A California congresswoman wants the Federal Trade Commission to investigate Herbalife Ltd. (NYSE:HLF)’s marketing and business practices. This news comes just a little over a week after activist investor Bill Ackman said shutting down the nutritional supplement company would be his life’s greatest achievement and days after a new study released by Herbalife got bulls excited. Ackman launched Herbalife into the spotlight through his extensive short thesis in December.
Sanchez’s Letter Regarding Herbalife
Today ValueWalk obtained a copy of a letter written by Linda T. Sanchez of California’s 38th district. The letter is addressed to FTC Chairwoman Edith Ramirez, and in it, Sanchez says she’s concerned about allegations that Herbalife Ltd. (NYSE:HLF) might be “harming consumers – especially those from our country’s most vulnerable populations.”
She pointed to “extensive media reports and allegations” regarding the company’s business practices. She referenced a March letter from the National Consumers League in which the organization asked the FTC to investigate Herbalife as a possible pyramid scheme. If you remember, that pyramid scheme allegation originated with Bill Ackman.
She also referred to a May letter from the Hispanic Federation also requesting that the FTC investigate. She said both of the organizations are concerned about whether the primary incentive for Herbalife distributors is recruitment of others or whether it’s actually selling the product. The groups and Sanchez especially expressed concern for “low-income consumers,” African-Americans and Hispanics, saying that these groups are “especially vulnerable to pyramid-schemes masquerading as legitimate home-based business opportunities.”
New York City Council Expresses Concern Over Herbalife
ValueWalk also obtained a copy of a letter from New York City Councilwoman Julissa Ferreras. It’s addressed once again to FTC Chairwoman Edith Ramirez and expresses similar concerns about Herbalife Ltd. (NYSE:HLF) and a request for the agency to investigate. Ferreras specifically named her Hispanic constituents as potential targets for the company’s alleged pyramid scheme operations. She also expressed concern for “vulnerable immigrant communities.”
She points to “dozens” of “alleged nutrition and wellness clubs,” which she says is how recruitment to Herbalife begins. Ferraras makes mention of “evidence of consumer harm” and says that it’s “widespread” in her district and across the country.
“If Herbalife is acting illegally by making false income claims to vulnerable Latinos in my community, then they need to be held responsible,” she wrote.
Shares of Herbalife Ltd. (NYSE:HLF) rose as much as 2 percent on Thursday.
Embedded Copies Of Letters Concerning Herbalife
Copies of both letters have been embedded below.