The Federal Trade Commission has received dozens of complaints about Herbalife making false promises. The distributors said getting refunds and collecting income owed is very difficult. Some of the distributors told FTC years before Ackman that Herbalife is a pyramid scheme.
Herbalife Ltd. (NYSE:HLF), the Los Angeles-based nutritional supplements distributor, is subject to a Federal investigation. Bill Ackman, the billionaire hedge fund manager and chief executive of Pershing Square has $1 billion short position against the company. He called the company’s multi-level marketing a pyramid scheme and said Herbalife will collapse eventually. Ackman said the company should be shut down at the earliest.
The NYPost filed the Freedom of Information Law request on December 26 to check if there are any big complaints against the company. In response to the request, the Federal Trade Commission said that 192 complaints have been filed against Herbalife Ltd. (NYSE:HLF) in the past seven years. FTC released them all in a 729 pages report.
FTC revised some sections, arguing that it can’t disclose the information obtained during a law enforcement investigation. Other complaints had a note “pending law enforcement action.” However, the authorities didn’t disclose whether the action was criminal or civil.
The Federal Trade Commission has received dozens of complaints about Herbalife Ltd. (NYSE:HLF) making false promises. The distributors said getting refunds and collecting income owed is very difficult. Some of the distributors told FTC years before Ackman that Herbalife is a pyramid scheme.
A Franklin, Pa.-based distributor said she was confused about the future of her business ever since she became a herbalife member. She said it’s fine if the company restricts her from revealing every detail to customers, but Herbalife encourages outright lying. The lady told the NYPost that Herbalife said she must spend at least $6,450 a month to make profits. “How in the world am I going to expend this kind of money?” she wrote in her complaint.
Herbalife Ltd. (NYSE:HLF) shares have seen several ups and downs (mostly downs), since Bill Ackman went public with his massive short position of December 29, 2012. Shares were down about 40 percent after Ackman attacked the company. But surged more than 70 percent in early January, when rival hedge fund manager Dan Loeb bought 8 percent stake in Herbalife.
After reviewing the complaints of the FTC website, Ackman said, “I have a lot more confidence in our government’s regulators than those who own the stock.”
Herbalife Ltd. (NYSE:HLF) shares were down 11 percent to $31 in pre-market trading after the reports of investigation.