14 DAY TRIAL // Herbalife, a company that is in the business of selling nutrition, weight management, and skin-care products, is now the subject of a US Federal Trade Commission investigation.
Information shared with the public says that the Commission decided that it might not be such a bad idea to have a closer look at the company's operations in the aftermath of several complaints that Herbalife was guilty of operating a so-called pyramid scheme.
For those unaware, such pyramid schemes mean that, instead of making a profit by selling various products, companies cash in by recruiting new distributors.
Such a business model is an unsustainable one, experts explain, simply because, whereas the folks at the top of the pyramid, i.e. the so-called originators, might in fact make considerable money, those that sit at the bottom, i.e. the ones that fail to get new recruits, more often than not end up with a deficit. Business Insider tells us that one of Herbalife's most avid critics is Hedge Fund Manager William Ackman, who first accused the company of operating such a pyramid scheme back in 2012.
More precisely, William Ackman says that not only is the company operating a pyramid scheme, but that its main targets are people with low income, especially those belonging to the Hispanic population.
Besides, it was this past March 11 when William Ackman took part in a conference call and lashed out at Herbalife on account of the company's violating direct-selling laws in China, and said that the company was operating a pyramid scheme in this part of the world as well.
Shortly after the news that Herbalife was being investigated by the US Federal Trade Commission, trading of the company's stock was briefly halted.
Besides, media reports say that the company's shares initially fell by about 17% only to partly recover sometime after and end Wednesday down by 7%.
On its website, Herbalife says that it has no reason to oppose the US Federal Trade Commission investigation, and expects that no harm can come to it as a result of this initiative.
“Herbalife welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC,” the company writes.
Furthermore, “We are confident that is in compliance with all applicable laws and regulations. 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.”