FTC Investigating Herbalife

For 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.

by Chris Morran via Consumerist