Shares of nutritional supplements companies Herbalife Ltd (NYSE:HLF) and Nu Skin Enterprises, Inc. (NYSE:NUS) rose as much as 3% in trading today. The initial rise came after a report from CNBC that the Federal Trade Commission would be meeting to announce enforcement actions against weight loss companies—but not against any that are publicly traded.
Herbalife, Nu Skin recover after last week’s sell-off
CNBC’s Scott Wapner noted earlier today that shares of Herbalife Ltd (NYSE:HLF) and Nu Skin Enterprises, Inc. (NYSE:NUS) fell last week after the FTC said it would be announcing enforcement actions against weight loss companies. Herbalife in particular has been in the crosshairs of lawmakers and consumer advocates in the wake of allegations raised by activist investor Bill Ackman in December 2012.
Regulators have faced pressure from multiple lawmakers and advocates to investigate Herbalife as a pyramid scheme, which Ackman claims it is. However, no official investigation has been announced, and the fact that today’s enforcement actions include competitors to Herbalife and Nu Skin but not the two companies themselves is certainly good news for investors.
FTC names four weight loss companies
USA Today reports that the four companies being targeted by the FTC are the company which makes Sensa, L’Occitane Inc., LeanSpa and HCG Direct. Sensa is a weight-loss powder which is sprinkled on food and sold at major nutritional supplement chains like GNC, as well as Costco and even on the Home Shopping Network.
Under the settlement, the company, Sensa creator and co-owner Alan Hirsch, and CEO Adam Goldenberg will no longer be able to make claims about weight loss benefits on dietary supplements, drugs or foods unless they have two “adequate and well-controlled human clinical studies.” The company will also pay $26.5 million to settle the FTC’s charges that it used endorsements which were misleading and made claims about weight loss which were unfounded. Consumers who purchased Sensa will have their money refunded as well. Sensa’s sales topped $364 million.
L’Occitane, Inc. will have to pay $450,000 for sales of its skin creams Almond Beautiful Shape and Almond Shaping Delight. The company claimed they could slim down the body and that this was clinically proven. Its ads claimed Almond Beautiful Shape could fight cellulite and “trim 1.3 inches in just 4 weeks.” However, the company did not do any studies to back up its claims, according to the FTC. Under the settlement, L’Occitane will also barred from making any claims about skin products causing reductions in body size or weight loss.
LeanSpa will turn over about $7 million in money, real estate and personal property as part of a partial settlement with the FTC. That’s in connection with promotions and fake news sites about acai berry and colon cleanse weight loss products, which regulators said were deceptive. The FTC said it is continuing to litigate other defendants in this case as well.
HCG Diet Direct marketed the use of the HCG hormone, also known as the pregnancy hormone, for the use of weight loss. However, the $3.2 million judgment levied against it was suspended because it was found to be unable to pay it. The company reportedly sold HCG drops and claimed that users could lose up to a pound a day by just putting the drops under their tongues before meals while also following an ultra-low calorie diet.