply criticized the company's practices but fell short of determining it was an illegal pyramid scheme. Under the settlement, Herbalife must stop its rags-to-riches promotional pitches. It also must verify through receipts that at least 80% of its sales are made to legitimate retail customers.
The FTC said that Herbalife's previous system of compensating distributors was driven not by selling products to people who actually consumed them but by recruiting additional people into the network.
On Tuesday, the agency warned all consumers to be wary of so-called multilevel marketing programs in which recruiters claim they don't have to worry about successfully selling the company's products because they can make money by recruiting others into the business.