Herbalife faces Federal Trade Commission probe


The Federal Trade Commission has launched a civil investigation into Herbalife Ltd., the Los Angeles-based nutritional-products maker said Wednesday.

Herbalife did not disclose any details of the probe, but it has been waging an ongoing battle against a hedge fund manager’s allegations that it is running a thinly disguised pyramid scheme.

The company reiterated its long-stated position that its business model is sound and said it would cooperate with the inquiry.


“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC,” the company said in a statement. “We are confident that Herbalife is in compliance with all applicable laws and regulations.”

Herbalife’s shares sank after the company disclosed that the federal agency had sent it a civil investigative demand. The stock fell $6.89, or 10.5%, to $58.50 immediately after the news.

The company sells nutrition and health products through independent salespeople in more than 80 countries. Its products are not available in stores.

In December 2012, hedge fund manager Bill Ackman accused Herbalife of operating a pyramid scheme and announced that he had bet more than $1 billion on Wall Street that the value of the company’s stock would fall. Thus far, Ackman has suffered a paper loss of about $500 million.

The company’s stock fell sharply at the time but recovered last year, gaining more than 100% when regulators appeared not to react to the allegations. Ackman trimmed his short position, a Wall Street play that pays when a stock’s price falls.

Nevertheless, Ackman has kept up a relentless battle against Herbalife, releasing a steady stream of reports that purport to show Herbalife abuses.



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